With infrastructure losses due to climate change as high as US$845 billion per year, and 60% of the physical assets the world will need by 2050 yet to be built, policy-makers and stakeholders must integrate urgently-needed resilience into their infrastructure planning, a new report concludes.
Taking climate change into account, the Average Annual Loss (AAL, or the expected loss per year, averaged over many years) of global infrastructure now stands between $732 billion and $845 billion, or roughly 14% of global GDP growth in 2021-22—and those losses far from being evenly distributed around the world.
“High-income countries could witness an increase in average annual loss by 11% due to climate change; the figure could increase by 12% to 22% in middle-income and 33% in low-income countries,” note the authors [pdf] of the inaugural report released by the Coalition for Disaster Resilient Infrastructure (CDRI).
The combined risk makes infrastructure resilience “a critical global challenge,” the authors say [pdf]. But investor hesitance and knowledge gaps remain major obstacles.
Using a “cutting edge” Global Infrastructure Risk Model and Resilience Index (GIRI), the 240-page report pegs the annual investment needed to address the global infrastructure deficit out to 2050 at US$9.2 trillion, of which some 30% ($2.84 to $2.9 trillion) will be needed in middle- and lower-income countries (LMICs).
The newly-published biennial report “brings together for the first time a unique body of evidence to make a compelling economic, political, and financial case to radically upscale investment in infrastructure resilience.” It describes the profound ecological, socio-economic, and political benefits that will accrue from ensuring that all new infrastructure, and the investment required to build it, are planned and pursued with climate resilience top of mind.
Included in these benefits are “avoided asset loss, reduced service disruption, better quality and reliable public services, accelerated economic growth and social development, reduced carbon emissions, enhanced biodiversity, improved air and water quality, and more efficient land use.”
Given the harrowing infrastructure losses already taking place, “new infrastructure investments without strengthened resilience are analogous to pouring water into a bamboo basket,” say the authors. Nature-based Infrastructure Solutions (NbIS) loom large in their discussion of the pathways to resilient infrastructure.
Social and Economic Resilience
Observing that “60% of the infrastructure needed by 2050 is yet to be built,” the authors say resilient infrastructure is the key to sustainable development, providing services that promote social and economic resilience. Infrastructure is critical to the achievement of many of the United Nations Sustainable Development Goals (SDGs), including industry and innovation, good health and well-being, quality education, clean water and sanitation, affordable clean energy, and resilience to disasters. And those “dependable, essential services are closely linked to multiple welfare benefits such as sustained employment (SDG 8), poverty reduction (SDG 1), and gender equality (SDG 5).”
In many LMICs, infrastructure deficits can constrain access to services and undermine social resilience, say the authors, citing the burdens on women who lack access to water infrastructure as one example. “Women and girls across the world spend over 200 million hours every day collecting water—an equivalent of 8.3 million person-days or 22,800 person-years—increasing their exposure to physical and sexual violence,” say the authors. “Roughly 40 billion hours per year are spent to collect water—equivalent to a whole year of labour by France’s entire work force—in Sub-Saharan Africa alone.”
Measuring Risk to Manage It
The report describes CDRI’s risk index—the GIRI—as “the first-ever fully probabilistic [as opposed to deterministic] model to identify and estimate the risks—associated with major hazards (earthquakes, tsunamis, tropical cyclone winds and storm surges, landslides, floods, and hydrological drought) across principal infrastructure sectors (power, oil and gas, telecommunications, ports and airports, roads and railways, water and wastewater, health, education, and commercial, industrial, and residential buildings)—in all countries and territories, accounting for existing climatic conditions and two other climate change scenarios.”
The GIRI is also one of the few publicly available risk indices. The authors of that analysis, such as insurance companies, typically keep their contents a closely guarded secret.
With AAL projections for global infrastructures well north of $700 billion, “decades of infrastructure investment without adequately considering disaster [i.e. earthquakes] and climate resilience means that approximately a seventh of the economic benefits generated by those same assets, as measured by GDP growth, is now being lost,” the authors say.
And that’s based on a research tool that “does not model other important hazards including heatwaves, wildfires, permafrost melting, sea level rise, or risk to ecosystems, natural capital, agriculture, or food production,” all of which “may be addressed in future iterations.”
The current version of the GIRI concludes that “countries and territories in the Sahel region, Middle East, the Horn of Africa, and several small island states (SIDS) are all likely to see major increases in their risk,” with Chad, Cape Verde, Eritrea, and Iraq among the countries at risk of seeing their AAL increase by 200% or more by 2100.
European countries, meanwhile, “may see declines in their AAL where hotter and drier conditions reduce flood risk to infrastructure assets.”
Nature-Based Infrastructure Solutions
The authors point to a profound financial incentive to embrace nature-based infrastructure solutions (NbIS). “It is estimated that NbIS cost, on average, only 51% of grey infrastructure projects and that 11% of all grey infrastructure could be replaced by NbIS,” they write. “The greatest potential for NbIS is in the water sector due to the importance of functional ecosystems for water capture, storage, filtration, and transmission, and in protecting grey infrastructure.”
Thanks to the regenerative power of nature, there is an added boon: “Over time, the effectiveness of grey infrastructure degrades while that of NbIS increases. For example, as sea walls depreciate in quality, well-protected mangroves become stronger and more widespread as they grow older, thus strengthening resilience.”
Those forests also deliver a host of other benefits. “Mangrove conservation and restoration not only protect coastal areas against storm surges but also improve water quality, replenish fish stocks, safeguard ocean health, and reduce coastal erosion.”
Taken in their entirety, widespread adoption of NbIS “would influence the achievement of 115 of the 169 targets across all 17 SDGs,” the report concludes, while creating an estimated 59 million jobs by 2030.
With current investment in NbIS representing only 0.3% of overall infrastructure investment, opportunities are everywhere and urgent.
Unfortunately, there are “formidable obstacles” to the widespread adoption of NbIS. “Many of the ecosystems that were the foundation for NbIS are in decline,” the authors say, beginning with the loss of 85% of wetlands over the last 50 years. So stopping ecosystem degradation is an “essential first step.”
After that, major efforts are needed to expand the knowledge base, regulatory environment, and capacity to design and implement NbIS, including production of literature on NbIS in languages other than English. “All countries, particularly LMICs, will need national centres of excellence in NbIS, with the capacity to document and research good practices, disseminate knowledge, provide outreach to practitioners, and network information with other countries.”
Participatory engagement will be key, and the authors cite the Green Shores Program, an effort to accelerate ecological restoration hosted by the Stewardship Centre for British Columbia in partnership with local First Nations, as an example of what it can achieve. “The program provides technical NbIS guidance at three scales: local government, shoreline development, and homes. It builds awareness and capacity for local governments through workshops, one-on-one coaching, and milestone-based certification.”
Another obstacle is the societal tendency to prioritize short-term economic gains over environmental integrity, especially in cases where “economic gains are privatized, while any resulting systemic risks are shared and transferred to other social groups or territories,” the authors say. Reluctant policy-makers and investors must be convinced of the political and economic value of investing in NbIS, even though “NbIS is often a slow solution in a context where many infrastructure requirements require quick action.”
Financing Climate Resilience
The “crux of the financing challenge” is how to attract an estimated US$106 trillion of untapped private institutional capital worldwide to “geographies with the greatest need.” Just 1.6% of that total is currently invested in infrastructure, “mainly in high-income countries and renewables.”
But investments in resilience are “still considered by many infrastructure developers and financiers as incremental costs with no immediate benefits, and sometimes imposed by regulators to meet safety standards.” The report cites “insufficient awareness that investment in resilience can lead to value creation through a combination of reduced future loss and damage, optimized life cycle costs, and improved certainty of operating cash flows, combined with positive development outcomes, such as increased well-being and economic growth.”
Capturing the Resilience Dividend
The report explores three key pathways to help countries calculate the dividends that accrue from resilient infrastructure and communicate them to potential investors. The first is up-to-date information, financial risk metrics, standardized methodologies, and performance-based resilience standards, all of them critical to building the necessary knowledge and capacities.
“Identifying and estimating the resilience dividend clearly is essential to change the perception of investments in resilience from a cost to an opportunity,” the authors say.
The report stresses the need for strong infrastructure governance, including methods that integrate resilience considerations into national systems for public investment planning. Together with the development of project pipelines and national resilience funds, those policy signals will help secure the final piece of the puzzle: clear signals to capital markets to mobilize urgently-needed private capital.