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Infrastructure

Mobilising finance in infrastructure

 

Context

Financing for quality and sustainable infrastructure will need to be significantly scaled-up to deliver key policy priorities and contribute to a strong, inclusive and green recovery from the COVID-19 crisis. Given the pressures facing government budgets, sources of private financing will need to be mobilised. Infrastructure projects with long-term and stable cash flows can be particularly attractive investments for long-term investors such as pension funds and insurance companies seeking to match liabilities.

 

Key solutions
  • Broadening the investor base by ensuring the availability of appropriate capital market instruments and vehicles for channelling financing for infrastructure projects, in which institutional investors can invest, without undue regulatory constraints and while ensuring adequate investor protection.

  • Carefully calibrated government intervention can influence the risk profile of infrastructure investments by influencing the overall level of risk, managing environmental and social risks, and promoting diversified risk mitigation instruments and incentives. Government liabilities associated with any public guarantees should be adequately disclosed.

  • Strengthened incentives and disclosure can enhance consideration of sustainability factors, and help to guide infrastructure investment toward key policy priorities. Infrastructure regulation, alongside the promotion of transparency in financial markets, including through the use of sustainability definitions and taxonomies, can provide incentives for private sector investment.

  • The public sector has an essential role to play in driving change and opening a path for private investment through providing early-stage financing for technology development and demonstration projects, collaborating with private investors in rolling-out new infrastructure, and adapting regulation and market design to incentivise innovation.

  • A strategic and coordinated approach is required that identifies barriers and bottlenecks and develops financing solutions that match investments with investor profiles and risk appetites.

Risk management incentives can help to mobilise financing in support of the low-carbon transition and biodiversity:

  • Supporting the shift in financing toward to low-carbon infrastructure requires the pricing and management of climate-related risks across the financial system and related disclosures.

In developing countries, a lack of viable projects and imbalances between perceived risks and the level of financial returns are often cited as reasons for the low-levels of private investment in infrastructure:

  • Enhancing the capacity to prepare bankable projects is critical. Project preparation facilities can help but their effectiveness may need to be increased. Along with enhanced fiscal transparency, public debt management capacity also needs to be strengthened to ensure large infrastructure investments do not result in unsustainable debt levels.
  • Blended finance approaches that involve mixing development finance with commercial finance, and are adapted to project risk-return profiles, offer a potential pathway to address imbalances. National development banks are well placed to catalyse private financing for infrastructure by serving as intermediaries between governments and private investors.
 
Documents and links

 Trends in ESG Investing and Quality Infrastructure Investment in Asia-Pacific (2022)

COP26 Event on Mobilising Finance and Investment for the Clean Energy Transition (2021)

G20/OECD Report on the Collaboration with Institutional Investors and Asset Managers on Infrastructure (2020)

ESG and institutional investment in infrastructure, OECD Business and Finance Outlook 2020 (2020)

OECD Reference Note on Environmental and Social Considerations in Quality Infrastructure (2019)

G20 Roadmap to infrastructure as an asset class (2018)

Mobilising Private Investment in Infrastructure: Investment De-Risking and Uncertainty (2018) 

G20/OECD/WBG Stocktake of Tools and Instruments Related to Infrastructure as an Asset Class Progress Report (2018)

G20/OECD Effective Approaches for Implementing the G20/OECD High-Level Principles on SME Financing (2018)

G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs (2016)

Taxonomy of instruments and incentives for infrastructure financing (2015)

Effective Approaches to Support Implementation of the G20/OECD High-Level Principles on Long Term Financing by Institutional Investors (2015)

Mobilising Private Investment in Sustainable Transport: The Case of Land-Based Passenger Transport Infrastructure (2013)

 Annual Survey of Large Pension Funds and Public Pension Reserve Funds

 

Implementation and capacity-building

EU-OECD Project on Promoting Economic Resilience in Yemen

EU-OECD Programme on Investment in the Mediterranean

Review of Egypt's good practices for quality infrastructure investment and capacity building for mobilising finance for infrastructure

 

     

 

 

 

 

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