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Financing Infrastructure Projects in Cities Avoiding Traps and Achieving Sustainability

Global Infrastructure Basel Foundation (©)

GIB, May 2014 | André Schneider

Guiding Principles for Sustainable Infrastructure

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• Promote sustainable development to assure that– ensure that all activities are environmentally sound, socially desirable, economically viable,

and in compliance with applicable law;– ensure that multi-stakeholder processes for the resolution of conflicts are in place.

• Assure equitable participatory processes to implement that– there is adequate stakeholder participation in the critical stages of the project;– there are stable, reliable and equitable partnership based on mutual trust and respect;– all consumers (men and women) will be actively informed about the sustainable

infrastructure and the ensuing services;– all consumers (domestic, governmental, industrial) are treated equitably and have easy,

non-discriminatory access to independent consumer rights offices assuring equitable treatment of complaints and prejudices due to non-compliance;

– workers’ rights are respected.

• Assure that the sustainable infrastructure and services that are safe and affordable for all parts of the population.

The 10 Principles

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• Based on the guiding principles, we have derived the following ten themes, which we can easily demonstrate that they clearly affect the performance of sustainable infrastructure projects and their governance: – Accountability– Transparency– Customer Focus– Results Orientation– Poverty Responsiveness– Power-Balanced Partnerships– Shared Incentives– Sound Financing Mechanisms– Proactive Risk Management– Resource Protection

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What are we looking at

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What are we looking at

Analysis of Project Characteristics by Region

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Comparing with GIB AssessmentOttawa Light Rail Transit

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42% of questions of the GIB assessment answered based on the business case on the Ottawa Light Rail Transit HBS case

Comparing with GIB AssessmentTransMilenio, Bogota

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27% of questions of the GIB assessment answered based on the business case on the TransMilenio HKS case

Comparing with GIB AssessmentLevel of Answers

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Comparing with GIB AssessmentResult Spiders

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Comparing with GIB AssessmentResult: Ottawa Light Rail Project

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Comparing with GIB AssessmentResult: Ottawa Light Rail Project

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Themes Best Practise Low Performance

Accountability Clear organisational setup, Enforcement of regulations, Traceable contract awards

Transparency Public access to information, Level of financial transparency, Level of transparency of service delivery, Level of transparency in contract preparation and negotiation, Communication of consultation with stakeholders

Customer Focus

Results Orientation Effectiveness to achieve targets

Poverty Responsiveness Poverty impact assessment

Power-Balanced Partnerships Stakeholder interaction, Balance between contracting parties when contracting out services

Shared Incentives Explicit future development

Sound Financial Mechanisms Knowledge of real cost structure, Cost recovery, Economic viability of tariff structure, Controlled financial liability impact

Proactive Risk Management Risk culture, Investigation of risk landscape, Risk mitigation and allocation

Resource Protection Quantitative monitoring of resources, Environmental considerations for investment priorities, Demand-side resource conservation, Environmental aspects in development of sustainable infrastructure

Comparing with GIB AssessmentResult: TransMilenio, Bogota

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Comparing with GIB AssessmentResult: TransMilenio, Bogota

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Themes Best Practise Low Performance

Accountability Clear organisational setup Existing rules for sustainable infrastructure, Enforcement of regulations

Transparency Level of transparency in contract preparation and negotiation

Public access to information, Effective communication, Level of financial transparency

Customer Focus Procedures for continuous improvement

Results Orientation

Poverty Responsiveness

Power-Balanced Partnerships Stakeholder conflict management

Shared Incentives Incentives for result orientation

Sound Financial Mechanisms Revenue collection efficiency Cost Recovery

Proactive Risk Management Provisions for unanticipated risks

Resource Protection Demand-side resource conservation

Insights and Best Practises

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• Sustainable lifestyles can only be developed if the infrastructure makes choices available that support these objectives.

• But confronting these challenges of climate change mitigation and adaptation, resource scarcity and energy

security will require massive investment in the fundamental reconfiguration of the infrastructure that supports modern society.

• This implies that every infrastructure that will be developed has to comply with sustainability characteristics and this for all aspects of sustainability: social, environment, and economic.

• Our experience shows clearly that not achieving such compliance will result in important risks for infrastructure projects, like costs for non-compliance, delays in project implementation or use of infrastructure, difficulty to assure project financing, and finally discontinuation of the project.

• During the conference, we will deepen many of the mentioned topics, like:– sustainable transportation, today at 14:00;– increasing credit worthiness, today at 16:00;– sustainable infrastructure as an asset class, tomorrow at 9:00;– sustainability grading, tomorrow at 11:00;– sustainable credit rating, tomorrow at 13:00.