Investments in sustainable infrastructure won't just fall into our laps

Public-private partnerships involving institutional investors are one key pre-requisite.

According to OECD and IMF projections, the global economy is beginning to pick up steam and things are really moving ahead in Europe regarding strategy to combat climate change. It may not be immediately obvious, but sustainable economic growth is also contingent on sensible investments in climate mitigation and adaptation.

Let me explain:

The EU not only wholeheartedly supports the Paris Climate Agreement but also the Sendai Disaster Risk Reduction plan and the G7 Climate Risk Insurance Initiative. Together, these two initiatives strengthen cities' capacities to address disaster risks and increase access to insurance coverage against the impacts of climate change for many of the most vulnerable people in the developing world. In collaboration with member states, the EU is also putting together a concrete climate adaptation strategy whose successful implementation will depend not least on the support of the insurance industry and public-private partnerships.

The EU is also working with city mayors across the world to draw the world's attention to the significance of urban centres in achieving the climate goals set by the Paris Accords. At a recent Swiss Re-sponsored conference on how public-private partnerships can make Europe more resilient to natural  catastrophes, Jos Delbeke, the EU Commission's Director General for Climate Action, said that because financing major infrastructure projects across the EU accounts for one-third  of the EU's regional budget, member countries are advised that before they commence  building a new highway or port, that  they should first take into account the future impact of climate change.

Collaboration, collaboration

My point is that there is enormous potential for more cooperation both within Europe, between Europe and the rest of the world and between the public and private sector. This is urgently necessary if the current economic growth momentum is to be sustained. Investments in green finance and infrastructure will be crucial here because they meet the requirement for sustainable growth, contribute to financial market stability, and benefit society as a whole. Moreover, I believe the role institutional investors can play in this context is still massively underestimated.

Indeed, the Paris agreement calls for more public expenditure in the area of green finance.  And because funds for such expenditure would ideally come from both public and private sources, collaboration is key – firstly because neither partner can shoulder the financial burden alone and, secondly, because it's up to the public sector to ensure a more standardised responsible investing environment with a generally agreed set of best practices. This will provide clear guidance to investors and reduce investment barriers.

Swiss Re's stance

Swiss Re is a strong advocate of an investment approach based on environmental, social and corporate governance criteria (ESG). Close to 90% of our investments already take account of these factors today. This approach does not just promote sustainability, but also improves the risk profile and therefore makes economic sense.

But responsible investing on its own won't be enough to encourage more public-private partnerships in infrastructure investment. Nothing is going to fall into our laps. So what else needs to be done?  Firstly, documentation for infrastructure projects and finance need to be standardised, and a clearly defined mechanism for conflict resolution put in place. This will reduce uncertainties about regulations and reinforce investors' rights. Only by doing this and by introducing a new tradable asset class for infrastructure will it be possible to motivate long-term oriented investors to use a higher proportion of their USD 70 trillion in capital to fund infrastructure, stimulate the economy and ease the burden on the public purse.

Supporting financial resilience

Re/insurance supports financial resilience by acting as a shock absorber and promoting growth through its core businesses. This is particularly important in a challenging and volatile macro-economic environment.

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