Project Finance

CHAPTER 7Environmental and Social Governance (ESG)

Project finance and infrastructure investment invariably entail some level of negative environmental and social impact—development versus sustainability zero-sum trade-off. Global population growth, urbanization, and the existential threat of climate change present new challenges in meeting the estimated $18 trillion gap between global infrastructure needs and current infrastructure investment over the next 20 years.¹ In January 2020, the Global Infrastructure Hub in collaboration with the World Economic Forum and Boston Consulting Group released a draft report on future trends for infrastructure and the large-scale, transformational megatrends over the next 30 years.² The report included a survey of 70 countries (35% emerging markets and 65% developed countries) identifying the most pressing issues that countries were most concerned about. Not surprisingly, infrastructure sustainability underscored by aging infrastructure, the increasing frequency of natural disasters, and reliance of infrastructure and the rise of climate change ranked highest in terms of both impact and lack of preparedness. In its 2016 report, “Meeting Asia's Infrastructure Needs,” the ADB quantified the cost of climate change impacts in meeting Asia's growing infrastructure needs through 2030 at around $3.4 trillion—primarily the costs to insulate infrastructure against increasing climate change impacts (rising sea levels, increasingly severe weather events, ...