The United Nations Climate Change Conference (COP) is the most important global climate change event of the year, bringing together stakeholders from governments, the private sector, youth organisations, and civil society. With the world not on track to meet the Paris Agreement’s climate targets, this year’s conference, COP28 – which will be held in Dubai from 30 November to 12 December – will be one of the biggest and most important to date. More than 90,000 people are expected to attend.
COP28 will see the conclusion of the inaugural Global Stocktake under the Paris Agreement – the result of two years of intensive work and collaboration. It will be an opportunity for countries and stakeholders to see where progress toward climate goals is occurring and where more progress is needed.
Already, we know more must be done. As the Intergovernmental Panel on Climate Change (IPCC) report showed earlier this year, it already seems likely we will exceed our collective goal of limiting global warming to 1.5C by 2030, and we will need to drastically cut carbon emissions to quickly control a further rise and then bring the temperature back down.
Infrastructure plays a leading role in ensuring global climate goals can be met. 79% of global greenhouse gas emissions are related to infrastructure, and 92% of the UN’s Sustainable Development Goals (SDGs) can be achieved through infrastructure investment. In recent years, we have seen an unprecedented global effort to accelerate the development of sustainable, inclusive, and resilient infrastructure. Although this is encouraging, we must act faster and smarter to close the estimated annual USD3 trillion gap in infrastructure investment, particularly at a time when government balance sheets are at capacity. This is most acute in emerging markets and developing economies (EMDEs), where there is the greatest need, but where governments can least afford it. Early indications from the GI Hub’s data and soon-to-be-released Infrastructure Monitor 2023 report show there is finally a small upward trend in investment in these economies, highlighting the potential for the private sector, although closing the gap is still a long way away.
As the IPCC report demonstrated, meeting the 1.5C target is achievable if all parties to work together. To achieve climate-related infrastructure goals, we must make progress on the following three priorities:
1. A shift in focus from project to platform. Infrastructure development is notorious for being siloed and for moving too slowly. This is in part due to a tendency to focus on individual projects. As the G20 Independent Experts Group report recommended, we need platforms, not projects, to achieve infrastructure development at scale. Platforms can include those with an outcome focus that coalesce efforts around an overarching global goal, such as to increase financing for mitigation and adaptation efforts, such as GAIA, as well as those with a geographic focus, such as Egypt’s Nexus of Water, Food and Energy program. Platforms combine stakeholders and tools – from blended finance to political risk insurance – to mobilise capital and deliver infrastructure at scale.
What to expect at COP28: Be on the lookout for announcements under the Just Energy Transition-Partnership (JETP) Indonesia country platform. JETPs had a rocky start in South Africa, so the International Partners Group (IPG) will seek to use JETP successes in Indonesia to reassure stakeholders of their viability.
2. Commitments from multilateral development banks (MDBs). Developed in the aftermath of World War II with little change since, MDBs are under pressure to modernise and expand their efforts, particularly around climate change. For such large organisations, there has been remarkably quick progress, including the World Bank’s Evolution Roadmap. Just last month, the World Bank widened its mandate to include climate change. However, more needs to be done by all MDBs. They play an outsized role in mobilising capital for infrastructure in EMDEs by bringing stakeholders together, de-risking investments, and providing much needed technical and policy expertise. However, their ratios for mobilising private capital are tiny, reflecting outdated bureaucratic processes, a lack of appetite to take on more risk, and a lack of coordination with external stakeholders.
What to expect at COP28: Be on the lookout for announcements from MDBs about their risk mitigation instruments for private capital mobilisation. The GI Hub is working with stakeholders to develop a risk mitigation pilot program to support these efforts, and we hope to make a public announcement on its scope and scale in early 2024.
3. Reforms to banking regulations. Globally, government balance sheets are at capacity. In the absence of serious debate around taxation policy, efforts to close the infrastructure investment gap are focused on private capital mobilisation. To mobilise private capital at the pace and scale required, we need global regulatory reform, including developing infrastructure as an asset class. Following the Argentinian G20 Presidency in 2018, the GI Hub has been leading these efforts. Recent Basel III regulations do not recognise infrastructure as a distinct asset class, so capital charges for infrastructure will very likely increase, making infrastructure less attractive to banks who play a leading role in financing private investments. If this is not addressed, it will become more difficult to mobilise private capital for infrastructure, at a time when this capital is desperately needed.
What to expect at COP28: We don’t anticipate any significant announcements in this space at COP28 but be on the lookout for this topic to be advanced during the Brazilian G20 Presidency, which starts in December 2023.
Although COP28 offers an opportunity for a global stocktake of collective climate efforts, including for infrastructure, the reality is that we remain off-course to meet the Paris Agreement’s climate targets. To achieve them, we must work more efficiently and accelerate our efforts, including tackling issues that may appear too difficult to address. Infrastructure’s role in achieving climate targets and sustainable development goals cannot be underestimated. To have any chance of coming close to achieving climate targets, we must make headway on infrastructure platforms, MDB reforms, and global regulatory reforms. Working together, we can achieve this.
Visit the GI Hub’s Treatment of Infrastructure as an Asset Class in Regulations initiative to learn more about how we're advancing regulatory reforms to support infrastructure development.