Thank you to Prime Minister Kishida for hosting us and to Japan for leading on quality infrastructure efforts for nearly a decade.
Infrastructure development needs vast new resources. The ambition should be to create a dynamic, investable asset class for infrastructure in developing countries that provides geographic and sectoral diversification. Climate infrastructure can clearly be an important portion of this asset class, as should be toll roads, electricity transmission assets, electricity distribution, and many types of water-related assets. All of these are currently underfunded but would be attractive to investors if properly packaged.
There are three main steps needed to achieve this: standards, verification of results, and standardization of contracts and techniques. This can make thousands of individual assets available to investors.
An important early step is to converge on a set of measurement standards. There are many examples underway now. At the 2019 G20 Osaka Summit, the World Bank was a key part of creating the Quality Infrastructure Investment (QII) Partnership. This has helped mainstream QII principles in more than $22 billion of World Bank projects.
Several different standards and taxonomies are under discussion for sustainability disclosure and climate finance. The ASEAN taxonomy was offered as a model in Niigata last week. The ISSB and U.S. SEC have proposed sustainability reporting standards. The World Bank Group supports harmonization of standards to reduce cost and enhance transparency and have published comprehensive Paris alignment guidelines for our instruments and sectors.
The second step is creating financing instruments with verifiable results that build trust and make projects attractive and “saleable” to donors and investors. They want to invest but need to avoid greenwashing. At first, this can be done one innovation at a time as we have done with Citi with the water purification bond in Vietnam and with the Black Rhino Bond in South Africa. To move to bigger projects focused on greenhouse gas emission reduction, we launched the multi-donor trust fund called SCALE. It is based on verification of results and builds on our experience with the Komati coal decommissioning project. The SCALE trust fund provides concessional resources for projects that cause actual reductions in greenhouse gas emissions. The goal is to create size, transparency, and verification that avoids greenwashing.
The third necessary step is standardization of contracts. This will allow risk diversification and can create a robust climate infrastructure asset class. Our Scaling Solar and Mini-Grid Portfolios are two successes in realizing the efficiencies and impact of scale and uniformity. Standardization can create a market of investment grade securities that provide institutional investors better access to emerging market infrastructure debt. Previous speakers mentioned the importance of a forum where expertise can be shared.
Let me conclude with an important related issue.
To become investable, countries need to do more to facilitate private capital. We are actively strengthening our support through a more holistic World Bank Group effort. For example, countries have been accustomed to hold the best assets in government enterprises. The World Bank, IFC, and MIGA can combine their efforts to help make these assets more sustainable and marketable. Ideally, this is part of a country’s overall effort to facilitate private capital inflows, including for climate.
I want to thank Japan and all of you for engagement.
