Børge Brende warns climate change is here, the pandemic is ongoing, and the economy is recovering unevenly. Yet he was optimistic that the infrastructure provided the answers to all of these problems.
Opening the Global Infrastructure Conference, Børge Brende, the president of the World Economic Forum, described a stark global landscape in the midst of multiple crisis. That landscape was one of tangible climate change, an ongoing pandemic and damaged employment and economic prospects around the world.
Speaking to global infrastructure leaders, he left no room for ambiguity: “We just experienced what was, along with 2016, the warmest year on record. The flooding, storms and heatwaves we are feeling all tell us climate change has, unfortunately, arrived.”
The urgency of the climate crisis has been highlighted recently by the IPCC, and Mr Brende pointed out this wasn’t the only great global crisis the infrastructure sector had to help solve.
He explained: “The Covid-19 pandemic caused the worst economic crisis of our generation — a 3.2% contraction in 2020. Though the global economy is projected to grow 6% this year, the recovery risks being uneven, both across geographies and across industries.”
Working-hour losses in 2021, according to the International Labor Organization, will remain 4.6% below last year’s level and one of the hardest hit sectors has been construction. But despite this, Børge Brende was optimistic.
Cause for optimism
“These are the challenges. But there are, thankfully, opportunities. Because when we look to infrastructure, it is a way we can both rebuild our economies and restore our environment. And, today, governments are stepping up.”
He welcomed the news that G20 economies had injected $11 trillion in stimulus spending after the outbreak of the pandemic — three times more than the response to the 2008–09 financial crisis. He noted as well that the US Senate had now passed the $1 trillion bipartisan infrastructure bill — demonstrating the importance of infrastructure in the recovery agenda.
This, he said, was important for global growth.
“We know investment in infrastructure drives growth. Because it has a multiplier effect—between 0.4 to 2.2 times GDP per year, according to BCG. And, every $1bn invested can help create more than 10,000 total jobs.”
Just as importantly or perhaps more so, he said this was also the path tackling climate change.
“Currently 70% of global greenhouse gas emissions come from infrastructure construction and operation. This is why it so important that we use this opportunity to shape investment in infrastructure to deliver green growth.”
Indeed, he told attending infrastructure leaders that there was now no meaningful alternative.
“Let’s be clear about costs: the cost would be not to go green.”
Natural disasters caused by climate change now cost low-and-middle-income countries $18bn a year in damage to infrastructure assets but he highlighted a worse aspect: “We have seen the human and economic toll recent storms and flooding have taken on communities around the world.”
So how does the president of the World Economic Forum see these challenges being met? Well, he sees three key enablers being crucial.
Public and private collaboration
“First, we need the public and private sector to work together. The magnitude of government responses has put us in uncharted territory. There are big announcements—trillions of recovery funds—but there are not yet enough mature infrastructure projects to absorb the capital.”
While he called on governments around the world to prioritise “shovel ready” projects to have an impact on climate change quickly, he called on business to work with government “to increase the speed at which project pipelines flow.”
In that light, he offered the World Economic Forum’s help, saying his organisation was pleased to run country dialogues between infrastructure industries and governments.
“These high-level virtual sessions bring together leaders to discuss frameworks for delivering projects that meet growth targets while fulfilling sustainability and equity goals. I am so proud that we have curated four dialogues with key G20 economies, with more to come in 2022.”
Supporting private finance through better information
Next, he turned to private financing, warning that government stimulus right now could not achieve everything and could not last indefinitely. And to support private sustainable finance, he called for better benchmarking and common metrics.
“The term ‘sustainable infrastructure’ is defined in a multitude of ways, often leading to investor confusion, or worse, avoidance. Having a common metric for sustainability is so important, it will help investors compare the sustainability of various projects more easily.”
The World Economic Forum has worked on exactly this challenge, alongside Deloitte, EY, KPMG and PwC. The aim was to cut through the fragmented landscape of sustainability reporting by developing a set of universal metrics that companies could report, and that investors could rely on to help guide decisions.
Innovation
Finally, Børge Brende stressed that innovation would be integral to rapid and lasting success.
“Transformation of infrastructure has the potential to improve sustainability, while increasing efficiencies and optimising performance. For instance, the use of artificial intelligence across infrastructure – energy, transport, water, and agriculture – can boost global GDP by up to 4.4% and reduce greenhouse gas emissions by as much as 4.0% this decade.”
Bringing existing infrastructure up-to-date in regards to existing technologies represents a significant opportunity because much of the sector still lags behind other industries for technological adoption.
The McKinsey Global Institute has reported that labour-productivity growth in construction is far below other sectors. If productivity were to catch up, it could boost global GDP by 2%.
To pursue greater innovation, Børge Brende highlighted the work of the Global Infrastructure Hub, a G20 initiative on infrastructure to collect best practices of technology adoption from around the world and present these to member countries.
Concluding, Børge Brende implored global infrastructure leaders to grasp the opportunity ahead, saying, “While there are no silver bullets to solving our economic and environmental challenges, infrastructure may be as close to one as we get.”
He then welcomed the willingness of the sector to take a stand.
“It is meetings such as these that fuel my hope. Because purpose-driven dialogue is the first step in accelerating the delivery of sustainable, future-focused infrastructure around the world.”
So he called on the industry to work together with stakeholders to shape the decisions today that would last for generations.
“If we facilitate the flow of finance in the right direction, and we make innovation a priority, I am confident we will achieve a more sustainable and prosperous future.”
