Day five at GEC
Private companies need to be incentivised to invest in infrastructure
The morning’s keynote addresses focused on the challenges of sustainable infrastructure investment.
Jordan Schwartz, Director for Infrastructure, Public Private Partner and Guarantees at the World Bank, talked about how to encourage private companies to invest in infrastructure projects.
In particular, he talked about how we need to provide incentives for private companies to bring all their expertise to an infrastructure project.
For example, he said, they should be encouraged to proactively bring new technologies to a project - rather than relying on the procurer to specify what new technology they’d like to be contributed.
‘More concrete and steel is not going to solve the problem’
The second speaker, Guna Gunalan, Vice President of AECOM, shared some examples of infrastructure challenges from his own personal experience.
He spoke about a rapidly growing population causing water shortages in Chennai, India, where he grew up. In Utah, where he currently lives, he pointed to the example of the Interstate 15 highway, which is suffering from a fast-increasing traffic burden.
“More concrete and steel is not going to solve the problem,” he said. “You need to have the leadership, you need to have the political will, you need to have a plan, you need to have the resources, and most importantly, you need … a good governance structure in place.”
Expanding on the need for good governance, he added: “Corruption and sustainability cannot co-exist.”
The role of asset tokenisation
Ahead of the panel discussion, the chair Theo Cosmora, Founder and CEO, Social Finance & SDG Foundation, gave the audience a role-play demonstration of asset tokenisation.
He explained that this blockchain-based technology would allow shares of physical assets to be traded in the form of digital tokens.
A question from an audience member regarding the security of these transactions led the panel to discuss the future possibilities of digital contracts, with blockchain-based ledgers allowing transactions to become public information simultaneously.
Engineers need to build trust in the community
Dean Kimpton, president of Engineering New Zealand and Chief Operating Officer at Auckland Council, led a workshop about how the engineering profession is critical to community-led change.
The thing most engineering conferences focus on is big infrastructure solutions and how we solve those, he said. But what they don’t spend enough time talking about is building trust in the communities we serve.
“As engineers we always operate in our communities and we need to remember that. It’s important to remember that trust doesn’t come from talking about big infrastructure stories or big investments opportunities,” he said.
“It comes from understanding customers and dealing with person interaction."
Engineers need to step outside their engineering box
Citing multiple public surveys, he outlined that the public trust of engineers is already there:
“But the question is, if public trust us, why do we as a profession globally feel we have a lack of impact and influence?”
One thing he emphasised was the need for engineers to step outside their engineering box and become leaders.
“You don’t have to only be an engineer for the rest of your life – I’m an engineer, but I also became a leader. I can influence outcomes in a way I could never have if I was just an advisor.”
He asked the delegates: “What are you as an engineer going to do differently? How are you going to stand up, be a leader, take some risks yourself and have a go?”
‘We need to be better about telling our story’
Some interesting comments came from the delegates at the session:
“Engineers are great technically, but they are bad socially and even worse at communication. We need to be better about telling our story.”
“Engineers need to be bold enough to step outside our silo. To walk with other engineers, from different disciplines. If we know what the solutions for the problems are – we need to get them in front of the politicians.”
Availability versus affordability of water
The morning’s session on the topic of water featured a panel discussion on balancing availability and affordability.
Peter Grevatt, Director of the Office of Ground Water and Drinking Water at the US Environmental Protection Agency, outlined the financial challenges caused by different population changes.
Over time in declining rural communities, he explained, there could be no tax base left to pay for loans taken out to build infrastructure.
Meanwhile, in urban locations, there’s often a wide disparity in income that sees a large percentage of the population struggling to pay water tariffs.
“Affordability [of water tariffs] in the US is 4.5% of median household income … There are estimates that suggest over the next couple of decades, close to 30% of our population will not meet that threshold,” he said.
The poorest people will be forced to make the toughest decisions
Grevatt stressed that this would lead to stark challenges for individual households, such as having to choose between paying for medicine or water access.
“In a city like Philadelphia, close to 30% of the population is behind on their bills,” he said.
“Then that family is in a position where social services can say you have no drinking water … you may have your children taken away.”
We have to accept that not everything will generate revenue
Alex Money, an Oxford University researcher and a consultant to the World Water Council, discussed how private investors’ focus on returns presents difficulties for financing infrastructure programmes.
Money said: “We have to accept that not everything will generate revenue … either we take the SDGs seriously or we don’t.”
He urged delegates to consider “social returns” and other benefits – and to find investors who appreciate these.
Using a pilot water project in Mexico as an example, he showed how potentially you can bring a portfolio of projects together that can cross-subsidise each other, and work better doing so.
Water as a ‘connector’
Meanwhile, Hakkan Tropp, Head of Water Governance Programme at the OECD, argued for the role of water as a “connector”.
“It makes good sense to invest in water. By investing in water, we will really be investing in other SDGs.
“Hunger, for example – water will be used to grow food … Health issues … We can find links between water and any of the other SDGs,” he said.
How to better fund and finance UK infrastructure
The morning’s Inspire session looked at ways to optimise the funding, financing and leadership of UK infrastructure.
It discussed ICE’s recent policy report, State of the Nation (SoN) 2018: Infrastructure Investment. The report explores opportunities for future investment and opens a conversation about how the nation’s infrastructure can be better funded and financed.
Paul Sheffield, ICE Vice President and SoN steering group chair, spoke about the recommendations made to government.
The report recognises that some lines of credit may be lost when Britain leaves the European Union. To ensure that financing options remain open for development of our infrastructure network, ICE recommends that government consider contingencies.
If a renegotiated relationship with the European Investment Bank isn't possible post-Brexit, the government should continue to examine how we make better use of the under-used UK guarantee scheme in combination with some form of a UK investment bank.
Making the UK an attractive place to invest
Andy Rose, CEO Global Infrastructure Investor Association, gave a global overview to funding and financing of infrastructure. He spoke about his experiences of working across the world in the public and private sectors.
His key point was that all capital looks for a common risk profile when investing in infrastructure; projects that offer stable and long-term returns. Markets that are able to demonstrate this will receive the highest volumes of investment.
In the UK, putting the National Infrastructure Commission on a statutory footing would send a signal to global investors that the government is committed to a long-term approach for infrastructure delivery - therefore making the UK an attractive place to invest.
On sustainability, he remarked that a number of his members will now only invest in infrastructure projects where genuine environmental benefits are built into their procurement.
UK government doesn’t spend enough on infrastructure
Moderator James Stewart, Vice Chair and Head of Brexit at KPMG, spoke about why there needs to be a reform in the way infrastructure is funded.
He stressed that in order to do this successfully, we must look to build on existing frameworks and not reinvent the wheel.
He also said that the government’s commitment to spend 1% – 1.2% of GDP on infrastructure projects does not go far enough to service what’s needed in the UK, and that this falls short of what’s spent in many other leading economies.
ICE Director General Nick Baveystock’s GEC closing message