Investing in the correct, sustainable infrastructure in African cities like Johannesburg as well as in Asia over the coming decades is fundamental for ensuring prosperity, not only for the continent, but globally, Paul Clements-Hunt, CEO of The Blended Capital Group and special adviser to the Cities Climate Finance Leadership Alliance (CCFLA), an initiative launched in September 2014 by UN Secretary General Ban Ki-moon, told Fin24 on Thursday.
With this in mind and in preparation for the United Nations Cop21 climate summit in Paris, the Cities Climate Finance Leadership Alliance is hosting a regional workshop in Johannesburg on November 23 and 24, followed by one in Bangkok on November 26 and 27. The workshops are presented in collaboration with the Executive Office of the UN Secretary General (EOSG).
At the workshops major investors, policy-makers, financial institutions and corporations will explore and recommend – in practical terms – how better to mobilise capital investment at scale into an emerging, low-carbon infrastructure asset class to create and accelerate long-term climate-smart infrastructure and climate-proofed cities, which will underpin a sustainable world, explained Clements-Hunt.
“We know investment in infrastructure is a long-term investment of 30 to 40 years. If you get it right, it is a solid investment for the world’s largest asset owners like pension funds, sovereign wealth funds and insurance reserves looking for returns of 4% and more,” he said. “Johannesburg and Bangkok are vibrant cities in emerging economies. Both cities have millions of people dependent on them and will be impacted by climate change in coming decades.
That is why there is a critical need for cities worldwide to have infrastructure upgraded and retooled to make them resilient to weather challenges due to climate change.”
The aim of the workshops is also to obtain pledges from the finance and investment community to look into how they – in conjunction with the UN – can mobilise trillions of dollars into these kinds of investments over the long-term. Clements-Hunt said the basic scale of the investment opportunity is that there are 7.4-billion to 7.5-billion people on the planet of which 60% live in cities.
This will increase to 70% over the coming decades. The bill for required city and infrastructure spend, per year, just to maintain and for essential upgrades, stands at $3-trillion to $4-trillion a year over the next 20 years. On top of that, and to allow climate-proofing resulting in smart cities, would cost an extra $1-trillion per year. “Cities account for a huge contribution to energy use.
A lot is common sense, but it is rather about how to integrate what we already understand,” he said. Both the private and public sector would have to be involved in the process. “Good long-term investment by the public sector is needed, which can draw on private capital too – like pension funds and sovereign wealth funds. If you get the public-private blend right, you get a good return on investment,” said Clements-Hunt.
“We need to build a sense that a multi-billion or trillion dollar in investment in African infrastructure is fundamentally a sound investment, given the nature of the Africa growth story. Productive investments of the future are to a large extent in Africa and in Asia, so we have to get the deep pools of capital from the North and the West involved. And this message will be carried through to Cop21 in a real-time video conversation.”
He said if African urban, transport and energy infrastructure can be gotten right, that would be a huge boost to global development in the 21st Century.
“Africa is where a fundamental growth story with planet-wide implications is unfolding and the continent needs the cities and connectivity to support that,“ explained Clements-Hunt. “The savings of hundreds of millions of pensioners worldwide need safe, productive investments that yield reasonable returns over many decades.
If you get African infrastructure right – and that includes fair and equitable pricing for the communities that use it – then this becomes such an investment that protects long-term investment wealth and the communities that benefit from smart, fit for purpose infrastructure.”
He emphasised that greater private investment needs to flow into smarter, safer, climate proofed cities that empower sustainable growth and the vibrant communities it creates. “Investing in climate-smart infrastructure is not a cost for communities, it is the best possible long-term investment that can be made,“ added Clements-Hunt.
“Also, the world’s largest investors such as pension funds, sovereign wealth funds and the family offices of the rich and super rich are waking to this. They can protect their assets and serve their pensioners over many decades with well targeted investment in sound infrastructure.”