Editorial Note:

From 25 to 27 April 2019, the 2nd Belt and Road (BRI) Forum for International Cooperation was held in Beijing, and on 22 April, the Office of the Leading Group for Promoting the Belt and Road Initiative published a report titled “The Belt and Road Initiative (BRI): Progress, Contributions and Prospects”. According to the report, significant results have been achieved in the proposed “five connectivities” since 2013: policy coordination, infrastructure building, unimpeded trade, financial integration and people-to-people exchange, and a sense of identity and countries’ willingness to participate in BRI cooperation have been strengthened.

Adhering to the principle of achieving shared growth through consultaiton and collaboration, the BRI aims to build a community of a shared future for mankind and actively promotes the economic globalization and the reform of the global governance system. A report released by the Advisory Council of the Forum on 24 April points out that by improving infrastructure connectivity, the BRI helps remove bottlenecks of economic growth, trade and investment in developing countries, improves regional economic integration, and fuels the growth of the world economy in the Post-Crisis Era.

Since the introduction of the BRI in 2013, China has been actively advocating and implementing the concept of green development in BRI cooperation. Building a green financial system and promoting sustainable infrastructure connectivity are a basis of green development. This paper defines the “sustainable infrastructure connectivity”, elaborates on the challenges faced by green finance as a facilitator, and finally raises policy suggestions. Due to the length of the text, this article contains the first part.

Defining “Sustainable Infrastructure Connectivity

Under the premise of not infringing the sovereignty of involved countries, the “five connectivities” of the BRI aim to support regional connectivity. Infrastructure connectivity is a fundamental and prioritized area. To that end, China initiated the Initiative on the Global Infrastructure Connectivity Alliance (GICA) in 2016. GICA received unanimous approval of finance ministers of G20 countries and presidents of central banks, turning the infrastructure connectivity into a global issue.

Infrastructure in general consists of tangible assets, equipment and facilities. From an economic perspective, infrastructure can be seen as a structure that permits or simplifies the production and exchange of goods and services.[1] It is, therefore the backbone of the global economy. At present, the need of replacing old infrastructure is increasing in developed countries, while population growth, industrialization and urbanization in developing countries require investments in new infrastructure. Infrastructure is crucial to stabilize and stimulate the global economic growth. Sustainable infrastructure will be conducive to the sustainable development of the economy and society.

Currently, there exists no uniform definition of “sustainable infrastructure”. In September 2015, the United Nations Sustainable Development Summit published the 2030 Agenda for Sustainable Development, listing sustainable infrastructure construction as one of the 17 sustainable development goals. The author believes that sustainable infrastructure should be interpreted based on the following basic elements:

  • Economic sustainability: From the macroeconomic perspective, sustainable infrastructure has a positive impact on GDP growth, employment and capacity building for economic development. From the microeconomic and financial perspective, sustainable infrastructure is affordable by government and users.
  • Environmental sustainability: By using advanced low-carbon technology, natural disaster-resistible design and clean equipment that does not damage the environment, sustainable infrastructure helps achieve environmental sustainable goals such as energy conservation, emission reduction, climate change adaptation and pollution control.
  • Social sustainability: Sustainable infrastructure not only helps improve the overall social welfare, brings positive social effects and generates positive social benefits, but also fulfills the demands of all income groups. It substantially alleviates regional poverty especially through financial support and reduction of climate risk, following the principle of universality and equity.

Connectivity within sustainable infrastructure refers to the free flow of goods, people, services, technologies, ideas and other elements among regions by tightening regional connection at the construction phase. The connections mentioned include not only physical connection, such as transportation (road, railway, airport, port), energy (oil and gas pipelines, power grids) and telecommunication (cross-border fiber-optic cable, broadband), but also institutional connections, such as policy frameworks and standards.

Unravelling the BRI sustainable infrastructure connectivity

Building sustainable infrastructure connectivity along the BRI is a massive multi-stakeholder undertaking.  It requires peer-to-peer discussions and collaboration and strong interaction between political, economic, social, technical and other matters.

It has the following goals:

  • deepen the cooperation among countries and regions with different resources, industrial structures, and economic and social conditions,
  • promote free flow of region-specific resources,
  • reduce regional logistics and transaction costs,
  • maximize sustainability technology transfer,
  • increase knowledge sharing through pilot projects.

Altogether, sustainable infrastructure connectivity aims to contribute to a more balanced and inclusive growth throughout BRI countries. As a result, sustainable infrastructure connectivity could enlarge the economic, social and environmental benefits of regional cooperation, lay the physical foundations for countries and regions to better use resource advantages, divide labor based on specialisms, support collaboration among industrial chains and expand market access. Ultimately, it could improve the economic resilience and sustainability of the involved countries.

(1)  Economic benefit: providing new impetus for the BRI economic growth

Infrastructure is an important indicator to measure people’s living standard and investment environment. As mentioned above, it is an important factor for productivity improvement and stable economic growth. Research has shown that an increase of 1% in infrastructure investment can result in a rise of 1.2% in GDP growth.[2] Investing in sustainable infrastructure could bring the following economic benefits:

  • Promoting green economy and creating new economic growth: Sustainable infrastructure positively impacts upstream and downstream industrial chains, particularly the application and diffusion of sustainable technologies. Ideally, it further supports research in sustainability, and thus accelerates the transformation of regional economies.
  • Expanding market demand and creating jobs: Sustainable infrastructure connectivity facilitates flows of resources among BRI countries and regions.
  • Reducing uncertainty and attracting new sources of investments: Sustainable infrastructure could provide better resistance to uncertain environmental, social and governance (ESG) factors, and motivate forward-looking views in technology application, management and operation. Increased public acceptance of sustainable infrastructure could appeal to wider sources of investment.
  • Reducing operating costs and improving return on investments: Due to the advantages of sustainable infrastructure in energy efficiency, it incurs lower operating costs than traditional infrastructure. By improving the quality and emergency response capacity, sustainable infrastructure is more resilient to the impact of daily wear and natural disasters, and therefore results in lower maintenance costs, which would bring about more returns on investments. Building connectivity could further reduce operating costs and potentially provide higher returns by facilitating regional trade and investment, reducing logistics and transaction costs, and realizing regional economic synergy.

(2) Environmental benefits: enabling BRI countries to better cope with environmental and climate change risks

Infrastructure is the largest source of greenhouse gas emissions (accounting for about 70% of total greenhouse gas emissions). infrastructure investments will have a far-reaching impact on the future climate. The environmental benefits of sustainable infrastructure could largely avoid the lock-in of high carbon emissions, mainly in the following aspects:

  • Reducing energy consumption and mitigating energy crises: Energy consumption could be reduced by improving energy efficiency in infrastructure or by providing new energy-saving facilities, such as renewable energy. In particular, sustainable infrastructure connectivity helps solve the imbalanced geographical distribution of energy resources, contributes to the global energy transformation, improves the security and stability of regional energy systems through multi-energy complementarity, and thereby enhances human capacity to deal with climate change.
  • Strengthening regional coordination and cooperation on environmental protection and mitigating climate risks through common planning and consultation.
  • Gathering joint efforts for climate change, disaster prevention and management among regions and enhancing the resilience of the entire region: Climate-resilience infrastructure is an important component of sustainable infrastructure. It safeguards basic public services and minimizes losses in extreme natural conditions by enhancing infrastructure resilience.

 (3) Social benefits: accelerating social development and improving living conditions

Along with the widening gap between the rich and the poor, various countries have been troubled with the questions on how to balance social equity. Social development goals, such as inclusive growth, social well-being and poverty alleviation, largely depend on the type, coverage and quality of infrastructure [3]. Due to the problems of the current governance, infrastructure in many regions has failed to fully perform its social functions. The development of sustainable infrastructure in the future should promote the improvement of social governance capacity.

  • Improving social inclusivity: Sustainable infrastructure needs to account for fair access of different income groups. If done right, it should help reduce poverty, improve the quality of life and enhance the well-being of residents through increased access to mobility and energy.
  • Improving stakeholder engagement: Sustainable infrastructure should emphasize participatory governance, promote open consultation, transparent decision-making and innovative management. It should contribute to the improvement of social governance capacity.

The original Chinese article was translated by Hanzhi Lu.

[1] UNEP, Sustainable Infrastructure and Finance: How to Contribute to a Sustainable Future, Jun. 2016

[2] Citi GPS. (2016). New Citi Report: Infrastructure – the $59-trillion opportunity to kickstart global growth.

[3] Bhattacharya A., et al. (2016), Framework for Assessing the Role of Sustainable Infrastructure, Brookings Institution, Washington DC.

About the author(s)

Dean at International Institute of Green Finance

Professor Yao Wang is the Dean of the International Institute of Green Finance (IIGF) at the Central University of Finance and Economics. She also serves as Deputy Secretary General of Green Finance Committee (GFC) of the China Society for Finance and Banking, as Secretary General of the Green Securities Committee (GSC) of the Securities Association of China, as fellow at the University of Cambridge Institute for Sustainability Leadership (CISL), as advisor to the Sustainable Finance Programme at the Smith School of Enterprise and the Environment at the University of Oxford and as consultant for the Luxembourg Stock Exchange.

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