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James Stewart: What Sustainable Development Can Teach Us About Infrastructure

The private sector can learn from the UN’s Sustainable Development Goals by prioritizing people, the planet and prosperity when it comes to infrastructure investment.

 

Nothing touches people’s lives more immediately than infrastructure. A competitive, inclusive, fair and modern society must deliver effective and affordable public services — including energy, housing, clean water, universal healthcare, communications and transportation. As global leaders grapple with the challenge and expense of delivering these services, the private sector has a critical role to play. But public-private partnerships (PPPs) must begin to prioritize a new set of P’s — people, the planet and prosperity.

The United Nations Sustainable Development Goals (SDGs) are a good place to start as we think about how to put the reimagined three P’s at the forefront of public infrastructure development. The SDGs aim to increase access to essential services in low-income countries, improve efficiency, fill the capability gap in the public sector, promote greater equality both in terms of income and women’s empowerment, make the planet more sustainable, mitigate risks, and create more resilient infrastructure. Solutions need to be replicable, scalable and deliver real impact.

Public-private partnerships will be essential to achieving these goals. I recently attended a meeting of the UN Economic Commission for Europe (UNECE) in Geneva, Switzerland that focused on new good governance guidelines for public-private partnerships that are working to address the SDGs. The conclusions have much to teach us about creating a moral infrastructure that prioritizes our shared humanity.

Developed countries have long used PPPs as a tool to attract private finance, get better value for investment and improve operational efficiency. While the SDGs are aimed at poverty alleviation and social development in low-income countries, I believe many of the new standards being set are also relevant in developed economies increasingly concerned about climate change, inequality, and unstable economic growth.

The SDGs require governments to change their priorities, which in turn will impact decisions regarding infrastructure. Measuring projects against the SDGs would force public-private partnerships to focus more on outcomes when evaluating a project’s performance. Value-for-money would still be an important driver, but not at the expense of other targets and the three new Ps.

How do the three P’s of moral infrastructure translate in practical terms? The “people” part of the agenda focuses on alleviating poverty and social good — especially by improving access to essential services such as healthcare and education. Affordability, a chief concern, may be achieved by subsidizing services to the poor, while providing incentives and a reasonable rate of return to the private sector.

The “prosperity” agenda would focus on inclusive development and a triangular model based on small projects and local SMEs, large investors with capacity and expertise, and the local government.

The “planet” agenda would focus on projects that mitigate the effects of climate change and move us toward a low-carbon economy, including renewable energy projects and PPPs that directly benefit the environment — such as wastewater projects or waste-to-energy projects.

When we put “people,” “planet” and “prosperity” together, we begin to create infrastructure morality. Every day, I read headlines about how infrastructure decisions impact these three new Ps — sometimes negatively as illustrated by the water crisis in Flint, Michigan or corruption scandals in Brazil. Poor infrastructure morality carries a huge social and economic cost in society. As an industry, we must do more to address these challenges, improve transparency and support the evolving landscape created by the SDGs.

Multilateral organizations like the World Bank Group, European Commission and Asian Infrastructure Investment Bank (AIIB) have the ability to become leaders on this agenda. They could do this by changing their lending criteria and performance measures to account for the SDGs. The AIIB, for example, already says it will put in place strong policies on governance, accountability, financial, procurement and environmental and social frameworks — so that is not a big leap.

Governments have a natural incentive to support more sustainable infrastructure, based on their moral obligations to protect their citizens, but the public purse cannot carry the burden alone. Infrastructure remains an expensive aspiration for many governments. The private sector is known for its creativity and will be called upon to find affordable solutions to these challenges even as the nature of PPPs changes to take into account these new goals.

What remains to be seen is who will step forward and lead from the private sector. Which companies will sign up to these new socially-minded PPPs, and which will not? I believe plenty of companies will recognize the long-term economic value in making sustainable, growth-driven business decisions. After all, infrastructure is a long-term investment that favors stability. The truth is that our future profits are already linked to how well we nurture “people,” “planet” and “prosperity.”

(Top image: The construction of the Miami Tunnel.)

 

Stewart headshotJames Stewart is Chairman of KPMG’s Global Infrastructure practice. 

 

 

 

 

All views expressed are those of the author.

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