CHAPTER 5 Green Infrastructure

Box 4. Quality Infrastructure Investment

Quality Infrastructure Investment is a driver of economic growth and prosperity. G20 countries introduced principles for Quality Infrastructure Investment as a prevailing strategic direction and high aspiration at the G20 Osaka Leaders' Summit in Fukuoka, Japan on 9 June 2019.

The QII principles promote an infrastructure development approach expected to deliver high benefits at low cost in the long-run in terms of contribution to well-being, human lives saved, environment and ecosystems services conserved, enhanced economic activity, as well as financial sustainability. The longevity of infrastructure and long-run cost-effectiveness matter as well: both social and economic returns on investment should be maximised through QII in the long term. Given that QII's positive impacts create favourable investment opportunities, alignment with QII principles is also deemed necessary in mobilising capital and narrowing the infrastructure gap.

It is worth noting that the G20 Osaka Leaders' Summit also recognised the Quality Infrastructure Investment Database (QII Database) and its ability to help to implement quality infrastructure investment. The QII Database was developed in collaboration with the GI Hub, the OECD and the World Bank and comprises resources and facilities relevant to Quality Infrastructure Investment under the Principles for Quality Infrastructure Investment including sustainable growth and development, economic efficiency, environmental considerations, climate resilience, social considerations and infrastructure governance.

Source: MoF.go.jp, GIHub.org

G20 Countries' Regulation for Green Infrastructure

The Survey shows that most countries have already integrated the principles of green infrastructure into national strategic documents.

For example, the Investing Plan in Canada is set to improve the resilience of communities and spur the transition to a clean growth economy. The Plan emphasises that climate change considerations should be incorporated into infrastructure planning, design and investment decisions. Under the Investing in Canada Infrastructure Program, the 'climate lens' applies an eligibility test for climate-related green infrastructure projects.

Japan has the Fundamental Plan for National Resilience, and Saudi Arabia has included 'green infrastructure' provisions in the National Spatial Strategy, National integrated infrastructure strategic plan and National Transport strategy. Under the Road map on circular economy, France is moving towards a new type of economy, where consumption is moderate, products have a longer lifetime, and waste is limited and can be transformed into new resources.i

Green Bonds and Related Financial Instruments Facilitate Investment in Green Infrastructure

In order to raise capital, it is necessary to ensure that growing concerns about environmental conditions and climate change interventions were combined with sustained economic returns.ii Many governments and international organisations are taking steps to stimulate green finance.

The green bond is an instrument intended to encourage sustainability and to support climate-related or other types of special environmental projects.iii Green bonds represent a small but growing share of the total bond market. investors through the debt capital market.^iv The World Bank is a major issuer of green bonds. Like any other bond, a green bond is a fixed-income financial instrument for raising capital from investors through the debt capital market.v

There are some other types of 'green' instruments - for example, Climate Bonds. Climate bonds are intended to achieve a specific environment or energy outcome.vi Additional measures may include loans discount interest, green funds, tax relief measures or "green" insurance and "green" public procurement.

Typically, green bonds have the same regulatory status as conventional "non-green" bonds. However, there are some voluntary regulation and principles of issuing.

The International Capital Market Association (ICMA) issued the Green Bond Principles (GBP) in January 2014, shortly after the issuance of the first corporate green bonds in 2013. GBP, developed by ICMA, are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond.

In June 2015, the London Stock Exchange launched its dedicated green bond segments, establishing strict admission criteria aligned with ICMA's Green Bonds Principles. London Stock Exchange has introduced its guidelines such as the GBPs that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a

Green Bond. Meeting the requirements of the London Stock Exchange's green bonds requires providing the Exchange with the relevant "second opinion" document that certifies the 'green' nature of the bonds.

In June 2018, the European Commission set up a Technical Expert Group on Sustainable Finance to assist in developing the European Green Bond Standard.vii In August 2019, Moscow Exchange updated Listing Rules to create a Sustainability Sector for financing projects in the fields of environmental and social sustainability.viii

COUNTRY

Strategic priorities for developing green infrastructure

Guidelines issued to encourage capital raising for green projects

Financial instruments relevant to green projects' funding

Argentina

Australia

Brazil

Canada

China

Franće

Germany

India

Indonesia

Italy

Japan

Rep. of Korea

Mexico

Netherlands

Russia

Saudi Arabia

Singapore

South Africa

Spain

Switzerland

Turkey

United Kingdom

In place

Not in place

Canada

Infrastructure Canada has developed a federal requirement related to the consideration of GHG emissions reduction and climate resiliency. Under the Investing in Canada Infrastructure Program, this 'climate lens' applies eligibility test for climate- related green infrastructure projects and to any projects with total eligible costs of $10 million or above.

The lens is also applied to the Disaster Mitigation and Adaptation Fund, and climate- related Smart Cities Challenge finalists. The climate lens provides insight into the climate impacts associated with individual projects, and encourage project planners to make choices consistent with shared federal, provincial and territorial objectives articulated in the Pan-Canadian Framework for Clean Growth and Climate Change - including a commitment to reduce Canada's GHG emissions by 30% below 2005 levels by 2030.

To support this target, the Investing in Canada Infrastructure Program Integrated Bilateral Agreements with provinces and territories have established a national reduction target of 10 Megatonnes (Mt) per year in 2030.

France

According to the Climate Bonds Initiative, since 2019, France has been the leading issuer of green bonds with $15.3 billion (around €13.4 billion).

At the beginning of 2017, France launched its first green bond, backed by expenditures related to energy and ecological transition, for an initial amount of €7 billion over 22 years. Thus, France has confirmed its commitment to implement the provisions of the Paris Climate Agreement. By September 2019, the value of France's green bonds has reached €20.7 billion.

As regards budgeting green bonds, France exploits the following method. The Treasury browses through the expenditures agreed by the Parliament, sums up all "green" expenditures and defines the maximum amount of green debt than can be issued for the year. The allocation is checked ex-post, as green expenditures constitute the basis for a statement of the use of proceeds. So far, infrastructure represents a limited fraction of expenditures eligible for green financing and mostly refers to the "Invest for the future programme" (Programme d'investissements d'avenir) and to the financing of satellites for Earth observation.

Indonesia

The Government of Indonesia through the Ministry of Finance and PT Sarana Multi Infrastruktur, which is a company engaged in infrastructure project financing, have established an integrated platform called "SDG Indonesia One" which combines public and private funds through blended finance schemes to be channelled into infrastructure projects related to the achievement of SDGs.

SDG Indonesia One is a platform that includes four types of pillars that are tailored to all types of donors and investors, namely, Development Facilities, De-Risking Facilities, Financing Facilities, and Equity Fund. The platform aims to attract financing from investors and donors to aid the projects in Indonesia that contribute to the achievement of Sustainable Development Goals.

Singapore

As regards strategic priorities, the Singapore Sustainable Blueprint (SSB) 2015ix was launched in November 2014 with a vision for a Liveable and Endearing Home, a Vibrant and Sustainable City, and an Active and Gracious Community. The 2030 targets laid out in the SSB show Singapore's ambition in practising sustainable development.

Also, Singapore has launched a Green Bond Grant Scheme in 2017 to encourage the issuance of green bondsx. The scheme leverages existing international green bond standards, such as the International Capital Markets Association Green Bond Principles.