Data is the new gold in every industry, everywhere. Nowhere is this truer than in the infrastructure sector, where data will shape the critical infrastructure decisions needed to achieve urgent climate targets. Right now, infrastructure is responsible for more than 79 per cent of global greenhouse gases and consumes 60 per cent of the world’s materials. Conversely, it is also one of the most impactful tools we have to achieve fair and sustainable economic growth, and to rapidly accelerate progress to net zero and the United Nations Sustainable Development Goals (SDGs).
We need to accelerate the speed and scale at which infrastructure is developed and financed in order to close the vast investment gap. To advance the conversation around this issue, the Global Infrastructure Hub (GI Hub) recently hosted the Infrastructure Investment: insights for tomorrow’s decisions webinar which provided participants with a data-informed understanding of the state of infrastructure investment. Below we present the main takeaways of the event.
Why do we need data in infrastructure?
Quality data is the bedrock of all good infrastructure decisions. For governments, unavailable or poor-quality data can lead to limitations in policy recommendations or research, misallocation of (increasingly limited) fiscal resources, and inequitable distribution of benefits. It could also result in the approval of projects that deliver low value for money or a negative economic, environmental, or social impact.
For emerging markets, these consequences can be even more damaging. Poor infrastructure investment decisions can lead to the development of projects that further entrench poverty and existing inequalities, which risks perpetuating the cycle of underdevelopment in these markets.
It is also important that governments are providers of good data for other decisionmakers in the infrastructure ecosystem, such as through the publication of long-term visions through infrastructure project pipelines. Pipelines clearly articulate government intentions and provide investors with a sense of certainty and clarity on the size of the market and the types of investment opportunities – such as ESG-aligned investments – in the short, medium and long term. Despite these advantages, this is not a standard practice, with GI Hub’s InfraCompass 2020 finding that almost one third of countries analysed do not publish a project pipeline.
A leading example of a published pipeline is the recently launched Brazil Investment Monitor, which provides a summary of infrastructure investment projects, historical investment series, scenarios, and projections of investment indicators; as well as promoting a methodology to help practitioners assess the sustainability of projects.
Where do the data gaps for infrastructure exist?
From the multilateral side, data about planning are required. Infrastructure gap analyses are typically conducted to describe investment requirements. However, existing estimates do not clearly describe infrastructure gaps in relation to the targeted outcomes. Where estimates exist, they are often derived from complex models that are difficult to understand and users are unable to adjust or update them to incorporate changing realities. More data is required in terms of access and quality indicators to support the identification of gaps and monitor the progress being made in closing them.
Data on investment levels is also needed. Public sector accounting and reporting standards do not explicitly consider expenditures incurred for infrastructure. Some data initiatives led by multilateral development banks and international organisations are closing this data gap for some countries – the InterAmerican Development Bank’s InfraLatam estimates historical executed public investment in infrastructure for countries from Latin America and the Caribbean; and the GI Hub’s upcoming update to the InfraTracker tool will provide estimates annual public infrastructure investments using central government budgets for the G20 countries.
It is equally important to ensure that data estimates provide evidence on the success of procurement, construction, and delivery. A full disclosure of time and cost delays can be instrumental in more precise planning for infrastructure projects and enhancing productivity of the delivery. Cost effective and timely projects could showcase best practices and latest technologies that could be integrated into other projects.
Additionally, evidence on performance that shows attractive financial performance is a key element in enticing private infrastructure investment. The GI Hub’s Infrastructure Monitor attempts to address this gap and presents evidence that infrastructure as an asset class provides attractive investment options for investors to diversify and optimise their portfolios.
However, the private sector requires a much higher level of information to determine the potential for both financial and non-financial value creation; and to assess, quantify, and mitigate any risks. Moreover, ESG data has become increasingly important. For example, GRESB’s ESG score allows investors to compare different assets across a fund and identify best practice, or set out a strategy and track it over time. An important next step is to go beyond focusing on reporting and transparency to assess the actual ESG performance of infrastructure funds and assets.
How can we move forward and address these data gaps?
There are several ways to move forward and address these identified data gaps, and particularly to encourage greater private investment in ESG-aligned projects:
- Infrastructure does not exist as a separate sector, making it very challenging to collect comprehensive sector-wide data. To move forward, key institutions such as national ministries of finance and infrastructure bodies, could work together to develop a comprehensive view of infrastructure.
- The public sector has an important role to play not only in the collection of infrastructure data, but also by establishing the right incentives for others to generate data. For example, requirements for collecting relevant metrics for impact evaluation could be implemented, which can in turn also be used to appraise new projects.
- To improve ESG data and encourage ESG-aligned investments, a consistent methodological framework to assess the ESG performance of projects could be promoted. This would limit greenwashing and better align financial systems to SDG goals.
While the significant data gap in the infrastructure space has long been a challenge for infrastructure policymakers and practitioners, it is increasingly critical to make strides in addressing these to ensure that the right decisions for the infrastructure of tomorrow are made.