SLoCaT releases background paper on alternative financing sources for sustainable transport
The SLoCaT Partnership has released a background paper titled, “Alternative Financing Sources for Sustainable Transport: Public-Private Partnerships and Institutional Investors.” The background paper was prepared for the Hong Kong Round Table on Enhancing Private Sector Financing for Sustainable Transport, which took place on June 4 to 5, 2015, organized by the Konrad-Adenauer-Stiftung (KAS) and SLoCaT Partnership.2015 is a critical year for the two major global processes on sustainable development and climate change. For sustainable development, the Post -2015 Development Framework and a final list of Sustainable Development Goals (SDGs) are to be finalized by the Open Working Group on Sustainable Development Goals and the General Assembly of the United Nations (UNGA) in September 2015.
In the context of climate change, a global agreement is expected to be reached at the 21st Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris, France in December 2015. On the road to Paris, the Peruvian Presidency of COP20 and the incoming French Presidency of COP21 launched a Lima-Paris Action Agenda to catalyze action on climate change by non-state actors.
Considering the urgency and scope of change required by these commitments, it is critical to quickly scale up current levels of funding for sustainable low carbon transport infrastructure and services. Much of the additional funding will be required to develop transport infrastructure and services that currently do not exist, particularly in the global South.
The background paper concludes that optimizing the potential contribution of institutional investors and PPPs to sustainable transport development will involve expanding and accelerating potential investment drivers and overcoming current obstacles to investment. Additionally, market dynamics to drive investment in sustainable transport can be complemented by concerted efforts among national and local government entities, private sector entities, and global policy makers.
The role of PPPs and institutional investors in driving sustainable transport investment is still quite early in its development curve; thus, on the one hand the sustainable transport community is faced with limited examples and a lack of clear trends, while on the other hand the community is presented with an opportunity to maximizing potential advantages in these emerging investment areas.
The following are the key conclusions of the background paper:
- First, sustainable transport infrastructure and services investment needs are too great to be borne by the public sector alone; thus, alternative sources of financing must be a critical component;
- Second, PPPs have shown potential in a limited set of transport subsectors, but the current trend is insufficient to keep pace with needed investments in sustainable transport;
- Third, institutional investors hold a considerable share in the world’s capital assets and are a potentially significant, yet largely untapped, source of long-term financing for transport infrastructure and services;
- Fourth, while institutional investors have signaled a growing interest in green investing, they have followed with little concrete action on sustainable transport;
- Finally, concerted efforts to leverage alternative funding sources are needed to scale up sustainable transport infrastructure and services to achieve transformational change and meet crucial global priorities.