On June 6, the Infrastructure Investment Frontiers event will take place in the Royal Automobile Club in London. IISD interviewed Gordon Noble of FenElpi Partners in the run-up to this event. Gordon explained to us why now is the time to organize this event.
Gordon Noble: My name is Gordon Noble, I'm a director of FenElpi partners. We are a boutique consultancy with four partners: Paul Clements-Hunt, formerly the head of the United Nations Environment Program finance and one of the founding directors of the UN Principles of Responsible Investment; Valborg Lie, former Ministry of Finance in Norway and Michael Marais, a South African national who is an expert around green finance. Our work is focused most recently around infrastructure and a range of system issues that we believe need addressing and that is the reason why we are putting this event on.
What is the Infrastructure Investment Frontiers event about, exactly?
Gordon Noble: We are running an event—Infrastructure Investment Frontiers—at the Royal Automobile Club in London on the 6th of June. The reason that we are doing it is to catalyze a conversation around infrastructure. So it is not a traditional event where people come to hear speakers for information, knowledge or education. It is really around catalyzing a new conversation around the importance of investing in frontier infrastructure.
Why do we need a conversation about Frontier Infrastructure in developing countries?
Gordon Noble: One of the issues with infrastructure is that we often talk about infrastructure from a project perspective. So we list the projects that we that we need—in developing countries in particular we have a very extensive list of needs for water, energy and transport [infrastructure]. The challenge that we would see is that instead of thinking about infrastructure from a project perspective we need to think about it from an ecosystem perspective. What we have not built with developing country infrastructure is the ecosystem that enables a flow of capital from where capital is plentiful—and that means institutional investors—through to where it is needed, and that means developing countries.”
And this would benefit the investors as well as the developing countries?
Gordon Noble: The analogy that we use with capital is water. So a good example would be the way canals were built in the Industrial Revolution, opening up economic development opportunities and enabling water to literally flow from one point to another point. A good example of this is the Erie Canal in New York, which was completed in 1825. When it was completed it really opened up the economic development of New York. What we would suggest is that when it comes to infrastructure in developing countries, we do not have "capital canal," if you like. We do not have the mechanism that flows capital from institutional investors to developing countries. Instead of having a conversation one by one about which project to invest in we can start to actually have a conversation about doing multiple projects at the same time.
Why should we focus on infrastructure, if we want to address sustainable development in developing countries?
Gordon Noble: If you go through each of the Sustainable Development Goals you can see the role that infrastructure plays and we would argue that without infrastructure investment it is going to be difficult for the Sustainable Development Goals to be met—and that includes climate change.
If government capacity is limited, why don’t we rely more on the private sector?
Gordon Noble: The way the infrastructure market is currently constructed is that there are there are two components of infrastructure investment and that's either governments—and most of the infrastructure in the world is still [owned by] governments—or the private sector. The challenge that we have is that in developing countries the need for investment is greater than the capacity to pay of some developing country governments. And therefore, if you solely relied on governments you simply won't get the flow of capital that's needed to address challenges.
The challenge with the private sector is that we know that there's an appetite to invest in infrastructure. We know institutional investors have what we call dry powder, which is money that's been committed to invest in infrastructure but that they haven't actually allocated to projects. The problem that we've got with institutional investors is that capital is generally not focused on developing country infrastructure. Institutional investors have a preference for investing in developed country infrastructure.
So what approach would you suggest to take?
Gordon Noble: We are proposing to address this situation where we, despite the need, are not going to see the flow of capital. And again, we need to find new ways of doing things rather than the traditional models. So the model we are proposing is really a blended capital model. That is really where governments and investors collaborate and invest together to build the kind of trust and open up that flow of capital.
Public–private partnerships (PPPs) are often mentioned as potentially successful constructions to invest in developing countries. How do PPPs fit into your approach?
Gordon Noble: Focusing on PPPs may be appropriate in a developed country market where you can have a competitive tension around a bid and there is a group of players in the market. But it is not necessarily the right way to go in terms of developing country markets.
What will be the output of the event?
Gordon Noble: We are producing a white paper on sustainable infrastructure finance that will be discussed at the event being held at the Royal Automobile Club in London on the 6th of June. From that discussion we are taking the input from all the participants. We will then make changes to the white paper that we release publicly following the event. One of the areas that we are focusing on in this white paper is what we are calling "Universal Infrastructure Coverage." What we are simply saying is that just as we have seen in the health debate and the discussion around universal health coverage, where putting out an ambition into the market and saying that having universal health coverage is something that people should see is as a right, actually catalyzes a new conversation. We are saying: It is time that we need the same in infrastructure. So the idea of Universal Infrastructure Coverage is about saying that infrastructure is not just a nice thing to have; it is a fundamental to society. So that is a core part of our white paper and the argument we will be having.
Why are you planning the Infrastructure Investment Frontiers event now?
Gordon Noble: The solutions that have been put forward have all got flaws, and so we need to find some new solutions. The reason we need to find new solutions comes back to the Financing Climate Futures report [Financing Climate Futures: Rethinking Infrastructure] in the first place: It is urgent. And if it were not urgent then we would not need to find new solutions. We could rest with the status quo, but the status quo is not going to cut it.
Oshani Perera, Director Public Procurement and Infrastructure Finance and Laurin Wuennenberg, researcher will attend the Infrastructure Investment Frontiers event on behalf of IISD.
See http://www.infra-frontiers.com/ for more information on the event.