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Construction : Infra Finance | March 2018 | Source : Infrastructure Today

India represents a $3.1 trillion climate investment opportunity

At the outset, Aditi Maheshwari, Climate Change Policy Specialist at the Washington DC-based International Finance Corporation (IFC) of the World Bank Group might appear to be demure, even reticent. However, once a conversation is initiated, she simply leaves you spellbound with her comprehensive assessment of India's overwhelming climate investment opportunity. According to Maheshwari, lead author of IFC's 'Climate Investment Opportunities in South Asia' report, 'sustainable infrastructure projects principally involve leveraging public finance to attract private investment.' 

How is IFC's report a deep dive into sectors identified for investment?
We have outlined and mapped all the existing climate-related policies for each of the sectors - renewable energy, transport, green buildings, municipal solid waste management and smart urban. Based on these, we have generated the investment potential estimates. But we have not done the estimates for climate smart agriculture because there is no consistent way in which countries define the sectors or their policies, which makes it impossible to generate steady numbers or data.
The investment estimates we have developed look at the current context of what is happening in these sectors what bottlenecks exist and how one can address some of them to attract increased private investment. The report also provides targeted recommendations for each of these countries.

What significant findings does the report hold for India?
Overall, we have found $3.4 trillion investment opportunities in South Asia between 2018 and 2030 in above mentioned sectors. In all of that, India represents a $3.1 trillion investment opportunity. While India has the lion's share of the opportunity because of the size of its economy and the scale of private sector engagement, there is substantial potential for growth in other countries as well. The most significant areas of investment in India are green buildings and transport infrastructure, including electric vehicles. And then, obviously, renewables continue to play a significant role. Here, there is a $1.4 trillion investment in green buildings alone. Almost 70 per cent of the buildings that will be coming up in India by 2030 are yet to be constructed. In addition, the country has comprehensive green building codes and has kept them regularly updated. The other big sector is electric vehicles. The government has a very ambitious target and we see significant growth in the coming years.

What are some of your key recommendations?
The numbers, I just provided, were generated as a part of our analysis to estimate the investment potential for key sectors in each of these countries. In addition to that, the themes that emerged are related to recommendations for each sector. In the green buildings space, for example, one of the recommendations that we had was putting in place a voluntary disclosure approach that would allow for property developers and construction companies to disclose their level of compliance with green building codes. This would be another tool for increasing awareness among property buyers. One of the reasons why there has not been much uptake for green buildings is lack of awareness about their benefits, quality of construction, etc.

And, how about electric vehicles and renewables?
Given the current capital costs and estimates on the number of vehicles to be put in place by 2030, we found $670 billion investment opportunity in electric vehicles. But to achieve that, one of the key factors that you need to set in order is the charging infrastructure. India currently has 100 charging stations. You cannot drive the market if there is no place to charge the vehicles in this massive country. Also, government must seek help from the private sector to create standardised charging infrastructure through PPPs to help facilitate market growth.

In renewables, the Indian government has done some amazing work. From fiscal incentives to giving cheap credit, access to land, tax holidays, etc., it has done enormous amount of work. The biggest, I would say, is setting the policy, which
sets the target to drive the market. If you could have better management, curtailment rates, grid connections and introduction of more energy storage into the grid management system, you actually allow for increased renewable investment.
One of the issues that we witness is that banks and other lending institutions have sector caps, which constrain investment in this space. Therefore, addressing some of these concerns would actually help unlock further investment.

Have you also recommended the most appropriate financial instruments for such kind of infrastructure creation?
We do not make specific recommendations on financial instruments, but the report does talk about innovative finance that is happening in India. Take green bonds, for instance. By April 2017, India had issued $3.2 billion worth of green bonds based on the Securities and Exchange Board of India (SEBI) framework. And you can see 68 per cent of that going into renewables, 20 per cent into clean transport and 10 per cent into green buildings. Green bonds actually help finance infrastructure investment in these sectors. Other approaches are being considered in countries like Bangladesh that use their central banks and regulations to help ease investment in different sectors. In India, we have the Indian Banks Association (IBA) and others who have joined IFC's Sustainable Banking Network (SBN). One of the key features of unlocking investments is about how best we leverage public finance to mobilise and scale up private finance. Multiple instruments are used in that context, but we at IFC talk about the role of blended finance in enabling investments.

Have you also defined a timeline for the recommendations?
The timeline of the report and investment opportunity is from 2018 to 2030. Everything that we talked about is Nationally Determined Contributions (NDC)-related end point of 2030. The recommendations would ideally be put in place as soon as possible so that opportunities can be unlocked to achieve full scale of the potential. That said, we have not specified a time frame for any given recommendation. These ecommendations are based on our analysis and observation of the investment climate in each of the countries. Since they are not government-driven recommendations, they are non-binding; they are suggested steps that can be taken based on our assessment.

Apart from India, what about the requirements of other countries in the South Asian region?
We have estimated $172 billion investment opportunity in Bangladesh, $2 billion in Maldives, $18 billion in Sri Lanka, $46 billion in Nepal and $42 billion in Bhutan. Since infrastructure requirements are also based on the countries' national policy priorities and targets they are, therefore, very condition- and context-specific. There is no homogeneity in that because you are talking about completely different scales. In the context of Nepal and Bhutan, they are looking at hydropower as a key growth area. Bangladesh is looking at green buildings as a big sector. Transport is another massive sector because the country plans to do a big shift of 20 per cent from road to rail.
In the context of Maldives, it is relocating a sizeable chunk of its population to an island it is creating and is, therefore, trying to put in place integrated low-carbon transport and green buildings. In Sri Lanka, there is a big prioritisation around waste management and transport. So, some countries are prioritising congestion, while others prefer energy access and some provision of low-cost housing.


- Manish Pant
 
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