Quality Infrastructure for Connectivity Enhancement
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The document summarizes work done by the OECD on infrastructure investment in the G20. It discusses the OECD's past contributions, current work, and areas of potential future focus. The OECD has delivered guidance and frameworks to the G20 on improving infrastructure governance and financing. Current work includes addressing data gaps through the Infrastructure Data Initiative. Looking ahead, the OECD will focus on developing quality infrastructure principles and convening international partners to coordinate efforts.
Quality Infrastructure for Connectivity Enhancement
- 1. QUALITY INFRASTRUCTURE FOR CONNECTIVITY ENHANCEMENT OECD-UNDP G20 Workshop 5 November 2018, Paris, France Raffaele Della Croce Senior Economist - Long Term Investment Directorate for Financial and Enterprise Affairs- OECD Raffaele.dellacroce@oecd.org
- 2. 1. Infrastructure investment in the G20 • The Infrastructure Working Group • Infrastructure as an Asset Class 2. The OECD’s contribution • Past, present and future 3. Looking ahead • Japan 2019 – quality infrastructure • Future areas of work Infrastructure investment – Overview
- 3. Infrastructure – a continuous G20 priority: • Canada (2010), Australia (2014), Turkey (2015), China (2016), Argentina (2018), Japan (2019) Contribution of G20 DWG Part of the G20 Finance Track through IWG – Closing the infrastructure investment gap – Developing infrastructure as an asset class – Increasing private investor participation 1. Infrastructure investment in the G20 Infrastructure in the G20 - overview 3
- 4. History of the IWG: • 2013: Initiation of the G20 Infrastructure Study Group • 2014: Investment and Infrastructure Working Group (IIWG) Not convened in 2017 • 2018: Reconvened as the Infrastructure Working Group (IWG) Steered by: G20 Presidency + two co-chairs (Australia & Brazil) Other G20 bodies: – G20/OECD Task Force on Long-term Investment – Next meeting 15/16 November Paris : http://www.oecd.org/finance/2018-lti-workshop- sustainable-infra.htm 1. Infrastructure investment in the G20 The G20 Infrastructure Working Group 4
- 5. Roadmap to Infrastructure as an Asset Class Informed by G20/OECD/WB Stocktake 1. Infrastructure investment in the G20 Argentina’s 2018 G20 Presidency 5 Improved Project Development Greater Standardisation Improved Investment Environment Contractual Standardisation Financial Standardisation Project Preparation Bridging the Data Gap Financial Engineering, Risk Allocation & Mitigation Financial Regulation & Capital Markets Quality InfrastructureQuality Infrastructure 2019
- 6. 1. Infrastructure investment in the G20 G20/OECD/WB Stocktake of Tools and Instruments 6 OECD focused on policy strategies, WBG focused on the operational project lifecycle.
- 7. • What the OECD has delivered in the past – OECD Framework for Governance of Infrastructure – G20/OECD Guidance Note and Support Note on the Financing of Infrastructure and SMEs • What the OECD is doing currently – Report on Breaking the Silos: developing infrastructure as an asset class and addressing the information gap – The G20 Infrastructure Data Initiative • What the OECD could do in the future 2. The OECD’s Contribution 7
- 8. Work recognised at highest levels (FMCBG and/or Leaders): • 2012: G20/OECD policy note on pension fund financing for green infrastructure and initiatives • 2013: G20/OECD High-level Principles on Long-term Investment Financing by Institutional Investors • 2015: G20-OECD Report on G20 Investment Strategies • 2015: OECD Framework for Governance of Infrastructure • 2016: G20-OECD Guidance Note on Diversification of Financial Instruments for Infrastructure • 2018: G20/OECD/WB Stocktake of Tools and Instruments Related to Infrastructure as an Asset Class These tools are valuable, but implementation is the key 2. The OECD’s Contribution – Past OECD work delivered to date 8
- 9. 2. The OECD’s Contribution – Past Better Governance – Better strategic planning and alignment of investments across sectors – Increased transparency and management of integrity risks – More emphasis on social value and on engaging stakeholders more effectively – Promotion of project pipelines, with appropriate delivery mode choice and allocation of financial risk OECD Framework for Governance of Infrastructure (endorsed by G20 in Antalya) Objective: making the right projects happen, in a way that is cost effective, affordable and trusted by users and citizens
- 10. 2. The OECD’s Contribution – Past Better Financing 10 – Diversifying Instruments and Optimising Risk Allocation – Equity instruments for the financing of infrastructure – Engaging institutional investors and capital markets – Addressing the information gap and developing infrastructure as an asset class G20/OECD Guidance Note and Support Note on the Financing of Infrastructure ( Endorsed by G20 Leaders - Sept 2016) Objective: attracting private sector, diversifying sources of finance, lowering the cost of financing
- 11. 11 2. The OECD’s Contribution - Current Addressing Data Gaps for Long Term Investment (LTI) Private Investment in Infrastructure The Roles of Different Investors Diversified sources of Finance Risk Mapping and Optimal Allocation 1. Mapping the Financing of Infrastructure Mobilization of Private Sector Financing Additionality and Value for Money Innovative Risk Sharing Instruments and Financial Products Evaluating Government Instruments 3. Mobilizing Private Sector Financing in Developing Countries Sustainability Performance Benchmarking Information Asymmetry/standardisa tion of documentation Investment Mandate Ambiguity: Financial Products needed 2. Infrastructure as an Asset Class and role of Institutional Investors Three main streams of work have been identified in the Breaking Silos report and proposed for the G20 and reference work (OECD and other IOs) :
- 12. 2. The OECD’s Contribution - Current The Infrastructure Data Initiative – Data as a public good Major attributes of the proposal: standardised, centralised and consolidated data on infrastructure assets. Global coverage in both developed and emerging markets. Collaborative , involving governments, MDBs, IOS, and the private sector A joint initiative by all MDBs, GIH, the OECD and private sector associations:
- 13. 2. The OECD’s Contribution - Current Expected outputs Infrastructure Data Initiative Data Repository Financial Performance Benchmarks Economic and Financial Viability ESG Performance A dynamic approach to infrastructure investment analysis… New benchmarks on investment profitability metrics (Return on assets, return on equity, and dividend yield, default rates and recoveries, etc.) Impact evaluation at project/asset level (utilisation performance, construction costs, and delivery performance) Sustainability and inclusive growth impacts and climate related risks (i.e. transition risk)
- 14. 2. The OECD’s Contribution - Future OECD infrastructure strategy going forward 14 1. Standard setting - Principles on Quality Infrastructure: benchmarks, best practice and guidance on what good looks like and what make infrastructure viable - across governance, sectoral and geographic dimensions. 2. Capacity building: using the standard to assess countries’ policy environments, identify and fill the gaps – including with OECD infrastructure policy reviews. 3. Convening: coordinate international work, continue to identify effective approaches, and support the G20 4. Connecting the dots: Making sure global efforts are aligned and the right people are working together, for example emerging technologies to drive standardisation, and firm-level database
- 15. Focus on “quality infrastructure” Underlined as a priority in this year’s G20 Roadmap for infrastructure as an asset class the G20 2016 Leaders Declaration 12-13 September - Joint Seminar on Quality Infrastructure in Tokyo, organised by OECD, World Bank and Japanese Government https://seminar-on-quality-infrastructure-investment- 2018.mof.go.jp/presentation.html Potential output Guidelines/Principles/Guidebook on Quality Infrastructure - integrated and multidisciplinary international good practices promoting quality infrastructure delivered in 2019 ESG Guidelines for quality Infrastructure Benchmarks for Quality Infrastructure 3. Looking Forward Japanese presidency 2019
- 16. Other OECD initiatives and recent activities
- 17. • The OECD is currently working on developing an horizontal project on “ Strategic Policies for Sustainable Infrastructure”, which brings together the expertise of 19 directorates and agencies across the OECD • This project is part of OECD objective to strengthen the coordination of the numerous OECD works streams stemming from its substance Directorates • The Development Centre is one of the main contributors for the OECD-wide horizontal project on developing international standards for quality infrastructure from a development angle bringing together developing and emerging economies and OECD countries to exchange experiences and lessons learned. • The horizontal project is the operational response to the clear need to break out of silos and ensure a multidisciplinary and cross cutting approach. • The horizontal project will inter alia address the need for – i) an integrated strategic framework for sustainable infrastructure, – ii) further development of sustainable/bankable projects through standardisation and good practices with a special focus on impact of new technologies, – iii) appropriate data and benchmarks – iv) thematic/sectoral/geopolitical/institutional factors – v) assessment tools and processes including through country infrastructure reviews and – vi)the strengthening of the international exchange of experience OECD HORIZONTAL PROJECT ON STRATEGIC POLICIES FOR SUSTAINABLE INFRASTRUCTURE 17
- 18. THE OECD HORIZONTAL PROJECT 18
- 19. Optimise current and recent work… … by focussing on implementation Building on: Principles on Quality Infrastructure in 2019 OECD Breaking Silos report & the Infrastructure Data Initiative G20 Stocktake and Roadmap to Infrastructure as an Asset Class of 2018 Leveraging DWG, the IWG and G20/OECD Task Force on Long-term Investment to increase global cooperation. 19 3. Looking Forward Driving work in 2019 and beyond
- 20. 3. Looking Forward Potential areas of focus going forward Sustainable and quality infrastructure Diversifying sources of finance & private sector Risk mitigation and allocation Addressing the information gap Infrastructure as an asset class Contractual and financial standardisation Innovation and emerging technologies
- 21. • How can the G20 expand common ground on the contribution of quality infrastructure to connectivity, inclusive growth and sustainable development for all? • What are common challenges to quality infrastructure and which elements of quality should be prioritised according to national circumstances and specific sectors? • How can private resource and public finance and capacity better complement to develop quantity and quality infrastructure investment? • How can we best consolidate the elements of quality infrastructure going forward, including for the development of internationally agreed guidelines and standards? 21 Which questions need to be addressed in the medium term?
- 22. Annex
- 23. • Survey of Large Pension Funds and Public Pension Reserve Funds – April 2018 • G20/OECD/WB Stocktake of Tools and Instruments Related to Infrastructure as an Asset Class – Progress Report – March 2018 • Breaking silos: actions to develop infrastructure as an asset class and address the information gap – December 2017 • Selected good practices for risk allocation and mitigation in infrastructure in APEC economies – October 2017 • Investing in Climate, Investing in Growth – May 2017 • G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs and accompanying G20/OECD Support Note (endorsed by G20 Leaders September 2016) • Fragmentation in Clean Energy Investment and Financing (June 2016) • Large Pension Fund and Public Pension Reserve Fund Surveys (2013, 2014, 2015, 2016) • G20-OECD Report on G20 Investment Strategies: Volume I • G20-OECD Report on G20 Investment Strategies: Volume II • Annual Survey of Large Pension Funds and Public Pension Reserve Funds (last published 2016) • Infrastructure Financing Instruments and Incentives – A Taxonomy (2015) • Report on Effective Approaches of the G20/OECD High-Level Principles on LTI by Institutional Investors (September 2014) • High Level Principles for Institutional Investors and LTI (2013) • Risk and Return Characteristics of Infrastructure Investment in Low-income Countries • Capital market instruments to mobilize institutional investors to infrastructure and SME financing in Emerging Market Economies: World Bank Group/IMF/OECD (cooperation) 23 OECD Infrastructure & LTI Publications
- 24. Facilitators Safeguards Investment Ecosystem Supporting Improvements in Investment Climate and Promoting Private Investment 1. Policy Framework for Investment (OECD) Facilitating Financial Intermediation 1. Summary of the G20/OECD/Singapore Ministry of Finance High-level Roundtable on Institutional Investors and Long-term Investment (OECD) 2. Summary Report on Effective Approaches to Support Implementation of the G20/OECD High- Level Principles (OECD) Enabling Appropriate Legal and Appropriate Setting 1. Regulation of insurance company and pension fund investment (OECD) 2. G20/OECD Principles of Corporate Governance (OECD) 3. Note on Action Plan for MDB Balance Sheet Optimization 4. OECD Methodology for assessing the implementation of the G20/OECD Principles of corporate governance Infrastructure Supporting Improvements in Investment Climate 1. Improving Public Investment Efficiency in the G20 (IMF) 2. Overcoming Barriers to International Investment in Clean Energy (OECD) 3. G20/OECD Voluntary Aggregation Exercise Results of the Checklist on Long Term Investment Financing Strategies and Institutional Investors 4. G20/OECD Report on Checklist on Long-Term Investment Financing Strategies and Institutional Investors 5. G20/OECD Report on investment strategies, volume I 6. G20/OECD Report on investment strategies, volume II 7. Global Infrastructure Connectivity Alliance 8. AfDB,IMF and WBG report on investment compact with Africa Facilitating Financial Intermediation 1. Mapping of Instruments and Incentives for Infrastructure Financing: A Taxonomy (OECD) 2. SME Debt Financing Beyond Bank Lending: the Role of Securitization, Bonds and Private Placements (OECD) 3. IMF Note on Asset-Based Financing, such as Sukuk, for Infrastructure 4. Capital Market Instruments to Mobilize Institutional Investors to Infrastructure and SME Financing in Emerging Market Economies (WBG/IMF/OECD) 5. Policies to Integrate Islamic Finance into Global Finance (IMF/WBG) 6. G20/OECD Guidance Note on the diversification of financial instruments for infrastructure and SMEs 7. G20/OECD Support note on diversification of financial instruments for infrastructure Mobilizing MDB Resources and Role of NDBs 1. Draft Action Plan on MDB Balance Sheet Optimization (Canada) 2. Partnering to build a better world: MDBs’ Common Approaches to Supporting Infrastructure Development (MDBs/ RDBs) 3. Official Development Finance for Infrastructure/Support by Multilateral and Bilateral Development Partners (OECD) 4. MDBs’ Joint Declaration of Aspirations on actions to support infrastructure investment 5. MDB response to the G20 balance sheet optimisation action plan 6. MDBs’ Joint principles and ambitions on crowding-in private finance Enabling Appropriate Legal and Institutional Settings 1. Towards a Framework for the Governance of Public Infrastructure (OECD) 2. Recommended PPP Contractual Provisions and good practices on PPP disclosure (WBG) 3. Framework for Disclosure In Public-private Partnership Projects (WBG) 4. Matrix on Evaluating Existing Legal and Institutional Settings for Infrastructure Investment (in this report) 5. Annotated Publi-Private Partnership Risk Allocation Matrices (GIH) Project Spectrum: Project Planning, Prioritization and Process Development 1. Infrastructure Prioritization Toolkit: Report on Recommended PPP Contractual Provisions (WGB) 2. PPP Days 2015 Summary (EBRD) 3. WBG/OECD Project Checklist for PPPs 4. Global Infrastructure Hub Business Plan 2015-16 Addressing Data Gaps 1. Addressing Data Gaps In Long-term Investment: An agenda for research (OECD) Selection of Support Documents provided in 2015/17 to FMCBG
- 25. Low carbon Infrastructure: Mobilizing Finance for the Transition in support of the 2017 German presidency of the G20 “Boosting economic growth does not mean locking the world into a high-emissions future, provided pro-growth reforms are combined with coherent climate policy and alignment of policies across the economy” • May 2017: Launch the G20 report on “Investing in Climate, Investing in Growth” - See chapter 7 on “Mobilizing financing for the transition” • Workshop on “Financing Green Infrastructure” on November 3rd 3016 (See summary of the discussions for further details) • Other relevant work includes the OECD report on Investment-Governance-Integration-ESG-Factors. For more information see also OECD Centre on Green Finance and Investment 25
- 26. Develop consultation and dialogue with private sector (LTI Network includes approx 3,000 financial industry participants i.e. asset owners, asset managers) The OECD is supporting the G20/APEC agenda on long-term investment through the G20/OECD Taskforce on Institutional Investors and Long Term Investment Financing (G20/OECD Taskforce) See www.oecd.org/finance/lti 26 The OECD Project on Institutional Investors and Long-term Investment OECD Long- term Investment Project Network on Institutional Investors and Long-term Investment Collecting data and information Developing analysis Towards a holistic approach to long-term investment analysis addressing private sector participants across the value chain (corporations, banks, institutional investors), including a broader range of issues (investment and financing), using better data and analytical tools G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs, endorsed by G20 Leaders, September 2016
Editor's Notes
- #14: The initiative aims to improve data transparency and viability of projects by creating a one-stop shop for infrastructure data covering both developed and developing economies, and all types of data, including financial, economic and ESG, as you can see here. We’re aiming to create a global open infrastructure database, led by international institutions and supported by governments, to inform decisions on viable infrastructure.
- #18: ·