Post-pandemic Recovery: Can there be an Infrastructure Resilience Dividend?

According to the World Bank, over one billion people came out of extreme poverty in the last two decades. The COVID-19 pandemic has reversed a significant part of this success with an estimated increase in the global poverty by 119-124 million in 2020[1]. Further, due to the economic lockdowns, the global output is estimated to have contracted by 4.3% in 2020. The effects of the pandemic are expected to depress economic activity for a prolonged period if recovery efforts are not prioritized and coordinated swiftly.

Investment in infrastructure development has long been viewed as an important part of economic recovery following a crisis, stimulating recovery efforts and resulting in job creation and revitalization of communities. Considering that governments around the world are now planning to invest heavily in infrastructure to expedite their recovery from the post-pandemic economic slowdown, it is imperative to ensure that such investments result in an inclusive, green and resilient recovery.

Even before the COVID-19 pandemic, investment in traditional infrastructure globally was experiencing a funding gap of $2.5 to 3 trillion per annum[2]. This gap has become even wider due to fiscal costs incurred by governments in addressing the COVID-19 pandemic[3], particularly in developing countries. Despite competing fiscal priorities, infrastructure investment is and will be a critical component of recovery efforts. It is becoming evident that the public sector, especially in developing countries, cannot cater to the huge demands of infrastructure investments alone. The private sector must therefore play a pivotal role in addressing this gap.

As fiscal constraints compound with challenges of making infrastructure resilient in the face of climate change, there is a real risk of advancing infrastructure investments at a sub-optimal resilience level, exposing social and economic value to climate risks globally. Financing climate and disaster resilient infrastructure may demand additional upfront costs, but the benefits realized over the lifecycle of a project in the form of avoided losses and damages, lower maintenance costs and sustained infrastructure services to all segments of society significantly outweigh these costs. In addition, as regulation, analytics and financial markets make relevant advancements towards enforcing and rewarding resilience, governments that integrate resilience into their national planning are expected to strengthen their sovereign credit ratings and their ability to attract foreign direct investment, among other benefits.

Complementing investments in infrastructure, the use of risk financing solutions within integrated risk management can cover residual risks to infrastructure and therefore minimize the financial burden of resilience-building measures. Mobilizing funds for resilience building and adequate risk finance for infrastructure, however, continues to be a challenge, especially in developing economies. In this context, economic recovery packages in the context of COVID-19 provide a great opportunity to scale up finance for infrastructure investments in alignment with climate adaptation targets, promoting resilient recovery and long-term developmental gains. This will take vision, innovation, governments, the private sector and other actors – united under multi-stakeholder partnerships such as CDRI, IGP and CCRI to address the task at hand.

The proposed session will deliberate upon mobilizing finance, including the role of risk finance, for enhanced disaster and climate resilience of infrastructure within economic recovery post COVID-19. This session will explore policy challenges, social dimensions and governance considerations to financing resilient infrastructure and to leveraging the potential of the public and private sector working together. The discussion is led by a high-level panel of representatives from governments in CDRI, IGP and CCRI Member Countries, multilateral development organizations and/or the private sector.

World Bank (2021), Updated estimates of the impact of COVID-19 on global poverty

Post-pandemic Recovery: Can there be an Infrastructure Resilience Dividend?