Current infrastructure needs far exceed the capacity of public funding, and private investment in infrastructure is insufficient to meet the investment gap, despite private capital’s stated eagerness to invest in infrastructure. Governments urgently need solutions to improve the quality and quantity of projects to attract investors and convert the potential of private capital into completed transactions.
The Innovative Funding and Financing (IF&F) tool aims to help governments structure bankable projects that attract private investment, highlighting specific solutions for structuring projects to optimise private infrastructure investment. It consists of (1) a framework for understanding the factors that support private sector investment, and associated funding and financing solutions; and (2) a library of global, real project case studies exemplifying these solutions.
IF&F complements the work of the G20’s Infrastructure Working Group and contributes toward the G20 Roadmap to Infrastructure as an Asset Class – an initiative that is ultimately focused on lifting growth, creating jobs, and increasing productivity through infrastructure.
The GI Hub in collaboration with the International Finance Corporation (IFC) has created the webinar series New Deals: Funding solutions for the future of infrastructure. This series features global project teams sharing the practical solutions and funding innovations they have used to create bankable projects while attracting private investment, de-risking the investment, optimising asset value, and achieving sustainable development goals.
The GI Hub in collaboration with the International Finance Corporation (IFC) has created the webinar series New Deals: Funding solutions for the future of infrastructure. This series features global project teams sharing the practical solutions and funding innovations they have used to create bankable projects while attracting private investment, de-risking the investment, optimising asset value, and achieving sustainable development goals.
New York, USA - By leasing air rights above one of its rail yards, Metropolitan Transportation Authority raised USD1 billion for its operations and future projects. (Image credit: Inera Isovic via Unsplash)
As noted above, the first element of IF&F is a framework for understanding the factors that support and drive private sector investment, and associated funding and financing solutions.
As defined by the International Monetary Fund, funding of a project refers to how investment and operational costs are repaid over time; in the case of public infrastructure, this means by users, taxpayers or a combination of both. Financing refers to money raised up front – through equity or debt instruments – for the design, construction and early operating costs of an asset. New funding and financing models have emerged in recent years, with a whole range of solutions to increase and diversify revenues and financing options.
The framework takes into consideration the macro-economic climate, legal and regulatory context, and management capabilities needed to deliver a project as well as the overarching objectives of the relevant government’s infrastructure program. However, its focus is on how the following factors impact a project’s ability to attract private investment:
are the fundamental means of generating cash flows to fund projects. They directly drive the amount of value that will be created by a project, which drives the business case for investors.
are the contract clauses and financial instruments that balance the risk-reward profile of a project – a non-negotiable requirement of most investors.
are the sources of capital for a given project. Capital may be sourced as equity or debt, or sometimes as a combination of the two.
The full framework and details about how to use it are contained in the link below. The G20 Infrastructure Working Group Reference Note provides additional insights and background analysis.
In 2021, the GI Hub extended the initial Innovative Funding and Financing work to include new green and circular economy case studies. Our Innovative Funding and Financing Green and Circular Infrastructure Compendium, prepared for the G20, presents global case studies of innovative funding and financing of green and circular infrastructure. The case studies were selected based on several factors, including their level of innovation, the impact of funding and financing, and their applicability across jurisdictions. The case studies reveal important lessons, including how to make new infrastructure more circular and the role of infrastructure in supporting a lower-carbon and more circular economy.
The GI Hub engaged with PwC to prepare these green and circular economy case studies. PwC has now extended their work on the case studies with a report that explores the lessons for funding and financing green and circular infrastructure from a private sector perspective, with due reference to the unique social, economic, and policy considerations that surround these topics.
Below are links to more than 50 global, real project case studies.
These case studies exemplify innovative use of revenue, risk management, and financing levers.
The levels of innovation in the case studies are described as: