FINANCING SUSTAINABLE MARINE AND FRESHWATER INFRASTRUCTURE

Recent years have seen an increase in publications and forums discussing the financing of ‘nature-based solutions’ and investments in nature, led by various organisations such as the International Union for Conservation of Nature, World Wide Fund for Nature, Organisation for Economic Co-operation and Development, European Investment Bank and EcoShape.

In this high-level study, representatives of the dredging sector, Swiss Re and B Capital Partners build on these publications in a joint exploration to identify, and clarify, the role of private finance in sustainable Marine and Freshwater Infrastructure.

The purpose of this exploration is twofold: to raise awareness of sustainable dredging solutions within the financial community, and to start building a bridge between the worlds of sustainable dredging and private finance.

How it started

In February 2020, representatives from B-Capital and Swiss Re, the Central Dredging Association (CEDA), the International Association of Dredging Companies (IADC) and Vital Ports participated in a round table to inform on each other activities with a purpose to increase understanding of each’ others world. In addition participants investigated what has to be done to improve the connection between green labelled funds sustainable waterborne infrastructure projects.

The conclusion of the early mentioned roundtable is that there is a need to clarify sustainable concepts and associated financial structures in order for the financial sector to become acquainted with the topic. But also develop ideas to bring this to mainstream infrastructure investment asset classes. The report “Financing Sustainable Marine and Freshwater Infrastructure; A joint study to explore financing of green coastal, river and port projects”, is a result of this and aims to provide content for further dialogue to foster the uptake of green marine and freshwater concepts by private investors.

About the report

About the organisations

Together with representatives from B Capital Partners and Swiss Re, the Central Dredging Association (CEDA), the International Association of Dredging Companies (IADC) and Vital Ports explored what is needed in order to improve the connection between green-labelled funds and sustainable waterborne infrastructure projects. One main conclusion is the need to clarify sustainable concepts and associated financial structures in order for both the financial sector and the dredging community to become acquainted with the topic. But also develop ideas to bring this to mainstream infrastructure investment asset classes. The report aims to provide content for further dialogue to foster the uptake of green marine and freshwater concepts by private investors. Through a number of case studies, the report also shows that sustainable infrastructure solutions are available, have been tested and are economically viable. Private capital could help to realise such solutions.

Key elements

The report shows that the dredging companies, engineering firms and research institutes are well positioned to help implement climate adaptation measures along rivers, coastlines and waterfronts. Given the size and attractiveness of the sustainable marine and freshwater works segment, and the growing appetite for sustainable infrastructure projects, it is expected that more avenues will open up to enable the pursuit of such projects. This means more capital from private and institutional investors can be put to work. To realise this, a number of key elements have been identified:

  • Sponsors and capital suppliers to work together in upfront project screening;
  • Certification of green projects might be instrumental in moving forward;
  • Development of standard legal and financial frameworks;
  • Reporting tools and harmonised methodologies;
  • The insurance industry as a ‘de-risker’ can be transformational in establishing a longer-term investment framework; and
  • The role of the carbon trade markets by means of carbon sequestration and also in biodiversity offsets markets and habitat banking.

Some background

Major coastal, port and river projects around the world are commonly executed by the dredging sector, including project owners, dredging companies, consultants and research institutes. Accustomed to vulnerable environments, and to address a myriad of climate, ecosystem or other sustainability challenges, the dredging community pushed hard to come up with new techniques and solutions. And they did.

A number of important philosophies and concepts, such as Building with Nature (EcoShape), Engineering with Nature (U.S. Army Corps of Engineers), Working with Nature (PIANC) and Dredging for Sustainable Infrastructure (CEDA/IADC) already play a significant role in many marine and fresh water infrastructure projects. As these sustainable solutions are proven in practice, the challenge ahead lies in scaling and replicating, and therefore financing.

Financing could help governments around the world, many of them committed to the 2015 Paris Agreement and the UN Sustainable Development Goals (SDG's), to implement projects fitting their local or national needs. With limited public budgets, the investment gap in Marine and Freshwater Infrastructure leaves a critical and supporting role for private capital to play in bridging the gap. It is therefore imperative that private institutions embrace coastal and marine infrastructure to ease the pressure on public budgets.

Authors

  • Arjan Hijdra – Managing Director, Vital Ports
  • Christine Kng – PPP Specialist, Vital Ports
  • Kathleen de Wit – Business Development Manager, CEDA/IMDC
  • Lotte Vandekeybus – Structured Finance Manager, IADC/DEME
  • Mark van Geest – Project Finance Manager, IADC/Boskalis
  • Polite Laboyrie – President CEDA, Project Director, Witteveen+Bos
  • Sien Kok – Environmental Economist, CEDA/Deltares

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