Climate-Resilient Infrastructure Climate-Resilient Infrastructure and Designing 2

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POLICY PERSPECTIVES

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OECD ENVIRONMENT POLICY PAPER NO. 14 NO. POLICYOECD ENVIRONMENT PAPER Infrastructure Climate-resilient Disclaimers

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1. Defining climate-resilient infrastructure climate-resilient infrastructure and designing 2. Planning climate-resilient infrastructure for the enabling environment 3. Strengthening in climate-resilient infrastructure 4. Mobilising investment in OECD and G20 countries riskassessments climate in national of infrastructure 5. Coverage and reports tools 6. Useful 7. References Executive Summary Executive

Valuable guidance, information and advice were provided by the Argentine G20 Presidency: G20 Presidency: Argentine the by provided were and advice information guidance, Valuable National Paolo, Lucas Di Pietro of Climate Change (Argentina), National Director Aguilar, Soledad (Argentine Corvaro Trinidad and Mariana Sofía del Castillo (Argentina), Adaptation Coordinator G20 CSWG team). The document has benefitted from the feedback of: Liwayway Adkins, Charles Baubion, Charles Baubion, Adkins, of: Liwayway the feedback benefitted from The document has Wolfrom and Leigh Leflaive Xavier Jansen, Julianne Ellis, Jane Deubelli, Teresa Boyd, Rodney Bank). (World Hallegatte Hennerkes (IADB); Stéphane (EBRD); Maya Davies (OECD); Craig This Policy Paper was drafted by Michael Mullan, with substantive contributions from Lisa Lisa from contributions substantive with Mullan, Michael by drafted was Paper Policy This was work The Perry. and Edward Crishna Morgado Naeeda Lasfargues, Berenice Danielson, Anthony and division) Water and Biodiversity of Climate, (Head Simon Buckle by overseen Paper, Working the OECD Environment It is based on Environment). Director, (Deputy Cox Mullan. and Michael Vallejo Lola by Right”, the Policies Getting Infrastructure: ‑Resilient “Climate Contents 2 . CLIMATE-RESILIENT INFRASTRUCTURE

Executive Summary

Infrastructure networks will be affected by the physical (e.g. raising the height of bridges to account for sea- impacts of climate variability and change, but will also level rise or using natural infrastructure such as play an essential role in building resilience to those protecting or enhancing natural drainage systems). impacts. Extreme events illustrate the extent of this ●● Flexible, adaptive approaches to infrastructure potential exposure. For example, OECD modelling of can be used to reduce the costs of building climate the potential impacts of a major flood in Paris found resilience given uncertainty about the future. that 30% to 55% of the direct flood damages would Climate model projections are a significant source of be suffered by the infrastructure sector, while 35% to uncertainty, particularly on a regional or local scale, 85% of business losses were caused by disruption to but other factors (such as socioeconomic changes) the transportation and electricity supply and not by are also relevant for climate resilience. Decisions the flood itself. Ensuring that infrastructure is climate about infrastructure should consider relevant resilient will help to reduce direct losses and reduce the uncertainties to ensure resilience across a range of indirect costs of disruption. potential future scenarios. New infrastructure assets should be prioritised, Strengthening the enabling environment planned, designed, built and operated to account for the climate changes that may occur over their lifetimes. for the development of climate-resilient Existing infrastructure may need to be retrofitted, or infrastructure managed differently, given climate change. Lastly, ●● Decision makers need to have access to high quality additional infrastructure, such as sea walls, will need information, consistent data and capacity to use to be constructed to address the physical impacts of this information to inform planning. Uncertainties climate change. This additional infrastructure can should be clearly communicated and valued, and include traditional infrastructure, such as hard defences there should be access to the tools needed to and other engineered solutions, as well as natural support decision-making under uncertainty. The use infrastructure, such as wetlands and other nature-based of platforms and online tools can provide accessible, solutions. credible and transparent information on past and A wide range of actors, both in the public and private future climate behaviour. Access to information sectors, are taking action to strengthen climate- should be complemented with the development resilience. This report highlights emerging good of technical and institutional capacity to manage practices and remaining challenges across OECD and climate-related risks. G20 countries. It provides non-prescriptive guidance to ●● Tools for mainstreaming adaptation in critical policy countries as they seek to enhance resilience in line with areas and encouraging investments in resilient their national circumstances and priorities. infrastructure include:

Designing climate-resilient infrastructure −− spatial planning frameworks to redirect development away from high-risk areas; ●● Climate-resilient infrastructure has the potential to improve the reliability of service provision, increase −− infrastructure project and policy appraisals, asset life and protect asset returns. Building climate including Strategic Environmental Assessment resilience can involve a package of management and Environmental Impact Assessment; and measures (such as changing maintenance schedules −− regulatory and economic standards (such as and including adaptive management to account for building codes). uncertainty in the future) and structural measures POLICY PERSPECTIVES 3 . EXECUTIVE SUMMARY SUMMARY EXECUTIVE faced by the port of Cartegena, Colombia motivated motivated Colombia port of Cartegena, the faced by for Support risks. climate to manage investment capacity can help to address preparation project Blended climate resilience. to relating constraints the risk-return to improve finance can be used appropriate. where of investments profile Climate impacts are projected to lead to increases in to increases to lead projected Climate impacts are particularly for infrastructure, required investment water supply and flood defences, storage, water use of tools The and sanitation in some regions. can reduce for decision-making under uncertainty reducing while retrofitting the need for costly flexible or innovative Nature-based, costs. upfront infrastructure to climate-resilient approaches approaches. than traditional be cheaper even may in investing of Global studies find that the benefits with high benefit-cost the costs outweigh resilience in flood defences of investment for example ratios, for coastal cities. infrastructure and communicating Developing to identify investment plans can help investors these plans provides Developing opportunities. a to take an opportunity for decision makers will affect climate change of how view strategic needs in the coming decades infrastructure of investment packages and design sequenced and interconnections that address (“pathways”) achieved that cannot be way in a resilience increase in isolation. projects looking at by include resilience promote policies that Public processes that consider public procurement when comparing competing climate resilience the asset lifetime accounting for costs over by bids, increasingly The scenarios. under alternative expected later climate change impacts of severe to be unlikely are project in the design life of the at the design developer project the by considered requirement government is a unless there stage will affect of discount rate choice The to do so. impacts potential future placed on weight the Public Private For to those in the near-term. relative it is important to clarify (PPP) contracts, Partnership climate- regarding the allocation of responsibilities and response. management planning, risks related private Public finance can be used to mobilise For infrastructure. finance for climate-resilient of the risks funded analysis publicly example, Climate risk disclosure can help raise awareness awareness can help raise disclosure Climate risk climate-related to reduce efforts of and encourage to tailored but needs to be risks to infrastructure, climate risks from The national circumstances. circumstances national by vary diverse, are change possible metrics for multiple are and there those risks. in addressing progress measuring ● ● ● ● ● ● Mobilising public and private investment for for investment Mobilising public and private climate-resilient infrastructure ● ● ● ● 4 . CLIMATE-RESILIENT INFRASTRUCTURE 1 Defining climate-resilient infrastructure

The defining characteristic of climate-resilient as a whole. Considering climate impacts for individual infrastructure is that it is planned, designed, built and assets, such as a bridge or a railway line, is necessary operated in a way that anticipates, prepares for, and adapts but not sufficient to ensure that the system functions to changing climate conditions. It can also withstand, reliably despite a changing climate. For this reason, respond to, and recover rapidly from disruptions caused by efforts to ensure resilience at the project level should be these climate conditions. Ensuring climate resilience is a embedded within a strategic approach to infrastructure continual process throughout the life of the asset. Efforts network planning that accounts for the direct and to achieve climate resilience can be mutually reinforcing indirect effects of climate change and climate with efforts to increase resilience to natural hazards. variability.

Climate-resilient infrastructure reduces, but may not This definition of climate resilience focuses on the fully eliminate, the risk of climate-related disruptions. process used and outcomes achieved to assess whether The extent to which climate change translates into climate change impacts have been considered and, if risks for infrastructure depends upon the interaction necessary, managed. Given the context-specific nature of changing climate hazards with exposure (the of climate adaptation, the measures used to achieve location of assets) and vulnerability (“the propensity this will vary widely. In some cases, no structural or predisposition to be adversely affected”) (Agard changes will be needed to achieve this: the climate- & Schipper, 2014). Climate risks to infrastructure resilient fibre optic cable may be identical to the one can be reduced by locating assets in areas that are that would have otherwise been installed. However, less exposed to climate hazards (e.g. avoiding new where changes are required, they can be grouped into construction in flood plains), and by making the two categories (EUFIWACC, 2016): assets better able to cope with climate impacts when ●● Structural adaptation measures: e.g., changing the they materialise. The development of infrastructure composition of road surfaces so that they do not should also consider the impacts on risk elsewhere: deform in high temperatures, building seawalls or for example, the potential contribution to flood risk using permeable paving surfaces to reduce run-off resulting from increases in paved surfaces. during heavy rainfalls. Ecosystem-based approaches Risk management requires making trade-offs between risk using natural infrastructure to design adaptation minimization and cost, where it becomes more expensive measures are also key alternatives to be considered and increasingly technically challenging to prepare for alongside structural adaptation measures. events that are very unlikely to occur. Resilience means ●● Management (or non-structural) adaptation that the risks have been considered and managed to measures: e.g., changing the timing of achieve an acceptable level of performance given the maintenance to account for changing patterns available information, and that capacities to withstand of energy demand and supply, investment in and recover from shocks are in place (OECD, 2014a). early warning systems or purchasing insurance The costs of protection need to be weighed against the to address financial consequences of climate consequences of damage or disruption. In the case of variability. These measures can also include protective infrastructure (such as flood defences) this enhanced monitoring of existing assets to reduce will be the assets protected by the defences. For other the risk of failure as climate conditions change. infrastructure, it will be the costs resulting from damage Adaptive management approaches also include or disruption to the asset (e.g. business interruption from provisions to include flexibility from the outset loss of electricity supply). to monitor and adjust to changing circumstances The climate resilience of individual infrastructure over the assets lifetime. assets should be viewed in the context of the system POLICY PERSPECTIVES 6 . CLIMATE-RESILIENT INFRASTRUCTURE

Planning and designing climate- 2 resilient infrastructure

This report examines how core infrastructure sectors can be made resilient to climate change. It focuses on the following sectors: transportation, energy, telecommunications and water. Many of these recommendations are relevant for both rural and urban areas, as well as for other types of infrastructure sectors, such as health or education. This section outlines the challenges and opportunities from making infrastructure resilient to climate change. Measures to overcome those challenges are discussed in section 3 (strengthening the enabling environment) and section 4 (mobilising investment).

Key messages

●● Infrastructure can have an essential role in and including adaptive management to account for strategies to manage the risks and minimise the uncertainty in the future) and structural measures negative impacts of climate change. The physical (e.g. raising the height of bridges to account for impacts of climate change – such as increasing sea‑level rise). temperatures, shifting patterns of precipitation, ●● Ecosystem-based approaches, including natural increased intensity or recurrence of extreme infrastructure, can provide an effective complement weather events and rising sea levels - will affect or substitute for traditional built (or “grey”) all types of infrastructure. Infrastructure should infrastructure. For example, watershed restoration be designed, built and operated in a way that can protect sources of drinking water and reduce anticipates, prepares for, and adapts to these the need for subsequent treatment. These changing climate conditions. As countries approaches can be cheaper than relying solely upon communicate their long-term low greenhouse gas “grey” infrastructure, as well as yielding co-benefits. emissions development strategies and implement their emission reduction goals, greater clarity ●● Flexible, adaptive approaches to infrastructure about future emissions trajectories and potential can be used to reduce the costs of building climate adaptation needs is likely to be achieved. resilience given uncertainty about the future. Climate model projections may be a significant ●● Ensuring that infrastructure is resilient to climate source of uncertainty, but other factors (such as change can support the achievement of the Paris socioeconomic changes) are also salient achieving Agreement, including through increasing the ability climate resilience. Decisions about infrastructure to adapt to climate change and ensuring that should consider relevant uncertainties to ensure financial flows are consistent with low-emissions resilience across a range of potential future and climate-resilient development. Climate-resilient scenarios. infrastructure can also support the efforts to achieve a number of the Sustainable Development The role of resilient infrastructure in a Goals and the Sendai Framework for Disaster Risk changing climate Reduction. The Paris Agreement has the goal of holding temperature ●● Climate-resilient infrastructure has the potential to increases “well below 2°C above pre-industrial levels improve the reliability of service provision, increase and pursuing efforts to limit the temperature increase asset life and protect asset returns. Building climate to 1.5°C above pre-industrial levels”. Analysis of existing resilience can involve a package of management NDCs suggest that collective ambition needs to be measures (such as changing maintenance schedules increased if that goal is to be met (Vandyck, Keramidas, POLICY PERSPECTIVES 7 . PLANNING AND DESIGNING CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT DESIGNING AND PLANNING decisions provide opportunities to increase efficiency and efficiency to increase opportunities provide decisions emissions. reduce the how illustrate vividly events weather Extreme vulnerable services could be of infrastructure provision the example, For change. to the effects of climate China caused major damage2011 flooding in eastern well as and 49 airports, 21,961 roads, links, to 28 rail 2016). to millions of households (Xi, power as cutting main reservoir in São Paulo’s level water the In 2015, drinking of leading to rationing fell to 4% of capacity, In Europe, 2015). (Vigna, and social unrest water to damage to increase projected is climate change ten-fold events weather extreme from infrastructure of adaptation in the absence of the century, the end by trend to extremes, In addition 2018). et al., (Forzieri, significant impacts for will also have changes value the a dry climate scenario, Under infrastructure. Africa could be reduced in generation of hydropower billion USD 83 leading to higher costs for consumers by 2016). & Strzepek, Neumann, Liden, , (Cervigni R. to climate is resilient Ensuring that infrastructure goals of of the can support the achievement change the increasing including through Agreement, the Paris Climate-resilient to climate change. ability to adapt a can also support efforts to achieve infrastructure of the Sustainable Development Goals and thenumber for Disaster implementation of the Sendai Framework is also importance of resilience The Risk Reduction. guidance in this area, OECD relevant emphasised by ofincluding the OECD Recommendation on the Governance on Framework and the OECD 2014b), Critical Risks (OECD, 2017a). (OECD, the Governance of Infrastructure BOX 1 GENDER AND CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT AND GENDER 1 BOX Source: (OECD, 2016; World Bank, 2010b). World 2016; (OECD, Source: There is an important gender dimension to climate-resilient infrastructure. Vulnerability to climate change climate to Vulnerability is an important climate-resilientThere infrastructure. gender dimension to poverty Men and and social status. range of socio-economicby a is influenced factors including gender, can supportwater piped to access services:for infrastructure example, for needs differing have may women and Women collecting water. for typically responsible are women in societies where empowerment female to infrastructure. including disruption by the impacts change, of climate differently men will also be affected societies, resilient achieving more change is a means to climate to is resilient infrastructure Ensuring that climate to is resilient infrastructure of ensuring that process such, the As than an end in itself. rather it will be important women’s this, ensure to achieve To gender issues. for change should account meaningful participation systematically and perspectives their needs in decision-making, are and that account. taken into Saveyn, Kitous, & Vrontisi, 2016). Limiting temperature 2016). Vrontisi, & Kitous, Saveyn, of the risk reduce would 2°C below well to increases changes, and irreversible” pervasive “severe, encountering to to adapt still have would people and ecosystems but 2014). impacts (IPCC, serious negative potentially low-GHG with should be consistent Infrastructure of changing to the impacts but also resilient transitions, of infrastructure nature long-lived The climate. will lock-in decisions made now assets means that The consider these impacts. fail to if they vulnerability made is significant: decisions being scale of investment year per USD 6.3 trillion 2017b) estimated that (OECD, globally in infrastructure will need to be invested with development. pace 2016 and 2030 to keep between by driven estimate does not include expenditure This majority of investment The or mitigation. adaptation of urban areas the expansion will arise from needs location, The countries. and middle-income within low- of those assets all need todesign and management to climate adapted are they to ensure be considered and change. variability of building climate-resilient challenges The inprimary challenge The country. by vary infrastructure economies is to build countries and emerging developing for the expansion of urban areas infrastructure new access to provide to cities, of new and the development connect and to for all, water and safe drinking energy Countries links and telecoms. transport people through to of building infrastructure the challenge also have Industrialised disasters. the risk of natural manage of replacing face the challenge predominantly countries and networks, existing infrastructure and upgrading policy and advances as technological particularly 8 . CLIMATE-RESILIENT INFRASTRUCTURE

Impacts of climate change on infrastructure insights about how the climate will respond to rising concentrations of greenhouse gases in the atmosphere Climate change will affect infrastructure provision and at a global level. However, some key aspects of operation, with the severity of these effects depending the climate system that affect regional and local on the overall emissions pathway and decisions resulting projections are not yet sufficiently well understood in increased exposure of assets and mal-adaptation. and modelled (Bony et al., 2015). The most suitable Projections from the IPCC find that the following projections will depend upon the purpose for which impacts are likely to occur by year 2100 under the low they are being used. Developments in observations, emissions (RCP2.6) and high emissions (RCP8.5) pathways understanding and modelling capabilities in coming (Pachauri, et al., 2014). The figures in Table 1 are relative years will improve the quality of projections at the local to the averages between 1986 and 2005. Overall, there level, but will not eliminate these uncertainties. is more confidence in temperature projections than those for precipitation or sea-level rise (Shepherd, 2014). The scale of climate hazards is just one of the set of Modelling of future socio-economic scenarios suggests relevant uncertainties in understanding the risks posed future emissions are unlikely to reach the levels implied by climate change. For example, the impacts of changes by RCP8.5 (Riahi, et al., 2017). in precipitation on requirements for water storage will also depend upon trends in consumption, which will be These global averages are illustrative of the scale and affected by economic development, population changes types of climate change that could be expected, but and technological changes. These other factors alter the impacts on a particular asset, such as a road or the levels of risks and thus can have a more significant reservoir, will be uncertain and context specific. There impact on resilient infrastructure planning, design and will be varied and sometimes severe impacts at the economics than climate hazards themselves. local scale, as global trends interact with diverse local weather conditions. In addition, risks can arise from Recognising this complexity, the following categories the interactions between different climate variables, capture the main ways in which the impacts of or cascade through infrastructure networks. Since the climate change can affect the demand and supply of publication of the IPCC’s Fifth Assessment Report, for infrastructure services. In some cases, there may also example, further research has suggested that sea-level be simultaneous impacts on supply and demand as a rise could exceed 2 metres on average by the end of the result of climate impact. For example, heat waves can century (Oppenheimer and Alley, 2016). increase electricity demand for air conditioning, but also limit generation from thermal power plans: Climate model projections are subject to deep uncertainty, and it is not possible to definitively ●● Demand for infrastructure services, for example: estimate the probability of different climate −− Changing patterns of demand driven by outcomes occurring at geographic scales relevant climate change, such as increased energy for infrastructure. Climate models provide valuable

Table 1 Projections of climate change impacts Averages in 2081-2100 relative to 1986-2005

RCP 2.6 RCP 8.5

Temperature 0.3 - 1.7 C 2.6 - 4.8deg C

Sea levels 0.26 - 0.55 m 0.45 - 0.82 m

Increase in average precipitation in high latitudes, decrease in subtropical and mid-latitude Precipitation dry regions

Ice cover Arctic sea ice cover will be reduced, as will the extent of permafrost in high northern latitudes

Risks associated with some types of extreme weather events, including heatwaves and heavy Extreme weather events precipitation, are projected to increase with climate change

Source: (Pachauri, et al., 2014) (IPCC, 2018). POLICY PERSPECTIVES 9 . Economic Analysis Economic Analysis of Increased efficiency of service provision - in provision of service efficiency Increased Increased asset life, reduced repair and repair reduced asset life, Increased Co-benefits - some approaches to climate- approaches Co-benefits - some use of the particularly infrastructure, resilient an equivalent deliver can infrastructure, natural while also approaches service to traditional value, as amenity co-benefits such generating and climate change conservation, biodiversity mitigation. impacts of climate considering the some cases, a providing of the unit costs can reduce change to business-as-usual approaches, service relative of better management for example through resources. hydropower climate for preparing - maintenance costs the need for avoid at the outset can change the asset reduce the risk of and retrofitting costly obsolete. becoming prematurely has benefits ex-ante, as it reduces the need as it ex-ante, has benefits (e.g. measures in backup to invest for users for businesses). generators PLANNING AND DESIGNING CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT DESIGNING AND PLANNING ● ● ● , provides guidance provides Climate-Proofing Investment Projects, on methodologies that can be used to assess such offs. ‑ trade adaptive uncertainty about the future, Given can facilitate climate approaches management assets. the life of infrastructure throughout resilience a design can have for example, dams, Hydroelectric is there time horizons, those Over years. life of 70-100 outcomes:potential climate in the variation wide very whether is uncertainty about there in some regions, It could be or diminish. will increase precipitation ● but analysis scale of benefits is context specific, The estimated that for example, (2013), Hallegatte et al. by on flood (annualised) year per spending USD 50 billion expected losses reduce would defences for coastal cities Projects USD 1 trillion to USD 60-63 billion. in 2050 from and there yield all of these benefits, will not necessarily climate be made between to will often be trade-offs objectives. policy and other resilience of the reliability for increasing of the techniques Many for example, costs: also increase may provision service or designing assets to account for redundancy, adding 2016; OECD, potential climates (ITF, of wider range a possibility of higher costs, as the well As forthcoming). example, For to make. trade-offs be other may there potential to the coastal defences have installing hard of of erosion the rate or increase disrupt ecosystems, ADB The report, other properties. ● ● increased cost of supply, as climate change climate change as cost of supply, increased the same providing the costs of increase may needed to reservoirs larger of service (e.g. level variable precipitation); address more when investments assets”, “stranded risk of of viable as a result no longer economically are or the of climate change, impacts physical the policies; impact of climate change to assets and disruption to service damage cascading effects in including provision, of sectors as a result other infrastructure interdependencies; to manage required investments additional damage, risk of environmental increased of injuries and deaths due to failure assets; infrastructure owner government, to the damage reputational the from of the asset resulting or operator factors. above demand for air-conditioning in summer and in summer air-conditioning demand for or winter, for heating in demand reduced demand for irrigation; water increased infrastructure, protective demand for increased of coastal defences to as the construction such rising sea levels; address weather of extreme as a result migration climate change. gradual or events − − − − − − − Increased reliability of service provision - reliable - reliable provision of service reliability Increased − − − − − − − Provision of infrastructure services, for example: services, of infrastructure Provision reducing by has benefits ex-post, infrastructure It also of disruption. and severity the frequency ● ● These impacts will be particularly important for cities, important for cities, particularly will be impacts These for networks infrastructure upon extensive rely as they and food. energy water, access to impacts by potential direct Some examples of to these, In addition 2. Table sector can be found in impacts on indirect also have may climate change impacts could include indirect These infrastructure. the loss of ecosystem services as from those resulting mortality and the tree increased wildfires, of a result species. of some invasive spread ● ● Climate-resilient infrastructure can yield a range ofyield a range can infrastructure Climate-resilient on the depending to business-as-usual, relative benefits include: These been implemented. that have measures Benefits and opportunities climate- from infrastructure resilient 10 . CLIMATE-RESILIENT INFRASTRUCTURE

prohibitively expensive to prepare for all of these and adjust to changing circumstances over the asset’s outcomes at the outset. Instead, adaptive management lifetime. More information on tools for decision-making (or iterative risk management) approaches can be under uncertainty can be found in section 3. used to design in flexibility from the outset, monitor

Table 2 Illustrative impacts of climate changes in different sectors

Changing patterns of Changing patterns Temperature changes Sea-level rise precipitation of storms

Transport – Melting road surfaces and – Inundation of coastal – Disruption of – Damage to assets, buckling railway lines infrastructure, such transport due to such as bridges – Damage to roads due to as ports, roads or flooding – Disruption to ports melting of seasonal ground railways – Changing water and airports frost or permafrost levels disrupt – Changing demand for ports transport on inland as sea routes open due to waterways melting of arctic ice Energy – Reduced efficiency of solar – Inundation of coastal – Reduced output – Damage to assets panels infrastructure, such from hydropower - e.g. wind farms, – Reduced output from as generation, generation distribution thermal plants due to transmission and – Disruption of energy networks limits on cooling water distribution supply due to – Economic losses due temperatures flooding to power outages – Increased demand for – Insufficient cooling cooling water Telecoms – Increased cooling required – Inundation of coastal – Flooding of – Damage to above for datacenters infrastructure, such as infrastructure ground transmission telephone exchanges – Damage to infrastructure, such infrastructure from as radio masts subsidence Urban – Increased cooling demand – Inundation and – Risk of drought – Damage to development – Reduced heating demand increased flood risk – Flooding buildings – Changes in land use – Deaths and injuries due to relocation of people living in exposed areas Water – Increased need for – Inundation of coastal – Increased need – Damage to assets treatment infrastructure for water storage – Decreased standard – Increased evaporation from – Salinisation of water capacity of protection reservoirs supplies – Increased risk of river offered by flood – Decreased standard of embankments being defences protection offered by overtopped coastal defences

Note: This table provides an illustration of the impacts that could occur in some sectors and in some regions. The impacts faced by a given infrastructure asset will depend on a range of factors, including location: for example, storms are projected to increase in some regions and decrease in others. A more comprehensive analysis can be found in the IPCC’s Fifth Assessment Report. POLICY PERSPECTIVES 11 . Externalities - potential benefits, such as the as such potential benefits, Externalities - infrastructure, of nature-based value amenity for the infrastructure in revenue not result may operator. Policy misalignments - regulatory decisions and - regulatory misalignments Policy governing as those (such frameworks policy distort can inadvertently procurement) the use of innovative and discourage incentives, solutions. and ecosystem-based ● ● PLANNING AND DESIGNING CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT DESIGNING AND PLANNING Experiences in strengthening and building in strengthening Experiences infrastructure resilient for the measures possible adaptation of An overview Examples from 3. Table sector can be found in energy 2 and the following other sectors can be found in Box climate in mainstreaming trends Emerging report: infrastructure multi-sector scale, in large resilience 2016). PPPs (World Bank, ● to address is required response policy A coordinated the between collaboration involving these barriers, and operators, owners infrastructure public sector, to do Measures associations and investors. professional discussed in section 3. so are ● Uncertainty about the future – there are inherent inherent are – there the future Uncertainty about and the climate, uncertainties in modelling how resilience, other factors affecting infrastructure means that climate- This in the future. will evolve for a prepared needs to be infrastructure resilient scenarios. possible future of range and - awareness Information and capacity climate change, information on the risks from readily not be may projections, as climate such to inform format, or in a useable available, not be may Information decisions. investment resolution geographic with sufficient available is Climate change planning. for infrastructure be needed may capacity complex and additional to support decision-making under uncertainty. Time horizons - some benefits of increased - some benefits of increased horizons Time the time will occur beyond climate resilience while decision makers, by horizons considered term. in the shorter incurred costs are ● ● ● ● ● A range of barriers can prevent new and existing new prevent of barriers can A range in a operated being built and from infrastructure climate-resilient manner: ● Challenges in making infrastructure resilient to to in makingChallenges resilient infrastructure change climate 12 . CLIMATE-RESILIENT INFRASTRUCTURE

Table 3 Examples of adaptation measures for energy infrastructure

Climate impacts on Management measure Structural Measure infrastructure Generation – Inundation of coastal – Model climate impacts – Fortify coastal, off-shore and infrastructure, such as on existing and planned flood-prone infrastructure against generation plants assets in collaboration with flooding – Reduced efficiency of solar meteorological service – Increase cooling system capacity energy – Revise maintenance schedules for solar energy – Insufficient cooling water – Update hydropower operating – Locate new facilities outside – Temperature of cooling rules high-risk zones water before and after use – Reduced output from hydropower generation

Transmission and – Flooding of electricity – Implement program for pruning – Adjust design criteria for distribution substations and managing trees near transmission lines, e.g: – Damage to transmission transmission and distribution – Increase transmission tower lines from climate extremes lines height – Create disaster mitigation plans – Bury distribution lines – Train emergency response – Use stainless steel material to teams for quick repair and reduce corrosion from water restoration actions damage Consumption – Change in energy demand – Undertake load forecasting – Improve building and industrial patterns (e.g. increased using climate information energy efficiency demand for cooling and – Promote behavioural change reduced demand for energy measures to reduce peak for heating) consumption

Source: (IEA, 2015; World Bank, 2016). POLICY PERSPECTIVES 13 . PLANNING AND DESIGNING CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT DESIGNING AND PLANNING : a strategy was developed to address climate impacts, including increasingly climate address to developed was : a strategy (Australia) Peninsula Eyre using participatory developed A plan was infrastructure. for of coastal inundation techniques frequent and structural management combining decision-making pathways under uncertainty sequenced produce to risks. increasing adapt to to measures to buckle, causes steel as heat to tracks (JR) (Japan) can cause railroad : Extreme heat Railways Japanese To achieve ground. to the fixed keep the tracks anchors that and rail ballasts, on ties, putting stress expand maximum performance estimated for the standard buckling, JR has raised track due to accidents” “zero also developed JR has investments. guide future 65°C to 60°C to from of its railroads temperature openings. joint detect that potential vehicles maintenance of annual rainfall cyclones and with an average tropical to : Prone China) Sponge Kong, City (Hong impacts, the Drainage climate future Considering cities. wettest 2400mm, Hong Kong is one of the world’s Services with the a nature-based Department China is implementing system drainage of Hong Kong, (DSD) constructing resistance of instead flood public spaces, and improving resilience aim of building up flood for public use space green an open will become lake that retention project is a flood A future infrastructure. 2017). wet season (Leung, duringthe site retention as a flood and operate on drydays, Force Task the Hurricane 2013, : In Sandy Rebuilding August (USA) HurricaneSandy Rebuilding Strategy by the affected support to of the region the rebuilding “Hurricane Sandy Rebuilding Strategy” issued the and coordinated report on ensuring policy a regionally The contains recommendation 2012 hurricane. It build back smarter by: aimed to infrastructure and stronger investment. infrastructure to approach resilient the efforts coordinating regulation; excessive visions; reducing funding with local rebuilding federal aligning and ensuring the rebuilding; to approach with a region-wide and local governments, state, of the federal, 2014a). (OECD, rebuilding resilient change and disaster climate region’s BOX 2 SELECTED INFRASTRUCTURE PROJECTS INTEGRATING CLIMATE-RESILIENCE IN IN CLIMATE-RESILIENCE SELECTED INTEGRATING INFRASTRUCTURE PROJECTS 2 BOX COUNTRIES G20 AND OECD 14 . CLIMATE-RESILIENT INFRASTRUCTURE

Strengthening the enabling environment for climate- 3 resilient infrastructure

This section identifies priority areas for ensuring that decision makers have the information, capacity and incentive to integrate climate-resilience into infrastructure development and operation. Efforts to strengthen the enabling environment will facilitate the mobilisation of finance for climate-resilient investments (section 4).

Key messages Improving understanding of climate change-

●● Decision makers need to have access to high quality related risks and supporting decision making information, consistent data and capacity to adapt under uncertainty planning to account for climate change. This can Information on climate hazards, exposure and be achieved through the development of platforms vulnerabilities are required to inform the development of and online tools to provide accessible, credible and climate-resilient infrastructure. Traditionally, historical data transparent information on past and future climate have been used to inform analysis of the potential likelihood behaviour. Relevant uncertainties should be clearly and severity of impacts. In addressing climate change, these communicated, and guidance provided on how to historical records need to be complemented with projections incorporate these into decision-making. Access of how those trends might change in the future. to information should be complemented with the development of technical and institutional capacity to Historical or observed climate information provides manage climate-related risks. a baseline for understanding how risks may evolve in the future due to climate change. The sophistication ●● Tools for mainstreaming adaptation and encouraging of historical datasets is increasing. For example, global investments in resilient infrastructure include: climate records between 1901-2016 at a spatial resolution −− spatial planning frameworks, including of 0.5° (approximately 55 km) are freely available via vulnerability maps, to improve management of the UEA Climatic Research Unit’s “CRU TS” dataset climate risks, reduce vulnerability and prevent (Harris et al., 2014). However, there are major gaps in the the construction of new infrastructure in recording of how those climate trends have translated into exposed areas; potential hazards, such as floods or droughts. In particular, data on smaller events are not collected or digitised −− infrastructure projects and policy appraisals, (OECD, 2018a). Efforts to recover such historic data, using including Strategic Environmental Assessment data sources such as newspapers and public consultation, and Environmental Impact Assessment; and can facilitate efforts to ensure that future infrastructure is −− regulatory and economic standards (such as climate-resilient. building codes). Climate projections are needed to understand how future ●● Climate risk disclosure can help raise awareness changes in climate may create risks for infrastructure. of and encourage efforts to reduce climate-related Most OECD and G20 countries have produced their own risks to infrastructure, but needs to be tailored to national-level climate projections or downscaled global national circumstances. The risks from climate climate projections to inform decision-making at national change are diverse, vary by national and subnational and local levels. While fine resolution projections can be circumstances and there are multiple possible metrics more informative for infrastructure planning, they depend for measuring progress in addressing those risks. upon the quality of the larger-scale model in which they POLICY PERSPECTIVES 15 . across critical infrastructure and to adopt a multi-sector, and to adopt a multi-sector, critical infrastructure across to climate risk assessments approach multi-hazard 2017). and Gamper, (Fisher (OECD, 2014a); assessment multisector an example of such provides 3 Box Effective Paris. in the Seine river from for the risk of flood key and information sharing among collaboration for understanding is critical organisations infrastructure of regionalA number risks. these shared and addressing Information Warning Critical Infrastructure EU’s (e.g. Sector Energy US Partnership national (e.g. Network), WeatherWise Toronto’s and local (e.g. Climate Resilience) been established to facilitate have initiatives Partnership) 2017). this (AECOM, and uncertainties affecting analysis complexity, scale, The of a risks necessitates the engagement of climate change in climate risk assessments of stakeholders range broad levels include different These planning. and adaptation non-governmental academics, government, parts of and andlocal and indigenous communities organisations, thatgiven is important Inclusiveness sector. private the as factors such by varies to climate change vulnerability gender. social class and can improve approaches participatory Well-designed decision-making and build support for implementing to date highlights Experience approaches. climate-resilient in of local and indigenous knowledge the important role not be and impacts that may vulnerabilities identifying and contextual localised because of the highly known well Community- 2012). of climate risk (Burton et al., nature participation can facilitate local-level based adaptation STRENGTHENING THE ENABLING ENVIRONMENT FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR ENVIRONMENT ENABLING THE STRENGTHENING 30% to 55% of the direct flood damages were suffered by the infrastructure sector by the infrastructure suffered were 55% of the direct flood damages 30% to of transportation the interruption caused by and electricity 85% of the business losses were 35% to the flood itself. supply and not by • •

Source: OECD (2014c). Source: In France, the OECD calculated the economic impact of a major flood of the Seine river affecting the Paris impact the economic of a major flood of the affecting the the OECD calculated Seine river In France, modelling of direct combining developed, was approach a hybrid this purpose, For area. metropolitan of the impacts assessment of critical networks connected with the interruption and macroeconomic losses, were flood of 1910, and direct damages centennial the historic built around were scenarios Three modelling. 400 000 job losses and an impact USD 3 and 30 billion, with 10 000 to between on the nationalestimated period. a 5 year over 0.1% and 3% cumulated GDP between the critical importance demonstrated sector: analysis of the infrastructure This BOX 3 MODELLING THE MACRO-ECONOMIC IMPACTS OF A MAJOR FLOOD IN PARIS IN MAJOR FLOOD A OF IMPACTS MACRO-ECONOMIC THE MODELLING 3 BOX are embedded. Some relevant uncertainties can be uncertainties Some relevant embedded. are providing scenarios or different providing by explored with these approaches, Even outputs. probabilistic are model results high resolution long-term, however, 2015). Stainforth, Smith and uncertain (Frigg, inherently to communicated uncertainties should be clearly These projections. users of those projections and climate change Historic climate data as such sources, with other data can be integrated modelling and information on the location hydrological to assess assets, of infrastructure and characteristics climate national and sectoral Authoritative climate risk. policiesplans and risk assessments can inform strategic can They development. infrastructure for climate-resilient detailed more for the data and a framework provide also assets assessments necessary for specific infrastructure OECD and G20 countries Most projects. and development conducted climate risk assessments at national and/ have (see is covered infrastructure which in levels or sectoral in tended to be qualitative While these have section 5). or complemented could be further developed they nature, of risk and economic costs. analysis a quantitative by meanswhich interdependent, systems are Infrastructure asset impacts on one infrastructure that climate change interdependencies These the system. can cascade through due to the dense high in urban areas particularly are extend even and may of assets, spatial concentration in floods in Bangkok The territorial boundaries. beyond affected the car industry significantly for instance, 2011, in the flood areas. located were as suppliers in Japan, interdependencies the need to map illustrates This 16 . CLIMATE-RESILIENT INFRASTRUCTURE

in local and national adaptation planning (Reid and Huq, 2014). Examples of stakeholder engagement in risk assessments and adaptation planning can be found in Box 4.

Tools and capacity are needed to make raw climate data useful for decision makers, including national policymakers, regulators, private sector and local governments. The growing demand for easy-to-use climate information and risk management services has created new business opportunities. Online platforms and data portals are being developed by both public and private sector entities to improve user access to multiple data sets and to deliver customised risk assessments (see Box 5). For these platforms to work effectively, it is important that there is transparency about the underlying data and their limitations.

Technical guidance is being developed to help decision- makers to incorporate climate risk into infrastructure. National standard organisations in Australia, Britain and the US have released risk management guidelines that focus on resilience for buildings and infrastructure. The roads authority in Western Australian has developed Climate Change Risk Assessment guidelines to identify climate change risks relevant to construction of roads and bridges. The United States Federal Highway Agency has developed a tool to support transportation agencies in selecting appropriate materials for road surfaces.

One of the major challenges is to help users make informed decisions given uncertainty about the future climate and socio-economic changes. Given the long lifetimes of infrastructure, it is important to take early action to integrate adaptation into decision making, but also to ensure flexibility or robustness to address future uncertainty. Tools such as Robust Decision Making and Real Options Analysis, portfolio analysis and iterative risk management are being used to support decision-making under uncertainty (OECD, 2015a]). Robust Decision Making, for instance, has been applied to water management in the Colorado River (Groves et al., 2013) and coastal resilience planning in Louisiana (Groves and Sharon, 2013).

Simplified techniques for decision-making under uncertainty can provide valuable insights where the use of more sophisticated approaches would be disproportionate or unfeasible (Shortridge, Guikema and Zaitchik, 2017). Hallegatte (2009) proposes a set of practical strategies to inform adaptation decisions, such as pursuing “no-regrets” options and building in extra safety margins where it is cheap to do so. Stress testing can be used to identify how infrastructure will perform under a wide range of potential future climates. POLICY PERSPECTIVES 17 . BOX 4 STAKEHOLDER ENGAGEMENT FOR FOR ENGAGEMENT STAKEHOLDER 4 BOX INFRASTRUCTURE CLIMATE-RESILIENT : Canada’s northern : Canada’s Canada Territories, Northwest by permafrost affected is heavily infrastructure alone, Territories In the Northwest degradation. as much as cost it could suggest estimates a to infrastructure adapt existing CAD 230 million to of Canada Council Standards The climate. changing a Northern developed has (SCC) Advisory Committee, of community members and expertscomposed across the North, local knowledge is incorporated ensure to 5 has released the SCC date To new standards. into change the unique climate address that standards in the northimpacts felt impact that infrastructure 2018). (SCC, constructiondesign, and maintenance 2010, the city India : since of Indore undertookIndore, to exposure of assessing process a comprehensive This strategy. a resilience develop risks to climate raising of awareness process included an extensive in informal living with communities and engagement particularly who are climate to settlements, vulnerable usedwas This and manage these risks. identify to risks, City of the Indore Resilience the development inform to . External with community funders worked Strategy supportinstitutions to of the implementation on the focussed of which many measures, adaptation 2016). drinking (Chu, supply of safe water Indonesia: In Indonesia,Semarang, a number multi-stakeholder promoting of cities are In the city planning. of adaptation to approaches Urban for a body called the Initiative Semarang, was (IUCCE) Change and Environment Climate civil society bring together established to and as local as well and practitioners, academics, NGOs, actors coordinate to government and national evidence. and gather processes local adaptation is supporting Program Transfer Best Practice The by of this multi-stakeholder approach replication other Indonesian city-to-city cities through peer- the by is complemented This learning opportunities. which brings together Indonesian Alliance, Climate donors, civil society, government, local and national to sector representatives and private academics, actively support of urban the institutionalization 2014). et al., climate-resilience (Archer STRENGTHENING THE ENABLING ENVIRONMENT FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR ENVIRONMENT ENABLING THE STRENGTHENING 18 . CLIMATE-RESILIENT INFRASTRUCTURE

BOX 5 INITIATIVES FOR COMMUNICATING CLIMATE RISKS AND SUPPORTING DECISION‑MAKING

Argentina’s Climate Risks Map System (SIMARCC): the Argentinian government’s National Climate Change Office developed an interactive website (known as SIMARCC) that provides risk maps covering different scenarios of threats and vulnerabilities related to climate change. This platform combines georeferenced data on the potential hazards from climate change with data on social vulnerabilities. This tool was designed to be useful for decision makers in the public and private sectors.

Brazil’s AdaptaClima Platform: the AdaptaClima platform was launched in December 2017 to support the dissemination of information and material on climate change to decision makers. It is an interactive and collaborative space for sharing tools, studies and methodologies. The development of the platform was coordinated by the Brazilian Ministry of Environment (AdaptaClima, 2018).

Copernicus Climate Data Store: this platform is intended to support adaptation and mitigation policies by providing free access to climate data based on the best available science and tools for interpreting that data. It provides access to information on historical, current and future climate across the world. This platform is supported by the European Commission.

European Climate-Adapt Platform: this platform was developed by the European Commission and European Environment Agency to provide comprehensive, reliable data to inform adaptation decisions. It includes data on projected climate change impacts, adaptation case studies and an extensive set of tools for managing climate change impacts.

Silicon Valley 2.0: The County of Santa Clara’s Silicon Valley 2.0 Project created a decision-support tool that maps infrastructure assets and their exposure to climate-related hazards, and quantifies the risk of asset loss. The tool is accompanied by a Climate Adaptation Strategic Guide targeting cities, the County and other key agencies and stakeholders (County of Santa Clara, 2018).

United States Climate Change Adaptation Resource Center (ARC-X): the Cross-Agency Working Group on Adaptation’s Climate Change Adaptation Resource Center (ARC-X) helps local and regional government in small to mid-size US cities make decisions about resilience planning. It provides access to data on climate risks, guidance on developing adaptation strategies, case studies and information on potential funding opportunities. POLICY PERSPECTIVES 19 . designed to account for climate risk 1 development. Integrating climate risk into Integrating development. planning can of stage this early decision‑making at with associated costs help to minimise downstream and costs, and maintenance measures adaptation It can also facilitate in maladaptation. locking avoid by to adaptation, ecosystem-based approaches that incentives or creating maintaining restrictions and and forests) ecosystems (e.g. wetlands protect of ecosystem services provision the ongoing ensure Box 6 control. erosion as flood defence and such promoting is Africa South an example of how provides Ecosystem-based Adaptation. tend to be established planning frameworks Spatial in their involved but local authorities are nationally, regulatory issue their own implementation and may parliament the Danish example, For requirements. to account directly enabling municipalities passed a law new The planning decisions. in local city for adaptation to ban construction in certain municipalities allows law to climate change relating due to reasons solely areas 2013). (OECD, adaptation can serve as a tool for mainstreaming adaptation into adaptation as a tool for mainstreaming can serve plans and programmes. policies, infrastructure-related used an SEA in the example, for Netherlands, The theprotect to of a Delta Programme development rainfall. severe rise and more sea level country against “business as usual’ scenario the SEA compared The risk- a new promoted and strategies, to alternative cost-effective in more that resulted based approach opportunities forwhile creating protection, climate and cultural conservation as nature other services such 2017). (Jongejans, heritage SEA and EIA into adaptation element of mainstreaming A key of climate risks into is the integration infrastructure policy the decision-support tools used in standard Environmental A Strategic appraisals. project and Assessment (SEA) “analytical a range of to refers Assessment Environmental 1. Strategic and participatory environmental integrate that aim to approaches the and evaluate plans and programmes policies, considerations into 2006). (OECD, interlinkages with economic and social considerations” STRENGTHENING THE ENABLING ENVIRONMENT FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR ENVIRONMENT ENABLING THE STRENGTHENING National adaptation planning can help identify entry National adaptation cross-sectoral promote and points for mainstreaming, or have, Most OECD and G20 countries coordination. and strategies national adaptation developing, are infrastructure core one or more plans that address For water. and energy, transportation, as such sectors, plan includes national adaptation Brazil’s example, (transport, dedicated to infrastructure a strategy also are governments Local urban‑mobility and energy). particularly plans, or strategies adaptation developing mostwhere as Canada, countries such in federated plans or strategies adaptation have governments local 2013). (OECD, can be to climate change adaptation Infrastructure climate risk into broader incorporating facilitated by as the well as frameworks, planning infrastructure that programmes protection critical infrastructure 2018). countries (OECD, 20 OECD place in over in are project major infrastructure for instance, In the UK, the Planning Inspectorate by reviewed are applications with a set of National Policy compliance to ensure to Statements that include an explanation of how of Developers adaptation. account for climate change to inspectors evidence providing are projects major the latest climate considered have they of how into account climate robustness and taken projections, those by provided the range beyond changes to extreme in proposals. their project projections, infrastructure planning can help reduce Spatial determining the by to climate hazards exposure types of infrastructure possible locations for different National policies Public policy and regulation play a key role in enabling role a key play and regulation policy Public infrastructure climate-resilient promoting and assessments and risk Climate change development. across be integrated need to measures adaptation This and decision cycles. processes policy existing the identification requires of mainstreaming process of decision- levels multiple points at of suitable entry local level. and level project sectoral, making: national, often are levels at these different choices Adaptation may level so that a decision at the national linked, level. options at a local adaptation enable or constrain creating objectives, policy with other also interact They important to It is therefore and trade-offs. synergies to adaptation approach whole-of-government adopt a 2009). planning (OECD, Enabling climate resilience through policy through and resilience climate Enabling regulation 20 . CLIMATE-RESILIENT INFRASTRUCTURE

BOX 6 PROMOTING ECOSYSTEM-BASED ADAPTATION IN SOUTH AFRICA

South Africa is promoting the use of Ecosystem-based Adaptation (EbA) which uses biodiversity and ecosystem services to help people adapt and build resilience to the adverse effects of climate change. EbA encourages the use of ecological infrastructure as a complement or substitute for built infrastructure. Ecological infrastructure includes healthy mountain catchments, rivers, wetlands, coastal dunes, and nodes and corridors of natural habitat, which together form a network of interconnected structural elements in the landscape.

The Department of Environmental Affairs and South African National Biodiversity Institute (SANBI) led the development of a Strategic Framework and Overarching Implementation Plan for Ecosystem-Based Adaptation (also known as the EbA Strategy, 2016 – 2021). The Strategy identifies four areas of work that will contribute towards achieving this vision. These are structured into the following outcomes (1) Effective coordination, learning and communication mobilises capacity and resources for EbA, (2) Research, monitoring and evaluation provide evidence for EbAs contribution to a climate-resilient economy and society, (3) Integration of EbA into policies, plans and decision-making supports an overall climate change adaptation strategy, (4) Implementation projects demonstrate the ability of EbA to deliver a wide range of co-benefits.

As part of implementing the Strategy, South Africa also developed EbA Guidelines, established a coordinating mechanism to support the implementation of the Strategy and embarked on a pilot project on ecosystem restoration initiative that is supported by the Adaptation Fund in the uMgungundlovu District Municipality namely “uMngeni Resilience Project” and the “Taking adaptation to the ground: a Small Grants Facility for enabling local level responses to climate change in South Africa”.

Source: (DEA and SANBI, 2016).

At the project level, Environmental Impact Assessments Technical codes and standards (EIA) provide a natural entry point for considering Regulatory standards, such as technical codes, are whether infrastructure projects are vulnerable to being reviewed and strengthened to promote climate climate change or could exacerbate climate risks resilience. For example, in 2014 the New York state elsewhere. In South Africa, a mandatory EIA was utilities regulator (Public Service Commission) approved conducted for the expansion of the Port of Durban that a settlement requiring power utility Con Edison to included a dedicated report on climate change risks. As use state-of-the-art measures to plan for and protect a result of the EIA, changes were made to the original its electric, gas and steam systems from the effects design, including making the port higher to cope of climate change. France’s Nuclear Safety Agency with sea level rise and developing an environmental updated its water discharge regulation in case of management plan to address heavier rainfall and winds heatwaves, based on new evidence on the impact of (Kolhoff and Van den Berg, 2017). discharged water temperature on fish populations In some cases, governments may need to revise their (Vicaud and Jouen, 2015). EIA legal frameworks to promote a more consistent Modifying economic regulations can also lead to and comprehensive consideration of climate risks in more resilient infrastructure, by removing barriers to infrastructure development. The EIA process in EU investment in adaptation measures. Energy, water and Member States, for example, has been strengthened rail regulators in the United Kingdom, for instance, by an amendment to the EIA Directive (2014/52/ aim to refine their price control review mechanisms EU amending 2011/92/EC), which places a stronger to reflect longer asset life spans, and encourage a emphasis on climate change adaptation and resilience focus on longer run issues and better management of across the screening, scoping and assessment process uncertainty. Similarly, in Germany, the Working Group (Vallejo and Mullan, 2017). on Regulation (Future-Oriented Grids Platform) is examining options within the framework of incentive POLICY PERSPECTIVES 21 . Securities and Exchange Commission (SEC) Securities and Exchange Adaptation Reporting Power (United Kingdom) - (United Power Reporting Adaptation Article 173, Law on Energy Transition for Green for Green Transition on Energy Law Article 173, guidance (United States) - the SEC issued in 2010 stating that guidance” “interpretative material to the company climate risks that are requirements. existing disclosure by covered were to require power the government the gives this to report providers types of infrastructure many round first The to climate risks. on their exposure being but it is now mandatory, were of reports basis. voluntary used on a required - listed companies are (France) Growth or explain impacts, on climate change to report Companies are not done so. have they why physical of to include disclosure encouraged climate risks in their reports. ● ● ● ● ● be valuable in raising awareness within organisations awareness in raising valuable be stimulating to climate risks, exposure about their focuses section This those risks. action to reduce climate risks from physical of on the disclosure risks related information on the other More change. risks and liability risks - transition to climate change produced paper background - can be found in the Table of the Round meeting for the February 2018 Climate Integrating for Sustainable Development, Investment. in Institutional Change‑related Factors or policies can be used to encourage Government but this is sector, private the by risk disclosure require than mitigation. for climate resilience at an earlier stage greenhouse Fifteen G20 countries had mandatory while the situation for place in 2015, in gas reporting Public companies complex. is more climate resilience “material” deemed to disclose risks that are required are on Climate-Related Force in most G20 countries (Task the this covers principle, In 2017). Financial Disclosures, but this does not climate change, from risks physical introduced Some countries have consistently. happen on Force (Task reporting to encourage specific initiatives Climate-Related Financial Disclosures, 2017): ● 2. For the purpose of this report, financial climate risks refer to physical to physical the purpose of this report,refer financial climate risks 2. For shifts or longer-term (chronic) risks (acute) driven which can be event which are transition risks, from different are These patterns. in climate GHG economies. to low financial with the transitions risk associated can 2 STRENGTHENING THE ENABLING ENVIRONMENT FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR ENVIRONMENT ENABLING THE STRENGTHENING support infrastructure resilience by informing by resilience support infrastructure can also of reporting process The decisions. investment Increased public disclosure of climate risks public disclosure Increased Facilitating climate risk disclosure climate Facilitating regulation to allow additional adaptation-relevant adaptation-relevant additional to allow regulation and transmission generation power for investments and (Vallejo or reimbursed distribution to be accredited 2017). Mullan, national technical revising are governments National A screening resilience. to account for climate standards to the UNFCCC andof 6th National Communications countries OECD five show sources national associations’ have and Korea) Germany Denmark, Canada, (Australia, Commission on The to their standards. made revisions has updated for instance, Safety in Germany, Process and flooding for floodprecipitation rule on its technical Accidents plants subject to the German Major safety of Corporation Expressway while the Korea Ordinance, for drainage the design requirements has strengthened bridge design and embankment slopes. capacity, organisations, international standardisation major Two (CEN, Committee for Standardisation the European de Normalisation) and International Européen Centre existing reviewing are (ISO), Organisation Standards CEN is The climate risk. to better address standards the Europeanamending and extending the scope of (Eurocodes), standards engineering technical civil infrastructure, and energy with a focus on transport also are They as building and construction. well as to account for climate standards product amending Task Adaptation its through working ISO is The change. vulnerability for a set of standards to develop Force and adaptation planning, adaptation assessment, Both of these 2015). (ISO, monitoring and evaluation and retrofitting re-use the assessment, cover reviews as the design of new well as of existing infrastructure, developments. or the modification standards of new development The of existing ones to better account for climate change climate the relevant which the extent to increases An underlying as a matter of course. managed risks are two this is the tension between in achieving challenge straightforward that are goals: establishing standards while also taking into consistently, and can be applied ofaccount the uncertain and context-specific nature care context specific, risks are Where climate risks. approaches standardised to ensure should be taken in or under-investment do not lead to systematic over- resilience. 22 . CLIMATE-RESILIENT INFRASTRUCTURE

These initiatives provide considerable flexibility in how There is a growing number of private sector and companies choose to report climate impacts. The G20 voluntary initiatives to support risk disclosure, aimed at encouraged greater consistency and action on this different audiences. topic by mandating the Task Force on Climate-related Infrastructure developers and engineers Financial Disclosure (TCFD) to create a voluntary framework for climate-related risks and opportunities Climate resilience is now being integrated into (Task Force on Climate-Related Financial Disclosures, frameworks of voluntary sustainability rating 2017) . This framework calls for the reporting of, inter programmes. Potential benefits of these ratings alia, physical risks relating to the impacts of climate include increased performance, reduced costs and change, with a focus on the following areas (Task marketing advantages. They provide a consistent form Force on Climate-Related Financial Disclosures, 2017): for tenderers to require, and bidders to demonstrate, governance, risk management, strategy and metrics. compliance with sustainability objectives. Sustainability rating tools include: Climate risks do not have a single metric, equivalent to the tonnes of CO2eq that is commonly used for ●● Infrastructure Sustainability Rating Tool mitigation3. Yet investors and lenders need to have (Australia) reasonably comparable and usable data with which to ●● CEEQUAL (UK) compare the characteristics of their investments. The TCFD guidelines suggest indicative metrics to consider ●● ENVISION (USA) using to inform investment decisions, but identifies the ●● SURE Infrastructure Resilience Standard development of methodologies, datasets and tools as an area where further work is required. There are no comprehensive statistics available on the extent to which infrastructure is being covered by Frameworks for risk disclosure should be tailored these rating programmes, but the value of rated assets to national circumstances. Developing countries remains a small proportion of total investment. For will be particularly adversely affected by climate example, the global capital value of certified projects change, but also rely upon investment for economic under the Infrastructure Sustainability Rating Tool is development. Approaches to climate risk disclosure, AUD 8 billion. However, there are initiatives underway and incorporation of these risks into decision-making, to increase use of these tools. For example, since should be designed to avoid deterring investment 2016 all public works in Los Angeles are required to in developing countries. Approaches to disclosure demonstrate compliance with the ENVISION standard should also account for differences in capacity and the (Meister Consultants Group, 2017). sophistication of financial markets to avoid generating undue administrative burdens. Investor initiatives Voluntary guides, toolkits and standards for Investors are taking an increasing active role in disclosing climate risks requesting information on the exposure of their assets to the risks of climate change. These risks include Tools for disclosure should encompass both the physical risks from climate change, and those arising physical vulnerability of specific assets, and examine from the move to a low-GHG economy. Voluntary whether management responses are sufficient to disclosure initiatives have been developed to meet this ensure continual management of climate-related need. They include analysis of the risks from climate risks. Relevant initiatives are being developed to change within broader frameworks of sustainability. support this ambition. For example, EBRD and the If designed well, they have the potential to encourage Global Centre of Excellence on Climate Adaptation infrastructure owners and operators to improve their (CGECA) are currently developing metrics for climate management of climate risks. risks and opportunities, and identifying how climate Some of the main initiatives that address climate risks risk information can be incorporated within financial include: reporting systems. ●● CDP - this global reporting framework covers a range of sustainability issues, including climate resilience. They report that 650 investors, 3. There are, nonetheless, differences in the climate and other effects of representing USD 87 trillion of assets under long-lived and short-lived greenhouse gases and other climate pollutants management request information under this that are captured by the CO2eq metric. POLICY PERSPECTIVES 23 . financially material risks, including physical risks physical including risks, material financially climate change. from Further refinements of these initiatives will help initiatives of these Further refinements in encouraging effective are that they to ensure in their climate resilience companies to consider to the metrics relevant particular, In operations. in non-financial expressed generally are resilience do not readily which consumption), water terms (e.g. The investors. by used within the financial models fit further encouraging are TFCD recommendations encourage metrics and to refine in this area work systems. harmonisation between STRENGTHENING THE ENABLING ENVIRONMENT FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR ENVIRONMENT ENABLING THE STRENGTHENING framework. Over 6 300 companies currently currently 6 300 companies Over framework. this framework. through report (GRI) - this modular Initiative Global Reporting with 93% used, widely is framework reporting having corporations 250 largest world’s of the include some metrics modules The adopted it. to climate risks. relevant Board Standards Accounting Sustainability States, based in the United (SASB) - this initiative, to on how guidance for corporations provides information disclose material sustainability The framework reporting. their financial through identifying includes 79 industry standards ● ● ● ● 24 . CLIMATE-RESILIENT INFRASTRUCTURE

Mobilising investment in climate-resilient 4 infrastructure

This section explores how climate resilience can be mainstreamed into the identification, design and financing of infrastructure projects. It identifies mechanisms through which public support can help to mobilise private finance for climate resilience. These mechanisms will be most effective when combined with the measures to strengthen the enabling environment (section 3).

Key messages the project developer at the design stage unless there is a government requirement to do so. ●● Climate impacts will have implications for For Public Private Partnership (PPP) contracts, existing global infrastructure investment needs, it is important to clarify the allocation of including increasing, decreasing, or re-directing responsibilities regarding climate-related risks particular investment needs in relevant sectors, planning, management and response. particularly flood defences, and water supply and sanitation. The use of tools for decision-making ●● Lenders and public funders are increasingly under uncertainty can reduce the need for costly using risk screening to identify infrastructure retrofitting while reducing upfront costs. Natural that may be vulnerable to climate change. One infrastructure and other flexible or innovative of the emerging lessons is that screening should approaches to climate-resilient infrastructure be combined with support to generate solutions may even be cheaper than traditional approaches to the risks that have been identified in the in some circumstances. Global studies find that screening process. the benefits of investing in resilience outweigh ●● Public finance and policies can be used to the costs with high benefit-cost ratios, for mobilise private finance for climate-resilient example of investment in flood defences for infrastructure. Support for project preparation coastal cities. can help to address capacity constraints relating ●● Developing and communicating infrastructure to climate resilience. Blended finance can be used plans can help investors to identify investment to improve the risk-return profile of investments opportunities. Developing these plans provides where appropriate, in combination with efforts an opportunity for decision makers to take a to improve the enabling environment for private strategic view of how considerations such as investment. climate change will affect infrastructure needs in the coming decades, and design sequenced packages of investment (“pathways”) that address interconnections and increase resilience in a way that cannot be achieved by looking at projects in isolation.

●● Public procurement processes can support climate resilience by comparing bids’ costs over the asset lifetime. This includes considering both operating expenses (OPEX) as well as capital expenses (CAPEX). The increasingly severe impacts of climate change later in the design life of the project are likely not to be considered by POLICY PERSPECTIVES 25 . MOBILISING INVESTMENT IN CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT IN INVESTMENT MOBILISING There can be a strong business case for making these case for making business be a strong can There The infrastructure. in climate-resilient investments all find that the benefits of above global studies cited In a different the costs. outweigh in resilience investing resilience Alaskan infrastructure of analysis context, 2017). to costs (Melvin et al., ratios of benefits finds high or innovative and other flexible infrastructure Natural even may infrastructure to climate-resilient approaches 7). (see Box approaches than traditional be cheaper will infrastructure Financing for climate-resilient The resources. private public and of a mixture require of finance for infrastructure these sources split between estimated atpublic finance of with the share varies, to 40% in countries compared 60-65% in developing et al., 2016; Bhattacharya countries (Ahmad, developed data on the finance no comprehensive are There 2016). thus it is not infrastructure, climate-resilient for flows private public or the roles possible to assess the relative in financing climate-resilient playing sector is currently for adaptation finance flows However, infrastructure. bilateral governments, including public sources, from climatemultilateral providers, finance development banks and development funds and development in trend an upwards finance institutions continued insufficient data currently are There 2016). 2014 (UNEP, sector financing for climate private in to assess trends resilience. bilateral finance institutions – national, Development in an important role play – all and multilateral supporting climate-compatible infrastructure, well as as projects financing infrastructure both by to required change policy supporting the necessary GHG and climate-resilient. low infrastructure make in supporting players key also increasingly are They developing by countries to mobilise-investment, greenfield in new investing by pipelines, infrastructure investment de-risking infrastructure and by projects Amongst the major investors. private and mobilising banks (MDBs) infrastructure development multilateral accounting for activity, key remains a financing still 2016). and Chiofalo, USD 31 billion in 2014 (Miyamoto Bank, Asian Development the Some banks – namely, Bank and Islamic Development African Development portfolios to than half their allocatedmore Bank, in 2014. infrastructure resilienceComparing the scale of financing for climate change mitigation is difficultwith financing for climate in terms reported the former is typically given to do, cost required the additional cost (i.e., of incremental rather to climate change an asset resilient to make made of the investment value the total than reporting There is already a significant gap between total between gap a significant is already There in trends needs and infrastructure projected OECD estimates investment. infrastructure under is required year per USD 6.3 trillion the infrastructure business‑as‑usual just to meet while development, economic needs for continued estimated to be USD 3.4 trillion was global investment than rather Thus, 2016). et al., in 2014 (Bhattacharya is significant scope there at in isolation, being looked considerations climate resilience for mainstreaming this existing efforts to address part of broader as thison information More gap. investment infrastructure in Investing in Climate, can be found challenge broader Crossing the Bridge 2017b) and Investing in Growth (OECD, & IDB, 2017). (Mercer to Sustainable Infrastructure implications for existing will have Climate impacts are There needs. investment global infrastructure estimates of these needs for no comprehensive some provide estimates but sectoral G20 countries, needs potential scale of investment indications of the possible than is detailed analysis for more and allow not estimates that exist are The global level. at the in assumptions due to differences comparable directly of 136A study 2015a). and methodologies (OECD, USDmajor coastal cities found that an additional in flood need to be invested would year per 50bn changedefences to offset the impacts of climate (2014) estimate et al. Hinkel (Hallegatte et al., 2013). need to be would USD 12-71 billion that an additional sea-level by 2100 to address spent on flood defences estimates tend to be higher than the National-level rise. suggest. would global results estimates help clarify the scale of funding needsThese but the costs for a infrastructure, for climate-resilient widely will vary depending given project on context. integrating on average, One estimate suggests that, 1-2% to the total cost add would climate resilience More 2010a). Bank, (World projects of infrastructure development project at the will be required resources A 2011 study phases to consider climate risks. and design to required analysis IDB found that the additional by 25% risks can add climate change identify and evaluate and impact costs of an environmental to the average on the Depending 2011). assessment (Iqbal and Suding, implementation required, measures climate resilience could require or they negative costs could be negligible, The use of tools for design. project changes in significant the needdecision-making under uncertainty can reduce costs. reducing upfront while retrofitting for costly Scaling-up finance for climate-resilient Scaling-up finance infrastructure 26 . CLIMATE-RESILIENT INFRASTRUCTURE

resilient to climate change) while the latter is reported Mainstreaming climate resilience at the project in terms of total capital cost in the MDB reporting. For investment level example, in 2016, MDBs reported over USD 27.4 billion in climate finance commitments, with USD 6.2 billion Mainstreaming resilience into infrastructure pipelines going to climate change adaptation (Joint MDB and pathways Climate Finance Group, 2017). However, the fact that All infrastructure sectors will be affected by risks approximately half of this incremental adaptation arising from climate change, albeit to varying extents. finance went towards infrastructure suggests that the It will be essential to mainstream climate resilience, total value of climate-resilient infrastructure could be in a proportionate way, throughout the full pipeline of significant, even when compared to mitigation4. projects to ensure that they are consistent with future climate change scenarios.

4. This includes 18% for water and wastewater systems, 18% for energy, Infrastructure pipelines translate countries’ overall transport and other built infrastructure and 16% for coastal and riverine policy objectives into coherent sets of infrastructure infrastructure (AfDB et al., 2017). projects. Developing these pipelines and supporting institutions can yield the following benefits (OECD, 2018):

●● Increase transparency and predictability for private investors.

●● Ensure that the cumulative total of projects being planned is consistent with overall objectives.

●● Improve sequencing of inter-related projects.

●● Inform the development of the supply chain; and

BOX 7 COPENHAGEN: WORKING WITH ECOSYSTEMS TO COST-EFFECTIVELY BUILD RESILIENCE

Cloudbursts (sudden heavy rainfalls) are predicted to become more severe in Copenhagen as a result of climate change. During these periods of heavy rainfall, the drainage capacity of the sewers can be overwhelmed, leading to flooding. A cloudburst in 2011 led to damages of more than EUR 600 million from flooding.

The 2012 Cloudburst Plan identified an initial set of measures would be required to address the rising hazard from increased periods of rainfall. These have been subsequently developed and refined:

• Property-level measures: these measures reduce damages when floods occur, including anti-backflow valves to prevent sewer water from entering basements

• Green space and waterway restoration: this can help to facilitate the flow of water and provide additional amenity value

• Grey infrastructure: a tunnel would be built to enhance drainage capacity in heavily built-up areas, roads are to be redesigned so that they can be used to channel excess rainfall to the sea

The lifetime costs of those measures were estimated at DKK 13 billion (EUR 1.7 billion), with the majority to come from water charges, and the reminder to come from private investments and municipal funds. Overall, the combined measures to address cloudbursts are expected to yield net benefits of DKK 3 billion (EUR 400 million), compared to net costs of DKK 4 billion (EUR 540 million) that would be incurred for the traditional solution.

Source: (City of Copenhagen, 2015). POLICY PERSPECTIVES 27 . MOBILISING INVESTMENT IN CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT IN INVESTMENT MOBILISING technological and socio-economic changes, for changes, and socio-economic technological for this area promising A whole. as a infrastructure of climate-resilient “pathways” of is the development go These 3). (as discussed in section investments in infrastructure projects potential lists of beyond investment of packages sequenced sectors to create pathways use of The that consider interconnections. for of options wider range a possible to identify it makes when possible be would uncertainty than addressing is This projects. of individual focussing at the level are practices but some emerging area, still an evolving 8. Box in shown for the accounts Ensuring that public procurement resilience benefits of climate thatpolicies can be used to ensure Procurement resilient to the is financed infrastructure publicly government On average, climate. effects of a changing accounts for 10-25% of countries’ procurement used to make process The 2017). Bank, GDP (World a have decisions for infrastructure procurement and ability incentive impact on the contractors’ direct public the scale of Given to account for resilience. indirect an also have can procurement investment, of and structure offered products the impact in shaping 2017). Bank, (World places market relevant : the Delta Programme is responsible for protecting the Netherlands protecting against for is responsible : the Delta Programme (Netherlands) Delta Programme countryThis is of critical 26% of the importance that given lies below supplies. flooding and ensuring freshwater which takes a long-term, Delta Management”, “Adaptive of the concept has adopted programme This sea level. range of possible futuresfor a prepared are decisions that to make short-term approach investment flexible (The 2012). Netherlands, 30 million people and for water River Basin provides : the Colorado States) Basin (United River Colorado Robust Decision Making used to was hydrology. and changing demand growing from is under pressure no longer are when options identify to which can then be monitored of vulnerability, the main drivers identify approachThe supply and demand. managing portfolios dynamic and develop of options for appropriate be could and those that the actions be taken in the near-term identifying needed to that dynamic, was 2013). et al., (Groves depending on circumstances implemented a national deliver to is required Kingdom): this commission (United Commission Infrastructure National approach” “whole system takes a assessment The each parliament (every to assessment infrastructure 5 years). isThis the future. for of possible scenarios a range considering and feedbacks, interdependencies identify to Transitions Infrastructure (the a consortium by universities of seven models produced integrated by informed Consortium).Research Establish responsibilities and delineate and delineate responsibilities Establish to delivering for actors relevant accountability for issuing responsibilities e.g. pipelines, the necessary permits. BOX 8 EXAMPLES OF INFRASTRUCTURE PATHWAYS OF EXAMPLES 8 BOX ● Improving the quality and availability of relevant of relevant the quality and availability Improving those in making is a first step projects infrastructure Infrastructure to climate change. resilient projects signalling the to do this by pipelines can help in infrastructure For projects. of bankable availability pipelines infrastructure of transparent the lack general, as the second most significant investors by rated was after uncertain investment, barrier to infrastructure & (Mercer regulations policies and and unfavourable 2017). IDB, is required progress found that more OECD analysis plans into infrastructure adaptation to mainstream is also of mainstreaming degree The 2017b). (OECD, projects additional with some identifying variable, focus morewhile others for climate resilience, relevant More on the enabling conditions for infrastructure. that infrastructure is a need to ensure there generally, and clear in specifying available publicly pipelines are and associated provision for infrastructure the targets 2017b). budget (OECD, to examine is required approach A strategic with along the implications of climate change, ●

28 . CLIMATE-RESILIENT INFRASTRUCTURE

The procurement process should account for the value variation between countries. Research commissioned of climate resilience. As discussed above, considering by the Greater London Authority found that it would be resilience will often entail additional upfront capital or consistent with their legal duties to integrate climate operational expenditures. Potential providers of resilient resilience into their procurement (LCCP, 2009). Given infrastructure will be at a competitive disadvantage the potential complexity of the topic, and capacity unless the benefits of resilience are accounted for. constraints, it recommended the sharing of good Decision-support tools, such as cost-benefit analysis, practices between subnational governments. However, should consider the range of potential benefits of efforts are underway to increase uptake. enhanced resilience. In the UK, this was achieved by More transparency is needed about the extent to which producing supplementary guidance for the normal climate risks are included in public procurement appraisal framework (HM Treasury and Defra, 2009). frameworks. UN Environment (2017) finds that the use The use of lifecycle costing and “green” procurement of sustainable public procurement is increasing, and can also ensure a level playing-field for resilient that two-thirds of the countries they examined consider approaches. climate change mitigation. This study does not consider Procurement policies can facilitate innovation in adaptation or resilience. the provision of climate-resilient infrastructure by Screening infrastructure projects for climate risks specifying objectives rather than mandating the use of specific technologies (Baron, 2016). In such contexts, Financing institutions and public funders are it is important that the objectives include transparent increasingly using risk screening as part of their recognition of climate change when specifying those approval processes for new infrastructure projects (see performance standards, e.g. relating to performance Box 9). The use of mandatory screening for projects reliability or reduction in flood risk. The development complements the voluntary disclosure of climate risks and adoption of recognised standards relating to by organisations, which is discussed in section 3. Some infrastructure will facilitate this process. major risk screening initiatives include (AECOM, 2017):

Procurement policies at the urban and other ●● The European Union examines major projects subnational levels of government are also important. co-financed by the European Structural and On average, subnational authorities account for 59% of Investment Funds for the 2014-2020 period public investment in G20 countries, albeit with a wide to consider climate risks. Projects being

BOX 9 INTEGRATING CLIMATE RISKS INTO PUBLIC INFRASTRUCTURE PLANNING

Queensland and Tasmania (Australia): these states require cabinet submissions for government projects to consider potential climate risks. The Queensland Climate Ready Infrastructure initiative requires local governments to consider climate change adaptation when applying for infrastructure grants to the Queensland Government.

COAG (Australia): the Council of Australian Governments requires state and territory governments’ strategic plans for infrastructure in capital cities to cover climate change adaptation. Infrastructure funding is linked to meeting these criteria.

West Coast Infrastructure Exchange (Canada and USA): was established by the states of California, Oregon and Washington in the United States and British Columbia in Canada. WCX aims at developing innovative methods to finance and facilitate the development of infrastructure in the region by developing a framework for infrastructure investment and principles for certification. The consideration of resilience and climate risks features among the WCX’s standards for infrastructure projects (WCX, 2012).

National Investment Plan (Costa Rica): the Costa Rican national investment plan for 2015-18 required all new infrastructure projects to meet resilience objectives. POLICY PERSPECTIVES 29 . The IDB’s private sector investment arm, IDB Invest, sector investment private IDB’s The proposals all investment screens systematically now A two-stage vulnerabilities. climate identify to first stepThe this screening. for is used process undertakes whether identify to assessment a rapid risks or is high, medium climate the vulnerability to medium are as high or scored are that Projects low. The detailed assessment. then subject more a to alia, whether inter examines, detailed assessment climate has considered the project documentation change impacts necessary and made any revisions. project with the the bank collaborates If necessary, the strengthen to measures identify to developers resilience. project’s BOX 10 RISK SCREENING BY IDB INVEST IDB BY SCREENING RISK 10 BOX MOBILISING INVESTMENT IN CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT IN INVESTMENT MOBILISING

Strengthen links between risk-screening tool risk-screening links between Strengthen fit are that they and users to ensure developers for purpose. where at a stage processes into lending Integrate balancing revisions, is still scope to make there to be sufficiently project the need for the against the risk screening to undertake well-specified process. climate- to help users develop support Provide been solutions to the risks that have resilient process. identified in the screening Ensure that users have access to credible and access to credible that users have Ensure for undertaking risk consistent data sources accounting for uncertainties. screening, screened have a total value of approximately approximately of value a total have screened EUR 70‑100 billion of investment. Bank (EIB) has Investment European The screening a climate-risk and applied developed Strategy. part of its 2015 Climate tool as has Bank (IDB) Development Inter-American The for climate projects all committed to screening pilot undertaken already having 2018, risks from countries. of studies in a number its lending screens Bank systematically World The and has to climate and disaster risks, for exposure process: a set of tools to support that developed https://climatescreeningtools.worldbank.org/. ● ● ● ● ● ● ● ● ● ● ● ● ● ● institutions can influence jointpublic by Risk screening countries, in developing investments: public-private banks contributing and state-owned with development financed privately 21% of the financing for around 2017b). (OECD, projects infrastructure of is an essential element Climate risk screening but its impact can approaches, mainstreamed The be limited if it is implemented in isolation. the can help to improve recommendations following (Hammill approaches of risk screening effectiveness Development 2011; Inter-American Tanner, and Bank, 2014): 30 . CLIMATE-RESILIENT INFRASTRUCTURE

Integrating climate resilience into PPPs considered by the private party, and would need to be addressed by the government in the planning, design Public-Private Partnerships (PPPs) are an important and contracting phase. delivery route for infrastructure: in 2016, USD 71 billion of investment was committed in PPPs in emerging and Despite the importance of clarifying risks, no OECD developing economies, predominantly for provision country has explicitly incorporated climate resilience of electricity and roads (World Bank PPI database). into their PPP frameworks (Vallejo and Mullan, 2017). The details of these contracts vary, but the essence This is also the case for a set of 16 emerging and is that they are long-term, fixed contracts. PPPs work developing economies, including Brazil, China, India, best when the contracts are as complete as possible: Indonesia and South Africa (World Bank, 2016). in other words, when risks are clearly identified and However, it is important to note that climate resilience allocated to the different parties. Table 4 provides a may, nonetheless, be considered in the development summary of recommendations for ensuring that the of PPP projects. For instance, resilience against many PPP process facilitates resilience. types of existing hydro-meteorological risks may already be mainstreamed into project technical design The underlying issue for climate resilience is to ensure processes and be considered existing best practice, as that risks relevant to climate change are identified is often the case of hydropower or dam projects. The and allocated correctly. The general principle for PPPs challenge is to ensure that these processes adequately is that risks should be allocated to the parties who are consider how risks may evolve in the future, as well best able to manage those risks. The management of as how they have been experienced in the past. While risks can consist of efforts to reduce the risk through progress at the national level may be slow, initiatives changes in design or operation, and the use of financial are taking place for specific projects and sectors (see instruments to transfer risks to other parties. The Box 11 for an example). risks from climate change are particularly difficult to manage because they are uncertain. Because of this uncertainty, passing the risk to the private sector can be expensive, but keeping it in the public sector reduces BOX 11 COLOMBIA’S 4TH GENERATION the private sector’s incentive to manage the risks. ROAD CONCESSION PPP

A central practical issue is the extent to which climate The La Niña floods of 2010-2011 led to economic change impacts are covered by relief, compensation or losses estimated at USD 6 billion, of which 38% “force majeure” clauses in PPP contracts. These clauses arose from damage to infrastructure. Roads under partially or entirely indemnify the concessionaire against risks that are exogenous and unpredictable concession suffered damage of USD 88 million leading or unforeseeable. In practice, risks covered by these to disputes between road concessionaires and the clauses represent potential financial liabilities held government about which parties bore responsibility by the government. Only a few OECD countries, for covering these damages. In response to this, the including Australia and United Kingdom, treat weather national infrastructure agency enhanced and clarified events separately from “force majeure”. In the United insurance requirements, with technical support from Kingdom, concessionaires are not eligible for financial the World Bank. The contract for the latest tranche compensation following hydro-meteorological events. The risks from climate change are uncertain, but, in of new roads clearly allocates climate risks to the some cases, they are now foreseeable based on the concessionaires, on the basis that they will be best available scientific evidence (IPCC, 2014). placed to manage those risks. Concessionaires have In addition to this, there can be a mismatch of to hold sufficient insurance to cover their expected time horizons between the concessionaire and the Probable Maximum Loss. The risk of insurance infrastructure asset. The concessionaire is only premiums increasing in future due to climate change incentivised to consider the performance of the rests with the private sector. asset during the contract term. Bridges, for example, can have a useful life of 100+ years, while typical Source: (CEPAL and BID, 2012; World Bank, 2016). contracts are only 20-30 years. As a result, if there are increasingly severe impacts of climate change later in the design life of the project, they would not be POLICY PERSPECTIVES 31 .

MOBILISING INVESTMENT IN CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT IN INVESTMENT MOBILISING An optimal risk-sharing allocation is crucial to (Rana, 2017). projects ensuring bankability for suitable at undertaken determination is typically This project during the project, the outset of the resilience The phase. and design conceptualisation the need given dimension to this - brings a new agenda risks the allocation of climate-related to consider how these risks. to manage will affect actors’ incentives can use providers public finance that context, Within and bridge of tools to allocate risks effectively a range infrastructure. for climate-resilient gap the bankability in the support, preparation project tool is One such project and financial assistance to form of technical particularly is This or concessionaires. owners complexitypotential additional the given important in infrastructure of considering climate resilience development. Blended finance can be used to support investment In this context, infrastructure. in climate-resilient finance is used to mobilise additional development the by improving finance private and commercial and helping of investments profile risk‑return viable become economically projects un‑bankable is not an asset class: Blended finance 2018b). (OECD, typically blended finance transaction an effective financial instruments in such traditional structures Therefore, capital. commercial as to attract way a on both sides of the blended finance can operate Potential measures by PPP phase by measures Potential Examine whether the risks from climate change affect the appropriate choice between PPPs and PPPs between choice change affect the appropriate climate risksExamine whether the from services infrastructure providing other mechanisms for resilience climate and service the project consider the technical to applied that standards Ensure to climate-resilient approaches for innovative room provide to specification the tender Design provision infrastructure by including benefits, resilience for accounts tenders of evaluating the process that Ensure contractterm of the than the rather of the asset, the life over net benefits considering liabilities) contingent risks (and resulting climate the potential and clearly allocate analyse Identify, “force provisions, “uninsurability” include Key terms change in the contract. climate from resulting clauses majeure” to bear the is able concessionaire the that to ensure of financial capacity, or proof insurance, Use in the contract risks allocated and transparency about risk management, risks, of climate-related disclosure Encourage of the contract the life throughout changing of in light management adaptive facilitate to the contract throughout Collaborate conditions climate Recommendations for incorporating climate resilience into the PPP process into resilience climate incorporating for 4 Recommendations Table Project Identification & PPP Identification Project Selection Phase Phase Preparation Project phase PPP procurement Implementation and contract phase management Source: Adapted from (PPIAF, 2016). (PPIAF, from Adapted Source: A key factor affecting commercial and private private and factor affecting commercial A key in climate-resilient decision to invest investors’ has project whether a is bankability: infrastructure adequate attributes (e.g. key number of a sufficient cash flow) future risk exposure, acceptable collateral, attractive. it commercially to make or hamper the constrain may barriers Several general in projects bankability of infrastructure will that projects new for also relevant are which inter alia, include, These need to be climate-proofed. with these associated risks perceived and high real in the enabling environment, weaknesses investments, sounding. and/or market preparation project poor will be enabling environment a supportive Creating infrastructure climate-resilient more critical to driving section 3). (see investment for funding climate-resilient challenge particular A be hard of the benefits may is that many infrastructure infrastructure protective for particularly to monetise, growing however, are, There as flood defences. such being examples of instruments and mechanisms potential benefits of the implemented to translate into adequate revenue infrastructure climate-resilient 9 for examples). (see Box streams Project development support, development Project risk mitigation for bankable finance and blended frameworks projects infrastructure climate-resilient 32 . CLIMATE-RESILIENT INFRASTRUCTURE

risk‑return spectrum. For instance, blended finance depreciation periods of infrastructure projects. can use credit enhancement instruments such as Expanded safeguards that integrate resilience aspects insurance and guarantees to take on some project are likely to play a key role in this regard, by providing risks. Alternatively, a project or portfolio of climate- a standard for financing by private/commercial resilient infrastructure projects can be structured financial actors. to increase the returns received by commercial A particular area of interest relates to the potential investors, thereby encouraging them to take on a high of insurance or guarantee products that could be level of risk. It is worth noting that blended finance developed for climate-resilient infrastructure. Insuring approaches often combine financial support with a new and existing infrastructure against future risks technical assistance facility, which can provide project due to climate change could be a factor in reducing preparation support. financing costs through risk mutualisation. Premiums, A co-ordinated approach between institutions will be or availability, of such insurance would need to reflect essential to address systemic bottlenecks and demand climate resilience aspects, as a potential avenue to for capital for climate-resilient infrastructure. Given both internalise resilience into the project finance, the long-term nature of infrastructure investments, while reducing actual financing cost. However, this financing is likely to be contingent on factoring in is dependent upon the availability and commercial resilience towards further expected or likely climate viability of such products. change within the long-term time horizons and

Table 5 Instruments and approaches to mobilise private investment

Potential role Project development facilities and technical assistance Support the development of bankable infrastructure projects

Co-investment platforms and funds Pool capital to directly finance infrastructure Pool public and private capital Debt subordination Reduce risk for private investors, as the public sector takes on the highest risk tranches

Guarantees Improve the credit rating of investment projects

Project development facilities and technical assistance Supports the development of bankable infrastructure projects

Source: Adapted from OECD (2017b). POLICY PERSPECTIVES 33 . MOBILISING INVESTMENT IN CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT IN INVESTMENT MOBILISING Source: (EPA, 2017; The Nature Conservancy, 2018; OECD, 2015b). 2018; OECD, Conservancy, Nature The 2017; (EPA, Source: : The city of Casablanca is in the process of extending its water network of extending its water city process is in the The of Casablanca : (Morocco) taxes Land development Partby of this is funded urbanisation. rapid to meet the demands from measures and flood protection 7% in 2004 from total investment, of share growing property a financing from who are contributions developers 0.7% of the the property of from of the price is a share ranging contribution when sold, The 54% in 2014. to luxury when 1.3% for waived housing to social apartments are for and contributions selling cost and buildings, also been set to have in underprivileged Special conditions take place neighbourhoods. the developments harness major urban of urban and to developments. expansion, the pace to adjust the contribution Conservancy Nature The (TNC): with Re, (Mexico) Swiss and and Insurance Reef and Beach Resilience The reef linking of a coral with the protection are insurance support and local government, the Mexican state from condition has yet their waves, from protectionstorm damage against offer reefs Coral Cancún. coast of off the It a one-meter that is estimated loss a variety pressures. due to of human-induced years in recent deteriorated km square 1,300 of inland flooding and USD 20 billion in lost infrastructure into translate could height of reef monitors trust that collective a to in will pay such as hotels, on tourism, businesses dependent Local in Mexico. a parametric for a premium A portionof the trust will go towards of the 60 km of reef. the condition stretch to trigger the If severe is sufficiently the storm of reef. stretch the designated policyinsurance covers that the necessary efforts. rehabilitation will cover the payout policy, insurance Authority and Sewer Water DC Washington, Impact Bond (US): InEnvironmental 2016, the September The Impact infrastructure. nature-based finance water Bond (EIB) to issued an Environmental storm (DC Water) payment where programs, environmental up-front capital for provide to approach Success” for “Pay EIB uses a had examined Water DC In this case, outcomes. entity is based on measured the public sector the private by to They deployment. needed for the use of nature-based but lacked the up-front capital investment solutions, about taking the project flood management as nature-based also concerned on debt for for infrastructure were which will allow bond, municipal tax‐exempt EIB issued a 30‐year The in the area. been tested had not yet with a financial investors In addition, EIB structure provides near its municipal rate. interest pay to Water DC financial risk share with a corresponding Water DC if the project outperformspremium and it provides its target, of nature- pilot the cost-effectiveness to Water DC structure allows The if the project underperforms.payment urban flood management.based solutions for BOX 12 MOBILISING FINANCE FOR CLIMATE-RESILIENT INFRASTRUCTURE CLIMATE-RESILIENT FOR FINANCE MOBILISING 12 BOX

34 . CLIMATE-RESILIENT INFRASTRUCTURE

Coverage of infrastructure in national climate risk assessments 5 in OECD and G20 countries

Year Sectoral focus Climate hazard focus Nature of assessment Coastal Author Multi- Transport Water Multi- Flooding change Qualitative Quantitative sectors only only hazard only only Working Group (Ministry ARGENTINA of Interior and Transport 2012 x x x as intermediary) DCEE 2011 x AUSTRALIA DCC 2009 x x x x x ATSE 2008 x x x Federal Ministry of Agriculture, Forestry, AUSTRIA 2013 x x x Environment and Water Management National Climate BELGIUM 2010 x x x Commission BRAZIL Ministry of Environment 2016 x x x CANADA Natural Resources Canada 2014 x x x Case studies National Environment CHILE 2010 x x x Commission CHINA Qin, D. (ed) 2015 x x x CZECH Ekotoxa Ltd., Ministry of 2015 x x x REPUBLIC the Environment DENMARK Danish Nature Agency 2012 x x x Ministry of the ESTONIA 2017 x x x Environment Ministry of Agriculture FINLAND 2013 x x and Forestry Ministry of Ecology and FRANCE 2009 x x x Sustainable Development Federal Environment GERMANY 2015 x x x Agency GREECE Bank of Greece 2011 x x Farago, T; Lang, I; Csete, HUNGARY 2010 x x x L. (eds) ICELAND Ministry of Environment 2010 x x x Ministry of Environment INDIA 2010 x x x & Forests Ministry of National Development Planning/ INDONESIA National Development 2012 x x x Planning Agency (BAPPENAS) Irish Climate Analysis and Research UnitS (ICARUS) IRELAND 2010 x x for the Environmental Protection Agency Ministry of Environmental ISRAEL 2008 x x x Protection POLICY PERSPECTIVES x x x x x x x x x x x 35 . Quantitative x x x x x x x x x x x x x Nature of assessment Nature Qualitative x only Flooding x x only Coastal change Climate hazard focus hazard Climate x x x x x x x x x x x x x x x x x x x x Multi- hazard x x only Water only Transport Sectoral focus x x x x x x x x x x x x x x x x x x x x x Multi- sectors Year 2013 2014 2014 2015 2011 2010 2015 2017 2012 2016 2017 2012 2008 2010 2015 2010 2017 2013 2017 2005 2010 2015 2014 COVERAGE OF INFRASTRUCTURE IN NATIONAL CLIMATE RISK ASSESSMENTS IN OECD AND G20 COUNTRIES COUNTRIES G20 AND OECD IN ASSESSMENTS RISK CLIMATE INFRASTRUCTURE OF NATIONAL IN COVERAGE Ministry the of and Natural Environment Resources Ministry Sustainable of and Development Infrastructure Ministry of the Environment Ministry Environment of Davis, C. (ed) Davis, Portuguese RepublicPortuguese Swedish Metrological and Metrological Swedish Institute Hydrological for the Office Federal Environment Ministry of Environment and Urbanization on Climate Committee Change Protection Environmental Agency KSA Ministry of the Environment Ministry the of Environment PBL Netherlands Environmental Agency Assessment Government New Zealand Ministry Environmental of and Regional Protection Development Author Ministry the of Environment Roshydromet Ministry of the and the Environment La Castilla of University Mancha Ministry Environment of Central Environment Environment Central Council Ministry the of and the Sea Environment MEXICO LUXEMBOURG SLOVAK SLOVAK REPUBLIC LITHUANIA SOUTH AFRICA PORTUGAL POLAND RUSSIA SPAIN UNITED KINGDOM UNITED STATES SWITZERLAND TURKEY SWEDEN SLOVENIA SAUDI ARABIA SAUDI NORWAY NETHERLANDS NEW ZEALAND LATVIA KOREA JAPAN ITALY 36 . CLIMATE-RESILIENT INFRASTRUCTURE 6 Useful tools and reports

Climate change and infrastructure ●● OECD (2018), Blended finance: mobilising resources for sustainable development and ●● Asian Development Bank (2015), Economic climate action in developing countries Analysis of Climate-Proofing Investment Projects ●● OECD (2018), Making Blended Finance Work for ●● IPCC (2012), Managing the Risks of Extreme the Sustainable Development Goals Events and Disasters to Advance Climate Change Adaptation (SREX) Sectoral adaptation

●● IPCC (2014), 5th Assessment Report: Climate ●● IEA (2015). Making the energy sector more Change 2014: Impacts, Adaptation, and resilient to climate change Vulnerability ●● ITF (2016), Adapting Transport to Climate Change ●● Vallejo and Mullan (2017), Climate-resilient and Extreme Weather infrastructure: getting the policies right ●● OECD (2018), Financing Water: Investing in ●● Campillo, Mullan and Vallejo (2017), Climate Sustainable Growth change adaptation and Financial protection ●● OECD (2013), Water and Climate Change ●● OECD (2017), Investing in Climate, Investing in Adaptation Growth, OECD Publication ●● UIC (2010), Adaptation of Railway Infrastructure ●● IADB (2017), Policy Evaluation Framework on The to Climate Change Governance of Critical Infrastructure Resilience in Latin America Websites and online platforms ●● Adaptation Learning Mechanism - compendium ●● OECD (2014), Boosting Resilience through of good practices and knowledge on adaptation – Innovative Risk Governance http://www.adaptationlearning.net Green finance ●● Climate-Adapt - European climate adaptation ●● OECD (2012) Towards a Green Investment Policy platform - http://climate-adapt.eea.europa.eu/ Framework ●● Climate & Disaster Risk Screening Tools - toolkit ●● OECD/CDSB (2015) Climate change disclosure in designed to support the screening of World Bank G20 countries: Stocktaking of corporate reporting investments - https://climatescreeningtools. schemes worldbank.org/

●● OECD (2017), Investment governance and ESG ●● World Bank Climate Change Knowledge Portal - factors central hub information, data and reports about climate change around the world - http://sdwebx. worldbank.org/climateportal/ POLICY PERSPECTIVES POLICY PERSPECTIVES 37 . REFERENCES 38 . CLIMATE-RESILIENT INFRASTRUCTURE 7 References

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Photo credits: Front & Back cover: Empty tunnel with footpath lit by sunset © VOJTa Herout / shutterstock.com Inside cover & page 1: Dark sky above a traffic overpass bridge motorway climate change weather © Jan K / shutterstock.com Pages 2: Residential building in the public green park during sunrise © VOJTa Herout / shutterstock.com Page 3: Paraty, Brazil during high tide © Michael Mullan / OECD Page 4: Clatteringshaws Loch reservoir dam feeding Glenlee hydro Power Station © stocksolutions / shutterstock.com Page 5: Biking road in green forest of a city park, Bucharest © Ioan Panaite / shutterstock.com Page 6: Very old stone bridge over the quiet lake with its reflection in the water © VOJTa Herout / shutterstock.com Page 11: Smart city & wireless communication network, abstract image internet © jamesteohart / shutterstock.com Pages 12 & 13: Aerial view HDB housing, Singapour highway - green trees & vehicles in traffic © Trong Nguyen / shutterstock.com Page 14: Detail shot with a bicycle traffic light switched to green colour © roibu / shutterstock.com Pages 16 & 17: Paris during the 2018 floods © Michael Mullan / OECD Page 18: Decorative windmill © Michael Mullan / OECD Page 23: Heavy snow in Paris © Jane Kynaston / OECD Page 24: Green city of the future. Harmony of city and nature © Danila Shtantsov / shutterstock.com and Charts of financial instruments for technical analysis © Vintage Tone / shutterstock.com Page 26: Urban rail transit and urban architectural landscape skyline © 4045 / shutterstock.com Page 26 & 27: Innovative & sustainable energy - fight against climate change, Germany © Christophe Francois / shutterstock.com Page 29: Tracks in the snow © 4 / Michael Mullan / OECD Page 32: Road for transportation at twilight, cityscape of Nonthaburi bridge, Bangkok © Travel mania / shutterstock.com Page 33: Double exposure of graph and rows of coins for finance and business concept © Number1411 / shutterstock.com Page 34 & 35: Modern intercity train on railway platform © Denis Belitsky / shutterstock.com Page 36: Office desktop with laptop and various office tools on blurry Moscow city background © Peshkova / shutterstock.com Page 37: Green wall on exterior of building © Alison Hancock / shutterstock.com Pages 42 & 43: Composing with wind turbines, solar panels and electricity pylons © gopixa / shutterstock.com Page 44: Rooftop garden. Environmental friendly and eco-friendly concept © enchanted_fairy / shutterstock.com Page 45: Open wooden door to the new world with green environment. Climate change concept © leolintang / shutterstock.com POLICY PERSPECTIVES 46 . CLIMATE-RESILIENT INFRASTRUCTURE Climate-resilient Infrastructure

A co-ordinated policy response is needed to ensure that new and existing infrastructure networks are resilient to climate change. This Policy Paper outlines a framework for achieving this based on the experiences in OECD and G20 countries. It shows how governments and businesses can collaborate to mobilise investment for climate-resilient infrastructure.

This Policy Paper was prepared as an input document for the G20 Climate Sustainability Working Group under the Argentine G20 Presidency.

The OECD Environment Policy Paper series

Designed for a wide readership, the OECD Environment Policy Papers distil many of today’s environment-related policy issues based on a wide range of OECD work. In the form of country case studies or thematic reviews across countries, the Papers highlight practical implementation experience.

Visit our websites www.oecd.org/environment/ oe.cd/adaptation

Join the discussions @OECD_ENV

Contacts: Michael Mullan: [email protected]

December 2018