Increasing private sector investment into sustainable city infrastructure

Key takeaways:

1. To attract investment city governments need to ensure they have appropriately functioning fiscal, credit, regulatory, legal and institutional environments. These environments should be underpinned by a strong vision and leadership from the city accompanied by a long term strategic infrastructure plan including a pipeline of investable projects which will provide an acceptable return level capable of attracting private sector investors.
2. Private investment in public infrastructure is increasing as the risk return tradeoffs are better understood by the private sector. One of the key requirements to attract private capital in to city infrastructure is a clear articulation of the risk allocation between the city and the private investor, codified through legally enforceable contracts. There exists a wide body of knowledge of risks crystallising and resulting in losses as the risks were not properly identified, allocated and mitigated. New approaches to managing the next generation of project investors and lenders is required.
3. There exists a range of tools available to catalyse private finance. The applicability depends on the context of the specific projects / plans city governments are looking to implement. There are three primary ways that cities can look to raise money for urban infrastructure: asset sales and land development; public-private partnerships; and asset monetisation / securitisation. Where investment is hampered by perceived and real risks and inefficiencies, for example in developing markets, there is growing recognition of the need to mitigate these risks through more innovative means to unlock private resources e.g. green bonds, land value capture and blended finance.