In the field of impact investing, there are no larger targets than sustainable infrastructure.
The transportation, housing, energy, food, water, information, and other systems that make the world run are vast in scale. They each have a fundamental impact on sustainability and the quality of life on earth, with time frames measured in decades. Infrastructure investments can set the stage for future progress—or future harm.
As Zipcar cofounder Robin Chase put it, “Infrastructure is destiny.” Chase started the car-sharing service in 2000 as a reaction to the lock-in created by road infrastructure. “We created our destiny as a car-dependent nation because that’s the infrastructure we built,” she said in a 2009 interview. “Our infrastructure allows us to do things in an easy way or to do things in a difficult way. And we all like to do things easily.”
Defining Sustainable Infrastructure
Sometimes, what makes infrastructure sustainable has as much to do with how the infrastructure is built as with the environmental and social impacts it creates. Infrastructure can facilitate or hinder sustainable outcomes, in other words. For example, roads can carry shared electric vehicles and bicycles just as easily as they can carry diesel trucks and SUVs.
Still, a few clear examples of sustainable infrastructure stand out.
In energy, renewables like wind and solar power can displace polluting fossil fuel sources—and now account for 17% of US electricity production. With the help of sensors, remote controls, and other technological improvements, water-efficient irrigation can reduce the footprint of agriculture and extend the life of water sources. And housing construction can prioritize low-impact materials and techniques, such as recovered wood and high-efficiency windows.
One underappreciated champion of sustainable infrastructure is wireless communications. According to the World Economic Forum, the mobile industry was the first to target alignment with the United Nations’ Sustainable Development Goals (SDGs). Cell phones, now held by more than 5 billion worldwide, support a range of crucial services in the developing world, from banking and health care to education and disaster relief.
Identifying and Meeting the Challenges
Overcoming the “destiny” of unsustainable infrastructure is an incredibly slow process that requires a substantial initial capital outlay.
The Global Commission on the Economy and Climate, a project of the World Resources Institute, has estimated that the world could see $90 trillion in new infrastructure investment by 2030, with over two-thirds of that in the developing world. While infrastructure is covered in large part by government investments, such a staggering sum will require private sector involvement. Impact investors may be able to partner with national governments and multilateral investors like the International Finance Corporation on sustainable infrastructure projects.
Still, with scale come complications. Long time horizons, large capital amounts, and the need to partner with public agencies set infrastructure investments apart from investments in private companies. Fortunately, a number of tools are available to help measure the sustainability of investments.
A new report by Guggenheim Investments and the World Wildlife Fund surveys and compares the many different ways to measure the sustainability of infrastructure investments, ranging from very broad assessments like the SDGs to tools tailored to specific types of investments. While investors may want a single standard to measure sustainability, the report predicts that one single standard is unlikely to emerge. Instead, the most active impact investors “are evaluating the conditions ‘on the ground’ and choosing among these many tools available,” often using more than one to assess the same project. Indeed, relying on a single sustainability tool can present difficulties, since many projects are unique and their problems may not be covered by one tool alone. And definitions of what is sustainable can change over time, even within the span of a given investment.
Food Systems: A Case Study
An illuminating example of this last challenge is the Rockefeller Foundation’s “green revolution,” one of the original social impact investments in agriculture. Starting in 1941, the program brought modern agricultural techniques to Mexico, India, and other countries and is credited with saving millions of lives. But it has also faced criticism for pushing chemical fertilizers and pesticides that can harm human and ecological health, as well as for neglecting small farmers.
Today, trends in food systems investment point toward improving sustainability and security. A 2017 survey by the Global Impact Investing Network found that while 63% of investors had an agriculture and food systems investment, it amounted to only 7% of assets, indicating room for growth.
A number of funds have emerged to aggregate investor interest in food and farming. Calvert Impact Capital claims to have supported over 700,000 small farmers with strategies like investing in Equal Exchange, a global fair-trade cooperative that markets coffee and other goods in the US. Agriculture Capital owns more than 20,000 acres of farmland in California, Oregon, and Australia, including 2,400 acres of organic production of high-value crops. New Island makes debt and equity investments in farmland, aquaculture, organics, local food production, and farm energy solutions. And the crowd-lending platform Kiva is dominated by food and agriculture, with over 2,000 lending opportunities.
Infrastructure investing requires diligence and patience, but in Chase’s words, it offers opportunities to protect the destiny of the planet and the people who live on it.