Credit Enhancement for Green Projects 3
Chapter 1. Green Infrastructure Financing
Dening Matters
Governments have benefited from private sector involvement in infrastructure projects boosting many times the
number of available resources and, hence, of projects. The large investment associated with infrastructure projects
has both daunted and lured investors at the same time.
While defining infrastructure is a complex endeavour, it can generally be construed as including “facilities, structures,
equipment, or similar physical assets – and the enterprises that employ them”.
2
The term “infrastructure” alone lends
itself to circumstantial definition by determining whether or not a specific structure will be developed on the basis of
its characteristics. It could refer to both physical
3
and social infrastructure
4
together when referring to government
responsibilities but independently when considering potential investment opportunities. For the purposes of this
paper, the term “infrastructure” refers only to physical structures and not social infrastructure.
The size of infrastructure projects and the large investments that they entail make them inherently complex and
beset with hurdles for investors, financiers, governments and the many stakeholders the structure allows. Risk
assessments, coordination of roles, visualization of the implementation phase, and other legal, administrative
and political problems scare investors and financers away from these projects. Over the last couple of decades,
myriad innovative financial models have appeared tailor-made for the actors´ needs or conditions, sectors, type of
infrastructure, country or region particularities, among others.
While it is imperative to provide a comprehensive definition of the term “green infrastructure” in order to develop a case
for extensive credit-enhancement mechanisms among other financing methods, it is also important to understand
the evolving and competitive nature of such a definition. The definition of green infrastructure also varies on the basis
of context and depends on several dierent factors—some of the more obvious are the institutional or academic
purpose, the intended audience or the results expected, or whether it is an investment or ecological discussion. It is
imperative for green infrastructure to develop to accommodate the changes and challenges arising out of new green
technological advancements, which in turn evolve from a greater understanding of the environmental concerns and
issues. A narrow definition of “green” risks excluding such new creations, while one that is too broad might not
be purposeful. The OECD, in its stocktaking exercise on what constitutes green investments, reviews the types of
definitions and their features to suggest that an “open and dynamic approach” and a “competition of definitions and
standards” may be a more productive strategy (Inderst, Kaminker, & Stewart, 2012, p. 7).
A non-exclusive list of infrastructure considered “green” for the purpose of this paper, includes:
(1) Low-carbon energy or energy-ecient infrastructure: Infrastructure that includes processes that produce
climate benefits.
(2) Renewable energy projects: generation or derivation of “energy from natural processes (e.g. sunlight and
wind) that are replenished at a faster rate than they are consumed. Solar, wind, geothermal, hydro and some
forms of biomass are common sources of renewable energy” (International Energy Agency, 2015).
(3) Green buildings: “Green building is the practice of creating structures and using processes that are
environmentally responsible and resource-ecient throughout a building’s life cycle from siting to
design, construction, operation, maintenance, renovation and deconstruction. This practice expands and
2
A Harvard Law School study by Larry Beeferman and Allan Wain (2013), reviews the origin and contexts of the term “infrastructure”
to provide a comprehensive definition: “Facilities, structures, equipment, or similar physical assets—and the enterprises that employ
them—that are vitally important, if not absolutely essential, to people having the capabilities to thrive as individuals and participate in
social, economic, political, civic or communal, household or familial, and other roles in ways critical to their own well-being and that of their
society, and the material and other conditions which enable them to exercise those capabilities to the fullest.”
3
The physical and organizational structures that form the backbone of any nation such as roads, dams, and power plants. Also see
Beeferman and Wain (2013).
4
Social infrastructure includes provision of social services such as health care, education, emergency services and cultural establishments.