The following event recap was written by Kathleen Fleischauer, Global Development Coordinator, GRI
The presentation began with an introduction by GRI Founding Director, Stephen Flynn, who emphasized the timeliness of the topic, considering the recent infrastructure legislation in the United States and the increased political and economic focus on renewing infrastructure across communities.
Ms. Jamieson started off by recognizing that “resilience” means different things to different people, but emphasized that her discussion would focus on climate. Not only is climate mentioned over 200 times in the new infrastructure bill, but “the impacts of climate change are no longer hypothetical.” This year alone, extreme weather events have affected one in three Americans, and has cost taxpayers over $100 billion. These weather events are varied, including droughts, wildfires, flooding, and hurricanes. Ms. Jamison stressed that these effects of climate change not only pose risks to traditional infrastructure, such as dams, buildings, and bridges, but also their related financial, transportation, and communication systems. In this way, climate disaster events “present physical risks to assets, publicly traded securities, private investments, and companies,” which risk profound damage the U.S. economy.
Considering these risks, Ms. Jamieson iterated that “it makes sense in economic, social, and environmental terms to invest in resilience before disaster strikes.” However, large-scale federal funding in the United States currently takes a “fix as fails” approach in which there is not enough money to make proactive, preventative investments, so governments wait until infrastructure fails and then ask Congress for funding after the fact. According to Ms. Jamieson, systematic approach to fund or incentivize pre-disaster resilience does not exist, and this presents a major problem.
Ms. Jamieson identified six areas that present challenges to proactive and preventative investments:
1. Market failures
2. Competing priorities and funding availability
3. Financial markets framework
4. Scaling and scoping of investments
5. Institutional misalignment
6. Project delivery frameworks
According to Ms. Jamieson, resilience projects often face market failures that discourage investments and make it difficult to build business cases for financing. Data that estimate the extent and probability of future damage is uncertain, which makes it difficult to quantify the value of investments. Furthermore, climate-related financial risks are largely unrecognized. Additionally, there is a lack of a uniform regulatory framework when it comes to resilience projects, and these projects are largely multi-sector and multi-jurisdictional. Therefore,planning, funding, financing, and delivery all become complicated issues. Ms. Jamieson referenced flood prevention projects as an example, where enacting preventative measures in only one jurisdiction of a larger community will not be successful in building resilience, as floodwater would just flow elsewhere and affect other community members. In response to these challenges, Ms. Jamieson suggests “creative public policy interventions in collaboration with private sector initiatives,” in order to create more opportunities for successful climate adaptation and resilience.
Ms. Jamieson quoted that U.S infrastructure needs over an estimated $7.7 trillion by 2030 just to keep pace with GDP, or as she puts it, “just to tread water.” This estimate does not even account for additional needs related to resilience initiatives. As public budgets are increasingly constrained, attracting funding to resilience projects remains particularly challenging. Funding is further complicated when taking into account the need for equity in resilience finance, affordability and maintenance issues, and types of funding to be used (taxes, fees, private investment, etc.). Therefore, Ms. Jamieson identified an ongoing need to “develop dedicated funding sources for resilience infrastructure,” in addition to mobilizing private capital by introducing market incentives, resilience metrics, innovative design, and collaboration during project planning.
Ms. Jamieson did reference that new programs have recently emerged to help facilitate investment in climate resilience, such as the Corps Water Infrastructure Financing Program and the STORM Act, which is a revolving loan program that provides funding for hazard mitigation projects. Despite the fact that these kinds of programs have increased, they are still not enough to meet the existing needs.
According to Ms. Jamieson, the United States currently does not have an existing framework around “channeling private investment into climate resilience projects and there is a need for more consistent regulation.” There is a concerning lack of clear definitions of the types of projects and assets susceptible to climate impacts. Ms. Jamieson also identified a need for better definitions of the types of financial instruments and standards available to support resilience, an increased inclusion of climate-related financial risk in underwriting, and creation of new types of data and pilot efforts. Addressing these needs may increase financial markets’ impact on driving public and private action. Some resilience-focused financial instruments have been developed, such as Catastrophe (CAT) Bonds, but these resilience-specific investment products remain relatively few. Ms. Jamieson noted that a recent Executive Order on Climate-Related Financial Risk was created in October 2021, which presents the beginnings of a much-needed climate risk framework for addressing climate-related financial risk, but there remains much to be done in terms of its implementation.
Beyond the financial framework, Ms. Jamieson also identified a need for a delivery framework. She explained that of all the world’s megaprojects (projects over $1 billion), nine out of ten overrun their budget, are delayed, and don’t deliver the expected benefits. She refers to this important barrier to resilience infrastructure as a “piecemeal, partial, and protracted implementation delivery approach,” in which investments are deferred, or made partially, so that project delivery is staggered. This causes delays and incompletion of projects, which is an enormous problem because it prevents projects from actually providing the benefits promised to the publics and communities. Long-term considerations are also not often planned for, such as maintenance of new infrastructure. According to Ms. Jamieson, there is a need for a holistic approach that takes into account the cross-institutional nature of resilience projects and plans for full investments, timely delivery, and resources for long-term maintenance.
Considering the funding, financing, and delivery challenges caused by the interdisciplinary nature of resilience projects and the diversity of project elements, Ms. Jamieson recommends increased collaboration and partnership to overcome these barriers, specifically community-based, public-private partnerships. She referenced the Community Based P3 (CBP3) model that was originally created for stormwater management. In this model, multiple projects are “bundled” together to allow the private sector to provide funding, with public agencies only needing to pay back private firms once they have reached certain milestones. This kind of model may be successful in overcoming barriers to funding and delivery of resilience infrastructure. Ms. Jamieson referenced another successful public-private partnership developed for the Fargo Moorhead Diversion Project, a project she has worked on personally.
In conclusion, Ms. Jamieson reiterated that public policy must adapt to meet the challenges facing resilience infrastructure investments at the appropriate scale. She stated that this of course involves additional funding, but money is not the sole, or even the primary challenge. “There is not enough money to go around for everything, so you have to figure out ways to make that money work in the most effective way possible,” she said. While there a few existing models and new models developing, there is a critical need for more attention on challenges in project implementation and asset management.