Capital Projects in the Era of Sustainability: A Global Infrastructural Shift
Paving the path to a sustainable tomorrow: embracing a global infrastructural transformation
Infrastructure services, such as the supply of drinking water and electricity, the disposal and treatment of wastewater, the mobility of people and goods, and the provision of information and communication technologies, form the backbone of economic development, competitiveness, and inclusive growth. However, addressing the global infrastructure gap requires not only increased spending on traditional projects but also a shift in how infrastructure is planned, developed, and operated.
As the world aims to address climate change and achieve sustainability goals, capital projects play a pivotal role in driving the necessary global infrastructural shift. It is estimated that 60% of global carbon emissions currently arise from the construction and operation of existing infrastructure, and future infrastructure is expected to consume a significant portion of the carbon budget. Moreover, delivering infrastructure projects has become increasingly complex due to climate change, environmental concerns, social challenges, and the need to attract private finance. In this context, defining and implementing sustainable infrastructure becomes critical to meet the growing demands for inclusive growth, economic development, and environmental stewardship.
With substantial investments projected in the coming years on capital projects, it is crucial to recognize the importance of incorporating sustainability into the planning, design, construction, operation, and end-of-life phases of these projects, align with climate goals, and promote environmental stewardship.
The global investment landscape
The investment landscape for capital projects is constantly changing. The necessity of transitioning towards sustainable infrastructure is often highlighted in the capital projects’ debate. It is estimated that an annual investment of $4.4 trillion is required to achieve net-zero emissions by 2050. This pushes stakeholders to embrace sustainable financing and innovative models, such as green bonds and blended finance, to mobilize the necessary capital. The recognition of sustainable investments as an attractive opportunity for institutional and private investors continues to grow, demonstrating the financial viability of sustainable capital projects.
Regional perspectives on capital projects
Capital projects hold immense potential to drive sustainable development across different regions. According to the Global Infrastructure Initiative, investments in sustainable infrastructure are projected to reach $3.7 trillion annually by 2030 in Western Europe, North America, and East Asia. Emerging economies, including Southeast Asia and Latin America, are likely to witness a surge in capital project investments. By leveraging these investments strategically, regions can accelerate their transition towards low-carbon economies, foster renewable energy deployment, and enhance social inclusivity.
The case for sustainability in capital projects
Integrating sustainability principles throughout the lifecycle of capital projects yields multifaceted benefits. Firstly, the incorporation of sustainable design and construction practices reduces greenhouse gas emissions, minimizes resource consumption, and optimizes energy efficiency. Secondly, sustainable infrastructure enhances social outcomes by prioritizing community engagement, accessibility, and resilience. It fosters job creation, upskilling, and promotes equitable economic growth. Lastly, the operational phase provides an opportunity to drive sustainability through efficient resource management, the integration of smart technologies, and the utilization of renewable energy sources.
Enabling sustainability through collaboration
Realizing the transformative potential of sustainable capital projects necessitates collaboration among various stakeholders. Governments play a vital role by establishing clear regulatory frameworks, providing incentives, and incorporating sustainability requirements into procurement processes. Financial institutions can facilitate funding mechanisms that stimulate sustainable infrastructure investments while considering environmental, social, and governance (ESG) criteria. Collaboration between project developers, engineering firms, and contractors ensures the implementation of sustainable practices and the utilization of innovative technologies. Furthermore, engaging local communities and incorporating their perspectives fosters project acceptance, enhances the project’s positive impact, and promotes inclusive development.
Driving sustainable capital projects through technological innovation
Technological advancements and innovation play a vital role in driving sustainable capital projects. The integration of digital technologies, such as Building Information Modeling (BIM) and Geographic Information Systems (GIS), enables accurate planning, efficient resource allocation, and reduced construction waste. Furthermore, emerging technologies like artificial intelligence, automation, and Internet of Things (IoT) facilitate real-time monitoring, predictive maintenance, and improved operational efficiency. Renewable energy deployment, energy storage solutions, and smart grid systems further contribute to the sustainability of capital projects, enabling the seamless integration of sustainable energy sources. Public and private investment in research and development is necessary to drive innovation and bring these technologies to market at scale.
Unlocking investment in capital projects for a net-zero future
As the world strives to achieve net-zero emissions by 2050 and combat the challenges posed by climate change, the International Energy Agency estimates that an annual investment of $4.4 trillion in clean energy will be required. This staggering figure highlights the magnitude of the task at hand and the urgent need for significant investment in low-emission assets.
Moreover, the global green bond market reached a record high of $269.5 billion in 2020, showcasing the growing interest in sustainable financial instruments. Additionally, the number of ESG-focused exchange-traded funds and mutual funds increased by 40%, with assets under management reaching $250 billion.
However, meeting the investment needs for low-emission assets will vary across regions and sectors. Developed economies will direct their investments mainly towards mobility, while emerging markets and developing economies need to allocate capital towards decarbonizing power infrastructure. It is estimated that the investment required for this transformation is $15 trillion in developed markets, $12 trillion in China and India, and $11 trillion in other emerging and developing economies. Sectors such as power, mobility, buildings, industry, agriculture, nature restoration, and hydrogen, biofuels, and heat will require significant investments.
This signifies the increasing importance of aligning public and private spending with the goals of net-zero emissions. The estimates around the net-zero transition are staggering. Developed markets may need to spend around 40% of their GDP, India and China are expected to spend 21%, and other emerging and developing economies are projected to spend 39% on energy and land-use systems. This is the opportunity of a lifetime to unlock this investment, leverage it strategically, and reimagine how we plan, design, build, and operate our capital projects.
Inspirations from the oasis: The UAE’s sustainable capital journey
The United Arab Emirates (UAE), known for its visionary approach and commitment to sustainable development, is at the forefront of driving sustainable capital projects. With Dubai as a leading example, the UAE has transformed its focus on infrastructure development by embracing sustainability at its core. Dubai’s ambitions have shifted beyond architectural marvels to include energy-efficient practices, waste management systems, and sustainable community development. Projects like the “Sustainable City,” a pioneering development that aims to create a fully sustainable and self-sufficient community, stand as shining examples of Dubai’s dedication to fully sustainable communities.
The UAE’s role in sustainable capital projects extends beyond its borders. The nation is set to host the upcoming Global Infrastructure Initiative Summit in February 2024, where global leaders in infrastructure and capital projects, industry experts, and financial institutions will gather to collaborate on shaping the energy transition through planning, financing, and implementing low-carbon capital projects and infrastructure assets. This conference serves as a crucial platform for knowledge-sharing and promoting best practices in sustainable capital projects. By hosting such a significant event, the UAE showcases its leadership and commitment to driving the sustainable infrastructure agenda on a global scale.
Building the future we want: unleashing the power of sustainable capital projects for a resilient world
The era of sustainability demands a transformative approach to capital projects. The net-zero transition created a new investment landscape, signifying the growing importance of sustainable infrastructure. Embracing sustainability across the entire lifecycle of capital projects is critical to achieve global sustainability goals and drive economic development. By leveraging investments strategically, regions can accelerate their transition towards low-carbon economies, foster social inclusion, and enhance resilience. Collaboration among stakeholders and the utilization of innovative technologies further bolster the transformative potential of sustainable capital projects.
As we shape the future of infrastructure, let us embrace sustainability as the guiding principle, ensuring a better, greener, and more resilient world for generations to come.
By Rawaa Al-Saadi Milner, Sustainability Technology Strategy Leader, Accenture