Building Infrastructure for 21st Century Sustainable Development: Lessons and Opportunities for the BRICS-led New Development Bank
The world’s infrastructure gap is currently estimated to be an astronomical US$ 90 trillion by 2030. Recognizing this shortfall of resources will be particularly significant in emerging markets, governments of the BRICS countries decided in 2015 to create their own financial institution, the New Development Bank (NDB). The NDB’s aspiration to meet the vast and unfulfilled infrastructure requirements of its member countries, whilst retaining a deliberate focus on sustainable development, represents a bold departure from approaches currently followed by its counterpart institutions. The NDB’s efforts to promote what it broadly labels as ‘sustainable infrastructure’ is thus both welcome and laudable.
However, as an institution that is now only in its second year of operation, and which is still in the process of pioneering its own unique approach to development financing, the NDB will no doubt be confronted with a number of challenges along the way. Questions persist around how exactly the NDB will define, build, measure and monitor sustainable infrastructure, how it will incentivize investments in sustainable infrastructure and whether and how it will formalize its engagement with the many stakeholders both engaged in, and directly impacted by, the development process. During this early phase of its existence, the NDB must plan around and account for these, as well as other, considerations. By doing so, the NDB will not only avoid replicating the mistakes of the very institutions and structures it seeks to challenge, but more importantly, it will enable it to pioneer a radically new approach to multilateral development financing.
The report Building sustainable infrastructure for 21st century sustainable development: lessons and opportunities for the BRICS-led New Development Bank - the result of the BRICS Sustainability Index project, a partnership between the Centre for Latin American and African Studies at O.P. Jindal University in India, Conectas Human Rights in Brazil and Fudan University in China – addresses some of these challenges and questions, and presents policy recommendations for a possible way forward for the NDB. To capture best practices and lessons of potential relevance to the NDB, twelve multilateral development institutions and organizations were benchmarked. In addition, inputs were sought from a range of stakeholders – government officials, private sector representatives, civil society, development practitioners, policy analysts and others - through bilateral conversations, online consultations and policy discussions.
To guide the NDB during its strategy implementation phase, the report seeks to provide concrete guidance on the following three areas:
Understanding sustainable infrastructure: The report argues that that easiest way to define sustainable infrastructure is to build on the triple bottom-line of sustainable development that integrates economic, social and environmental performance, in addition to financial feasibility of the project. The emphasis on each pillar of the sustainable development triple bottom line needs to be nuanced to reflect each of the BRICS’ national development priorities. At the very least, however, sustainable infrastructure would need to abide with certain minimum, universally-agreed principles relating to the protection of human rights as well as the environment. Sustainable infrastructure should not be assumed to be synonymous with green or renewable energy projects, and neither should traditional, physical infrastructure be assumed to always be unsustainable.
Laying down the principles for sustainable development:
a. Pragmatism, but not conformism: A pragmatic approach would involve focusing on projects that address local problems and assist countries in their transition to a low-carbon economy. A non-conformist approach involves recognizing that infrastructure projects are often designed and implemented in highly unequal settings in terms of distribution of political and economic power.
b. Incentivize rather than regulate: Building on the experiences of the BRICS countries to design financial and other forms of incentives to promote sustainable infrastructure projects.
c. Inclusive and bottom-up approach: Pre-empting potential conflict arising from infrastructure investment by establishing meaningful participation and consultation processes with civil society.
d. Gender-responsiveness: Ensuring that a gender-responsive approach to sustainable infrastructure catalyzes positive and transformative development impacts for women.
e. Strengthen country systems: Prioritizing the strengthening of country systems to ensure sustainable development, greater country ownership, and robust social and environmental management. Any use of country or corporate systems must still ensure a minimum level of social and environmental protection.
Developing a model for assessing the sustainability of NDB’s infrastructure projects: Informed by the above principles, a model is presented to form the basis for the future creation of a composite index that assesses the sustainability of projects. The model would comprise the following three levels, and over time, criteria could be developed across each level:
a. Strategic: Does the project enhance competitiveness, connectivity and openness? What is the project’s contribution to broader development objectives (including the Sustainable Development Goals)? Is the project designed to foster systemic innovation?
b. Tactical level: Is Environmental, Social and Governance analysis applied in the project? Are corporate social responsibility (CSR), ethical and human rights standards used to assess private parties’ adherence to sustainability frameworks? Are country systems being strengthened?
c. Operational level: Are safeguards capable of preventing harm to communities and the environment? How is compliance with safeguards ensured? What are the monitoring tools and indicators? Are fundamental rights being respected?
Building on the above, the report proposes the following recommendations to the NDB:
Create a NDB-CSO (academia, NGOs, etc) task force on sustainable infrastructure to elaborate indicators to assess the sustainability of NDB infrastructure projects;
Develop financial and non-financial incentives based on the degree of sustainability of NDB projects;
Establish a Centre of Excellence on sustainable infrastructure to generate and share knowledge, including through the hosting of a collaborative platform for MDBs and Southern stakeholders;
Develop a gender policy to proactively attract and retain female talent as well as to deepen women’s access to and control over economic resources;
Create a NDB-CSO reference group to institutionalize NDB's engagement with civil society (academia, NGOs, etc) while retaining its lean structure;
Develop a plan for NDB-civil society interaction with dedicated budget to further consider and implement such reference group.
Over the next five years, the NDB will look to implement its inaugural five-year strategy. At this point, it remains unclear to what degree the NDB will succeed in redefining the contours the international development financing. New approaches, modalities and partnerships are on offer. Ambitions and aspirations run high, but these must now be matched with action on the ground. The NDB has an unprecedented opportunity to unlock new funding and catalyze a bold, new approach to development, both within the BRICS as well as other developing economies of the Global South. It must do it well, and it must do it right.