Milbank LLP Global Project, Energy and Infrastructure Finance partner Allan Marks participated in a Q&A about climate resilience in infrastructure with Financier Worldwide. He discussed the impact climate change is having on infrastructure projects, recommendations for businesses when incorporating climate resilience into their corporate strategies, and trends in infrastructure development finance.
Mr. Marks explained how “climate-resilient infrastructure” can better withstand and more rapidly recover from disruptions caused by extreme weather and other climate impacts. Often, he said, the higher up-front capital costs to make projects more resilient allows for greater efficiency and lower operating costs over the long term. Still, he warned, “Mitigation remains critical for system planners and regulators, since the degree of resilience needed depends largely on the degree to which climate impacts can be prevented or mitigated in the first place, and how quickly those steps are implemented.”
He noted that identifying and managing climate risks starts with regulators and policymakers. “Government agencies and regional organizations should use risk screening early in the development process to map vulnerable infrastructure,” Mr. Marks said. “They should identify specific infrastructure that may be vulnerable to climate change, and they should take climate risks into account as a part of their approval processes for new infrastructure projects.”
Mr. Marks offered guidance for businesses trying to integrate climate resilience solutions into their corporate strategies. “Resilience means that the risks have been considered and that capacities to withstand and recover from climate impacts are in place,” he commented. “Climate risks to infrastructure can be reduced by locating assets in areas that are less exposed to climate hazards like floods and wildfires. Assets should be designed and located to withstand climate impacts when they arise.”
Regarding trends in the development and financing of infrastructure, Mr. Marks noted that renewable energy technologies have become cost competitive with traditional fossil fuel sources and are likely to dominate near- and medium-term capital allocation to infrastructure investment. “Developers and investors are increasingly interested in clean hydrogen, carbon capture and storage, and methane monitoring and containment,” he said. Longer term, Mr. Marks expects a ”shift from investing in new capacity to investing in adaptation and resilience, especially protective infrastructure facilities” like sea walls, water recycling, and hardened utility grids. “The resulting demand for climate change mitigation will create more opportunities to invest in increased energy efficiency and in abating emissions in manufacturing, building and construction, shipping, air travel and agriculture. Energy and infrastructure, as an asset class, may be defined more expansively,” he concluded.
