![]() ![]() Ironically, if successful, PGII could achieve something potentially more meaningful than initially intended through its competition with BRI: a race to the top in quality infrastructure investments. Thus, PGII versus BRI is a false dichotomy. Most borrowing countries are eager to have multiple options. There is plenty of need and room for both. The infrastructure gap in developing countries is enormous, on the scale of tens of trillions of dollars. Finding a sufficient supply of bankable projects without compromising standards will likely depend on substantial G-7 investments in technical assistance and capacity development-which is far from given.įinally, even if the PGII initiative is able to mobilize the full $600 billion pledged, this sum is not likely to deter or displace Chinese investments. Additionally, the high-quality attributes that make the projects attractive also restrict the number and breadth of projects that can meet PGII’s requirements. Furthermore, these governments have no real control over whether the private sector will actually invest their share-which comprises the majority the PGII pledge-or that they will select sustainable projects. Several factors minimize the head-to-head competition.įirst, while PGII’s pledged price tag is impressively large, there are no assurances that G7 governments will be able to make good on their commitments over five years, especially given current political volatility within most of the G-7 countries. ![]() So, what is the chance that PGII-with its high-quality standards and private sector investors-will draw developing and emerging economies into Western partnerships at the cost of their alliances with China? In other words, can PGII rebuild Western soft power by outcompeting BRI? Not likely. FAST-Infra’s Sustainable Infrastructure Label and BDN Certification standards can and should reinforce each other in the quest to crowd in more private sector investments to sustainable, quality infrastructure investments in developing and emerging economies. A group of public- and private-sector financial institutions have joined forces to develop another initiative, FAST-Infra ( Finance to Accelerate the Sustainable Transition- Infrastructure), which shares the goal of developing a global sustainable infrastructure label to de-risk private sector infrastructure investing. It is not just governments that want to create global standards to attract private sector financing. The G-7 is banking on this certification of high-quality and low-ESG risks to provide the assurance that private investors need to attract them into PGII public-private partnerships. A BDN certification aims to provide a globally recognized certification-akin to a “Good Housekeeping Seal of Approval”-for infrastructure projects with low ESG risks, high debt transparency, and sustainable economic returns. To attract private sector investments, the governments of the United States, Australia, and Japan are creating a quality infrastructure certification initiative called the Blue Dot Network (BDN). Yet these institutional investors have difficulty identifying “bankable” sustainable infrastructure projects with acceptable levels of risk in developing countries. Due to rapidly expanding ESG investment funds, private-sector institutional investors-such as pension and insurance funds-have literally hundreds of billions of dollars available that could be invested in sustainable, low-risk investments. G-7 governments are not in a position to compete with China’s BRI through public spending. There is a second reason that quality infrastructure is a fundamental component of PGII: Quality projects with low ESG risks are needed to attract private sector investors, which are key to PGII’s financing model. By offering quality, transparent investment opportunities, G-7 nations hope to build soft power in low- and middle-income countries. Some past BRI projects gained international attention for environmental hazards, labor violations, corruption scandals, public protests, and unsustainable debt burdens in recipient countries. The G-7 is betting that such investments will be more attractive to host-country governments than what China has been offering. Implied-and at times overtly stated-in this PGII characterization is its sharp contrast to BRI projects. In launching PGII, the G-7 leaders repeatedly stated their goal to support “quality infrastructure” projects, that is, economically viable projects with transparent disclosures and low environmental, social, and governance (ESG) risks. PGII is distinctive not just for the quantity of pledged investment, but also the quality. ![]()
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