The Frame

They also support governments’ sustainable investment objectives, by helping to mobilize private capital, align public and private finance objectives, and tap into international sources of finance. They can also help shape the pipeline of infrastructure projects, ensuring individual projects respond to clear needs while promoting the sustainable transition. Further, infrastructure banks can contribute to better reporting practices in this area by helping to define clear environmental, social and governance criteria, and to collect data needed to measure the sustainability performance of the infrastructure assets.

EC:  What can Canada learn from other countries about using infrastructure to tackle climate change and do you have some good global examples of how projects from other infrastructure/development banks have resulted in great socio-economic gains?

MC: While new infrastructure often gets the spotlight, given it will lock in emissions pathways well into the future, countries are looking at all stages of the infrastructure lifecycle to meet sustainability goals. This includes ensuring that existing infrastructure is resilient in the wake of our changing climate, and the growing exposure to natural disaster risks.

Second, our work shows the importance of involving all levels of government in sustainable infrastructure planning and investments. After all, 60 per cent of public investment in infrastructure is made at the sub-national level.

Third, we have found that governments can make progress on sustainable infrastructure investment by improving the clarity of their environmental objectives and the plans by which infrastructure investment will help to deliver on such objectives. For example, Canada’s ‘Investing in Canada Plan’ includes a specific funding stream dedicated to investments that support a transition to a clean growth economy in provinces
and territories.

Finally, there are numerous examples of countries accelerating mechanisms that incentivize and support private investment in green infrastructure. For example, the European Green Deal Investment Plan will mobilize at least EUR 1 trillion in sustainable investments by 2030 and will provide a European Union budget guarantee so the European Investment Bank Group and its partners invest in more projects, including higher-risk projects. The United States is launching a US$27 billion green investment bank, offering grants to deploy low or zero-emissions projects. In 2021, the United Kingdom launched its Infrastructure Bank, providing GBP 22 billion of infrastructure finance and partnering with the private sector and sub-national government to finance green investment.

While it is still early days for the new infrastructure banks, existing banks have created socio-economic gains over time. For example, investments by the European Investment Bank Group backed by the Juncker Plan’s European Fund for Strategic Investments, which started in 2014, is expected to have lifted the EU’s gross domestic product by 1.8 per cent and created 1.7 million jobs by 2022.

EC:  What are the other infrastructure development banks like the CIB? How has the CIB’s model informed creation of similar infrastructure investment vehicles in the U.K., U.S. or elsewhere?

MC:  Like in Canada, most OECD countries now have institutions that help attract private investment, allocate capital, provide technical expertise, extend credit and provide liquidity and guarantees. As well as the U.S. and U.K. examples I mentioned earlier, today there are at least 28 green infrastructure banks across 12 OECD and non-OECD countries. Green infrastructure banks use innovative transaction structures, risk-reduction and transaction-enabling techniques, and local and market expertise to channel private investment, including from institutional investors, into domestic low-carbon, climate-resilient infrastructure.

While in the past, infrastructure banks often focused on project preparation, value for money of public-private partnerships and finding further external sources of funding, more recently their focus has expanded to include sustainability and green considerations.

The OECD report, OECD Institutional Arrangements for the Planning, Financing and Delivery of infrastructure, shows that the CIB exhibits all the best-practice functions when compared with similar institutions in OECD countries. These best-practice functions include exploring new approaches to project finance and delivery, providing technical assistance to make projects commercially viable, attracting investment from private and institutional investors and provideing financing and investment for new projects.

The CIB is the only infrastructure bank we surveyed that engages relevant stakeholders at all levels of government in infrastructure finance, which is also a best-practice function. It therefore provides a valuable example for other jurisdictions to consider when designing infrastructure bank policy frameworks.

Marco D’Angelo, president and CEO of the Canadian Urban Transit Association, says the Canada Infrastructure Bank (CIB) is helping to accelerate the electrification of city bus fleets by encouraging large orders rather than each municipality buying a few at a time on a pilot basis.

“It’s really been the leadership role that the CIB has taken as a catalyst in, I think, clearing many of the financial and operational obstacles that existed for local transit agencies to decide that they wanted to take the leap from conventional diesel or natural gas,” he said.

Calgary Mayor Jyoti Gondek says adopting more efficient and sustainable public transportation is just one of the ways municipalities are reducing carbon emissions to address climate change.

She says Alberta’s largest city is getting “a great return on investment” from its order for 259 ZEBs by investing $100 million along with receiving $165 million in CIB loans and millions in government grants.

“Our partnership with the Canada Infrastructure Bank has been critical to make sure that we can acquire a zero-emission fleet much quicker than we would have done on our own.”

CIB Chief Executive Officer Ehren Cory said the Crown corporation is a key investment partner to significantly increase access to sustainable public transit and the Government of Canada’s goal of 5,000 ZEBs.

“Electric buses are one of the easiest ways to reduce greenhouse gas emissions from the transportation sector that accounts for 25 per cent of carbon output in Canada,” he said.

The CIB is helping to accelerate the reduction of carbon emissions from transit fleets by covering the higher upfront capital costs of zero-emission vehicles compared with diesel buses. It has committed more than $1 billion so far to help transit agencies in Brampton, Edmonton, Ottawa, Durham Region and Calgary, and nearly $500 million towards school bus operators in Quebec and B.C. to modernize their fleets.

Lion Electric Company, one of several Canadian manufacturers of these vehicles, says its order books have never been fuller amid growth fuelled in part by jurisdictions joining the global push to reduce greenhouse gas emission targets.

“Well, it is a good time. I mean, obviously, there’s a big hype about going electric, especially in the school bus transportation world because it makes sense,” says Patrick Gervais, the Quebec company’s vice-president of marketing and communications.

Winnipeg-based bus manufacturer New Flyer (NFI) said it is enjoying record bidding activity with unprecedented government funding in Canada and the United States.

“Our sales, bid, engineering, and operations teams have all been extremely busy in 2022. We’ve received new orders (firm and options to backlog) for more than 3,800 units and delivered the highest number of quarterly bids ever in the third quarter of 2022,” said Stephen King, vice-president, strategy and investor relations.

NFI (or New Flyer) anticipates this strong growth will continue as transition to electric accelerates.

“But the transition still takes time. It’s an evolution, not a revolution,” he said.