Global Infrastructure Projects at Risk from Climate Change
Factions of the global infrastructure investment community are still failing to consider the impact of climate change on their infrastructure assets, leaving major infrastructure developments exposed to the increased long-term physical risks created by changing environmental conditions, says Marsh.
According to a report published by the insurance broking and risk advisory group, entitled
‘Sustainable Infrastructure – Weathering the Storms’
, the sustainability of infrastructure assets should be assessed at the project inception stage and throughout the asset’s lifecycle. However, many investors, particularly those operating in sectors or geographies still largely unaffected by severe weather or environmental pollution, have yet to build climate change into their risk models.
“The physical damage to property assets and infrastructure as a result of severe weather events such as storms, floods and droughts globally is having a direct impact on society and business, particularly in more fragile and developing economies,” said Dr Cliff Warman, Marsh’s environmental practice leader, Europe, the Middle East and Africa (EMEA).
“While some infrastructure investors are starting to take environmental risk criteria into account when undertaking project appraisals, there is a prevailing lack of urgency among firms that have yet to be affected by the changing climate and extreme weather.”
The Marsh report details how key stakeholders involved in infrastructure development can implement best practice and manage the risks associated with climate change more effectively. Methods include wider climate change risk due diligence, which improves project delivery and operational efficiency throughout the asset lifecycle; more effective management of ‘force majeure’ risks in a long-term economically sustainable form between the public and private sectors; and how the impairment of debt servicing capabilities can be avoided through more robust risk pricing and risk mitigation measures.
“We face an uncertain future and climate change will continue to challenge the nature of infrastructure investments,” said Martin Bennett, head of infrastructure risk advisory services for Marsh. “It cannot be overlooked where investment is being made in infrastructure that is expected to perform for many decades.”