Building climate-resilient infrastructure in the post-pandemic world
By Blair Chalmers and Lawrence Slade
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However, the risk profile of infrastructure assets is shifting: Climate change is imposing new pressures on the long-term and stable returns traditionally promised by the infrastructure sector. Volatility in the earth’s climate and an unprecedented global transition toward low-carbon energy and consumption is presenting new risks, and the private sector will not be able to effectively protect against these risks alone.
Instead, to truly build resilience against the risks presented by the climate challenge, private owners and operators of infrastructure will need to employ a stakeholder engagement-focused approach. As the complexity of the climate challenge intensifies, proactive engagement across a diverse range of stakeholders relevant to an asset will become crucial for both identifying climate risks and for building resilience against them. This will include both communication and collaboration with the public sector, industry peers, local communities and shareholders.
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Local Community Engagement
Identifying risks: Early engagement with relevant communities can reveal localized risks that are often challenging for firms to uncover without being privy to the local context. Establishing communication channels with local communities can uncover specific climate risks that a new asset may exacerbate and can highlight subcommunities that may be disproportionately affected by the fallout (such as racial or low-income groups). This engagement can also provide an owner-operator insight into market trends that may be generated by the climate transition in a specific community. Changing preferences around energy consumption or transportation use can have significant impacts, ultimately on revenue and utilization, for example.
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Shareholder Engagement
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Identifying the key stakeholders relevant to an infrastructure asset — that is, stakeholders that stand to either significantly benefit or be harmed by the asset’s construction and operation — and collaborating with those stakeholders will be a crucial method of building lasting climate resilience. This approach establishes a dynamic method of resilience-building: one that leverages changing perspectives from a diverse base of sources to help navigate the ever-evolving landscape of the climate challenge. Global Risks for Infrastructure: The Climate Challenge, a recent report from Marsh & McLennan Companies and the GIIA, explores particular applications of this approach as well as a broader framework of resilience-building that can aid infrastructure owners and operators in navigating this landscape.