On 9 Febrary 2023, IADC hosted a 1-day conference in Dubai on “Financing Sustainable Marine and Freshwater Infrastructure”. Designed for professionals in the fast changing world of finance, dredging and related sectors, 80 delegates came together to address what is needed to break the deadlock in the funding of sustainable projects. And most importantly, who needs to do what.
While sustainable projects generally make use of naturebased solutions (NbS), one of the main bottlenecks identified in the financing process of such projects is obtaining the certainty of a project’s cash flow. Projects are often relatively small and as a result, the start-up costs are high. A possible solution to interest investors is the bundling of projects. At the same time, a case-by-case approach is necessary since risks, which are a relevant factor for investors, differ per project. NbS projects are generally more risky than traditional projects as the effectivity of the solution is sometimes uncertain.
Can investors be tempted to have a greater risk appetite while accepting a lower ROI as is often the case with NbS projects?
The lack of a proper legal framework with a clear definition of project and governance also remains a challenge.
An ROI can be achieved from, for example, carbon credits. Projects with an NbS design often have a lower ROI and are therefore less preferred by investors. More and more pension funds however are willing to participate in NbS projects, prepared to settle for lower returns in favour of sustainability. In addition, insurers can reduce claim costs with NbS coastal protection projects. By investing, thereby reducing flood risk, they in turn can reduce their costs.
It is paramount that projects are viewed in an integrated way and that all the costs and benefits, including externalities, are assessed. Another problem identified is the difficulty of translating social benefits into financial benefits. While there are methods for this, they involve many assumptions and discussions about the value of parameters.
Delegates suggested ideas for ways to move forward that included organising regional symposia to showcase examples of successful nature-based solutions. Consultants and contractors to highlight existing NbS projects at infrastructure finance conferences. Developers and authorities to integrate NbS in large commercial infrastructure developments. Authorities to facilitate the implementation framework of sustainability by bringing all stakeholders to the table at the early stages of a project. Along with governments to create laws to include sustainable solutions as part of a project’s evaluation for approval.
Overall, the conference provided a much-needed springboard to move the topic of funding sustainable projects forward. In keeping with the topic, check out the sustainability article on page 30 that shares research on finding more cost effective and sustainable quay wall structures for the future. Also in this issue are articles addressing the importance of flocculation in dredge plume modelling and early contractor involvement in maritime projects.
Frank Verhoeven
President, IADC
