Creating conditions for financing and investment for disaster and climate resilient infrastructure

The threats of climate change loom heavy over our region. Asia Pacific is one of the most vulnerable places in the world to climate-induced disasters, with our partners in Southeast Asia facing particularly severe risks. 

Geo-physical and extreme weather events hazards like floods, typhoons, and wildfires have a cascading impact on infrastructure. These extreme events cause damage to roads, bridges, and power plants, making them increasingly vulnerable to the growing frequency and intensity of future disasters.

This damage to infrastructure results in around USD58 billion in costs per year in Asia Pacific alone. Beyond the financial impact, disasters claim thousands of lives every year, with many deaths linked to inadequate infrastructure. In fact, infrastructural failures contributed to over 80,700 disaster-related deaths in Asia and the Pacific between 2012 and 2021. 

As climate change intensifies, investing in disaster and climate resilience is increasingly critical. In Australia’s most disaster-prone region, the Queensland Betterment Program has made significant strides in enhancing resilience. Since 2013, Queensland upgraded essential public assets to prioritise additional investment in resilient infrastructure. This investment, totalling AUD244 million, has saved four times that amount since its inception.

Australia’s partner governments are committed to building collective resilience across the region to protect our communities and help them to thrive. But progress on disaster and climate resilience varies significantly across countries and sectors. A key challenge is that resilient infrastructure has higher upfront costs. And although greater resilience results in cost savings across the lifecycle of the asset, the higher initial cost may be a barrier to investment. With many countries embarking on major infrastructure projects, it is crucial to ensure sustainability, resilience and inclusion principles are built into these new developments from the start.

We need to explore new and innovative approaches to finance these large-scale projects to address the critical financing gap, moving beyond sole reliance on public funds. In Australia, Public-Private Partnerships (PPPs) have been highly successful, sharing both the financial burden and risk of building and maintaining infrastructure between government and the private sector.

P4I hosted a side event at the Asia-Pacific Ministerial Conference on Disaster Risk Reduction (APMCDRR) 2024 to facilitate knowledge exchange and share best practice with our regional partners. The panel focused on “creating conditions for financing and investment for disaster-and climate-resilient infrastructure”. 

Australia’s Ambassador for Climate Change, Her Excellency Kristin Tilley, opened the event, which was chaired by Becky-Jay Harrington, Director of Climate and Inclusion at P4I. The Australian Ambassador to the Philippines, Her Excellency HK Yu PSM also attended the session.

Panellists, including private sector representatives, discussed how government agencies can use regulatory frameworks and incentives alongside public-private partnerships (PPP) to foster private investment and ensure projects are implemented sustainably and equitably.

Public-private partnerships are already a crucial pillar of infrastructural investment. As of 2024, the Asia Pacific region has unlocked more than USD236 billion in PPP financing, although allocation differs significantly across countries and sectors. With infrastructure already one of the main areas of PPP investment, it is feasible to integrate climate and disaster resilience in these processes.. With infrastructure already one of the main sectors of PPP investment, it is feasible to integrate climate and disaster resilience in these processes.

Panellists from the Philippines and Australia shared their experiences of embedding disaster and climate resilience in infrastructural projects. Representatives from the Philippines PPP Center and the Department of Transport highlighted the need for government agencies to ensure disaster-related parameters are included in investment agreements.

Partnerships between the private and public sectors to fund, develop and maintain infrastructure can involve anything from the operation and maintenance of existing infrastructure like transport networks to the building of new projects like energy storage facilities. 

Investment, management and risk are shared between both sectors, with private firms usually paid on the basis of performance. These contracts are often long-term, which incentivises companies to build high quality infrastructure that require lower levels of maintenance. 

Australia has successfully incorporated climate and disaster risk reduction into a number of its PPP projects. Melbourne’s EastLink Toll Road — a partnership between the Victoria State Government and the private sector ConnectEast Group — was built with climate change in mind. 

Bushfires are a growing problem in the area, so ConnectEast Group was responsible for building with materials resistant to the area’s growing bushfire problem. It must also keep a climate risk register for the road, which involves stress-testing assets against potential future climate scenarios. The risk register uses Commonwealth Scientific and Industrial Research Organisation (CSIRO) data to identify and manage key operational risks. CSIRO employs scenario analysis within the climate risk register to evaluate how different climate scenarios could affect infrastructure over time. This includes stress-testing existing assets against projected climate conditions to identify weaknesses and areas needing enhancement.

PPPs aren’t only about brick-and-mortar projects. They can integrate financial protection such as insurance, as well as innovative financial instruments like green bonds, are important tools to foster resilience and finance repairs. 

At the panel, P4I Sustainable Finance Specialist, Russell Marsh, highlighted the growing recognition among capital providers that disaster and climate risks are financial risks. Because of this, investors increasingly require projects to demonstrate that they have assessed the asset's exposure to physical climate risks and have plans in place to reduce or mitigate these risks. 

Building resilience is an ongoing process, and one that requires the knowledge and expertise of partners across our region, all of whom are at different stages of their sustainable infrastructure journeys. For infrastructure to be truly sustainable, it must be built with both decarbonisation goals as well as disaster and climate resilience in mind.

Take a look at our briefing paper Building disaster- and climate-resilient infrastructure through public–private partnerships outlining key entry points for enhancing the disaster and climate resilience of infrastructure through PPPs.

Pictured in the image above, from left to right: Philip Varilla, Assistant Secretary for Infrastructure Management of the Department of Information and Communications Technology Philippines, Australia’s Ambassador for Climate Change, Her Excellency Kristin Tilley, Becky-Jay Harrington, P4I’s Climate and Inclusion Director, Rowena Candice Ruiz, Executive Director of the Government Procurement Policy Board, Timothy John Batan, Undersecretary for Planning and Project Development of the Department of Transportation Philippines, Australian Ambassador to the Philippines, Her Excellency HK Yu PSM, FCPA (Aust), Ma. Cynthia Hernandez, Executive Director, Public-Private Partnership Center, Jeffrey Manalo, Deputy Executive Director, Public-Private Partnership Center, Russell Marsh, P4I’s Sustainable Finance Specialist and Jake Ellwood, Chief Executive Officer from Queensland Reconstruction Authority.