Table 1
Approach Opportunities
Innovative infrastructure financing
  • Raise new funds from private sector investors for large-scale greenfield/brownfield investments by

    • sharing risks with intermediary (eg, reinsurers) which is backed by government funds.

    • creating fixed-income bonds with a good credit rating that are interesting for long-term investors (eg, Sovereign Wealth Funds, insurances, pension funds).

  • Achieve lower cost of capital.

Green bonds
  • Raise new capital for projects with a specific purpose (eg, climate mitigation) from investors who want to invest in a climate-friendly initiative, without being exposed to risks associated with individual projects.

  • Creates a long-term fixed-income security that can be traded—given a liquid market.

  • First product standardisation efforts have already been made.

Social impact bonds
  • Raise private funds for (co)financing the delivery of social services.

  • Create investments that do not correlate with mainstream investments which allows diversification of risk.

Business practices
  • Overcome political constraints to pay for prevention measures (eg, health prevention).

  • Expand risk and return assessment of investments to non-financial dimensions.

  • Enable the creation of new financial products attracting investors who are interested in climate-friendly/health-friendly investments.

  • Expand ESG criteria to ESG+H including health thereby broadening the asset class to a wider group of mainstream investors.

Approach Challenges
Innovative infrastructure financing
  • Good credit rating of the sovereign that backs the bond might limit the availability of the instrument to more creditworthy countries.

  • Each project depends on a variety of different risk factors (competition, security package, counterparty risk, technical risks, availability of labour and materials and event risks) which might make standardisation difficult.

  • Regulatory framework might have to be adapted.

Green bonds
  • Bonds need to ensure to have investment grade, that is, a good rating that allows institutional investors to integrate the bond into their portfolio.

  • Scalability of such bonds still needs to be proven: sufficient availability of suitable projects and liquidity as the market is still relatively small).

Social impact bonds
  • Low liquidity: At the moment, there is no secondary market for social impact bonds.

Business practices
  • Measurability of social outcomes limits the range of suitable projects.

  • Pay for Performance scheme introduces additional risk.

  • Distrust in the market to incorporate non-financial indicators into risk assessment.

  • Need to formulate key health criteria for incorporation in ESG+H framework.

  • Need to build framework for health criteria inclusion in corporate reporting, stock exchange criteria and responsibility frameworks.

  • ESG, Environmental, Social and Governance; H, health.