Flooded roads, crumbling bridges, buckling rail tracks and snapped utility poles have become a constant reminder that the current stock of critical infrastructure is not able to cope with increasingly frequent extreme weather events. Asia has been particularly hard hit. Looking ahead, according to McKinsey, physical assets and infrastructure in Asia are expected to bear the brunt of losses under a changing climate: by 2050, 75% of the USD1.6 trillion global annual damage to capital stock from riverine flooding alone will occur in Asia. With the emergence of climate resilience-enhancing technologies and growing investor interest, it is an opportune time to make progress in developing and scaling up the application of solutions to make infrastructure fit for a changing climate.
Impact of Climate Change on Infrastructure
Reliable infrastructure services are fundamental to sustainable socio-economic development. For communities and households, access to basic infrastructure services is a lifeline to better health, better education and a better livelihood; for businesses, reliable infrastructure means smoother business operations, improved bottom lines and more opportunities for job creation and investments. To maintain its growth momentum and tackle remaining poverty in the region, developing Asia will need to invest USD1.5 trillion annually in infrastructure until 2030.
As a result of a combination of factors, including a lack of data-driven, evidence-based asset planning, design and management, infrastructure is vulnerable to changes in climatic conditions, especially changes in extreme weather events. In 2020, overall disaster loss in Asia amounted to USD67 billion, and it is estimated that the growth in average annual disaster losses will outpace gross domestic product growth in the region.
To date, the design of infrastructure assets typically assumes a future climate that is much the same as today. However, a changing climate and the resulting increase in extreme weather events mean the current design climate tolerance range is becoming outdated and insufficient. This can present direct threats to the assets as well as significant knock-on effects for the people relying on the services they deliver. With the large investments and long service life associated with most infrastructure, it is essential that the design, construction and management of infrastructure consider the risks of climate change and integrate measures that enhance the resilience of assets and associated services to climate and climate-related disaster risks.
How Can Technology Enhance Climate Resilience of Critical Infrastructure?
Technologies, particularly digital technologies, can play a major role in enhancing the climate resilience of critical infrastructure. Technologies such as internet of things (IoT), artificial intelligence (AI), building information modelling (BIM), digital twins (DT) and agent-based modelling (ABM), can contribute to enhancing climate resilience of infrastructure through data collection, processing and communication, as well as generation of actionable intelligence (e.g., early warning). These solutions and the generated data and insights can:
- Enable the delivery and communication of automated, rapid and accurate assessments for adaptive management of infrastructure systems, which could lead to the reduction in operation and management cost through climate-risk informed predictive maintenance;
- Accelerate the delivery of systemic approaches to infrastructure development which considers interdependencies and multiple hazards, and streamlines nature-based solutions;
- Facilitate the balance between efficiency and resilience of infrastructure systems through more accurate and automated decision-making for safer infrastructure, while providing end-users with means to communicate, visualize and interact with the systems.
Resilience-enhancing technologies can cut losses, generate more revenues, save lives and livelihoods. For example, satellite imagery and analytics can help utilities identify underground leaks in water infrastructure in increasingly drought-stressed areas, support agriculture produce in finding new sources of water and ensure food security. Computer modelling can help to predict and manage increasing risks from wildfire and tropical cyclones affecting energy infrastructure, exacerbated by rising temperatures. Analytics and data are making the energy transmission more resilient to both spikes in heat-driven power demand and impacts from extreme weather events, the Internet of Things (IoT) sensors and networks are providing a dynamic understanding of the state of infrastructure as the environment changes; and new technologies are enabling more efficient use of water and wastewater as scarcity intensifies.
Despite the huge potential that such technologies bring to enhance climate resilience, they are not yet readily available in the emerging markets and developing countries. Challenges remain for early-stage companies with resilience technologies to access finance to scale up and deploy their solutions. Developers of climate resilience technologies face the dual challenges of limited demand for their products and services as well as constrained access to finance to develop and scale up their solutions. Unlike solar or wind energy solutions, technologies for climate resilience are not yet regarded as proven or mature and lack a ready market. This has not been helped by existing public policy and regulatory frameworks which largely do not yet consider climate resilience as an evaluation criterion for public procurement or project appraisal. Simultaneously, climate risks to and resilience of infrastructure are not yet properly priced in terms of asset valuation, which leads to a lack of incentives for investment in climate resilience solutions. In addition to efforts in developing technical methodologies for properly pricing climate risks and resilience in infrastructure assets, progress needs to be made to build the evidence base through data collection and analytics.
AIIB's Initiatives and Investments in Climate Resilient Technologies
Actions are being taken to tackle these challenges. Fully recognizing the importance and urgency to act, the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank (MDB) focusing on Infrastructure for Tomorrow, has been actively engaged in supporting the development, scaling up and deployment of emerging technologies for climate-resilient infrastructure. Leveraging its market position, AIIB, as well as other MDBs, have been working with national entities to develop pro-resilience regulatory frameworks and to set the appropriate policy incentives for climate-resilient practices for major infrastructure development and management. From July 1, 2023, AIIB will only invest in operations that are aligned with the goals of the Paris Agreement on climate change, in line with the joint MDB methodological principles and AIIB’s methodology for assessing the alignment. This would ensure that all AIIB investments are themselves resilient to material physical climate risks and, where opportunities arise, contribute to the strengthening of climate resilience of AIIB project beneficiaries, including through the deployment of resilience technologies.
AIIB is currently developing an Infratech Platform which aims to promote and facilitate increased adoption and development of Infratech by sharing knowledge, connecting Infratech stakeholders, providing financing and investment, and boost innovation. The Platform addresses the entire Infratech ecosystem, which can be defined as all stakeholders (technology providers, investors, governments, research institutes and others) involved in the Infratech space and their exchanges of knowledge and value. The Platform, which is expected to launch a public web portal later this year, will include a library of Infratech solutions and feature a dedicated climate technologies section.
As an infrastructure financier that considers the entire value chain, including relevant technologies, AIIB has been actively seeking opportunities to invest in climate resilience solutions. For example, AIIB made a USD30 million equity investment in Lightsmith Climate Resilience Partners, the world’s first climate resilience solutions focused fund, to support growth stage companies with climate resilience solutions. Similarly, AIIB has been working with other clients to explore the potential to integrate technologies into infrastructure projects to enhance the climate resilience of assets and their services.
Furthermore, in June 2023, AIIB and Lightsmith organized an online webinar on Financing Infrastructure Technologies for Adaptation and Resilience in Asia. The webinar discussed opportunities and challenges in financing adaptation technologies and emerging trends in adaptation solutions across difference sectors, particularly water and infrastructure. Speakers from different venture/impact funds presented their investment strategies and the audience could hear practical experiences and examples of technologies developed by the companies promoting specific adaptation solutions. There was a broad consensus that technologies ensuring infrastructure assets are built to last in a changing climate are becoming available, and that a growing number of investors are interested in financing the scaling up of such technologies. The event recording can be accessed here.
The momentum is building up for investment in resilience-enhancing technologies for infrastructure to ensure that the vast investment in infrastructure in Asia and the Pacific can weather the pervasive and damaging impacts of climate change. In the global public domain, there has been growing calls from the science and policy communities for stepping up action on adaptation and climate resilience. In the past years, private sector and investors have shown a growing interest in climate tech, defying headwinds that affected most capital markets. Investing into climate resilience solutions and climate-resilient infrastructure is not only a development imperative, but a smart investment strategy that delivers enduring social, environmental and economic co-benefits.