The important role engineers can play in green finance initiatives

Civil engineers are being asked what they can bring to the table when it comes to financing low carbon infrastructure. As highlighted by a new report from the Institution of Civil Engineers (ICE) in the UK, “civil engineers have always played a leading role in infrastructure development” but they now need to innovate and harness their skills to help achieve net zero.

“Engineers can play an active role in ensuring the success of green infrastructure initiatives by considering how they can be financed and working with investors and financiers to bring these essential schemes to life,” says Andy Milner, Executive Chairman of Matrix Networks Group. “Knowing what information is needed to deliver an investment is a fundamental skill that engineers need to develop. This will help to make investment as attractive as possible and underpin the development of the infrastructure we need.”

In compiling the ICE report on Financing Low-Carbon Infrastructure, the project team talked with engineers and client bodies, as well as consulting with institutional investors, economists and legal and financial advisers. ICE believes that large-scale decarbonisation will only happen if all sectors work together to achieve it. It says the research, information and advice in its report “represents a significant step towards developing a collaborative approach to engineering and financing the infrastructure projects needed to achieve net zero”.

There is a fear that civil engineering will get left behind in this green industrial revolution if the profession does not clarify the role it needs to play. Civil engineers were critical to the first Industrial Revolution, driving social change and prosperity, but ICE says they need to ask what role they should be playing now, such as focusing on decarbonising infrastructure, equitable economic growth and mitigating climate change.

ICE says it wants to help equip engineers with knowledge and understanding of the issues at play and show how the profession can accelerate the development and financing of decarbonising both existing and new infrastructure.

The report aims to:

• Provide a practical guide to green investment tools and methods, helping to promote a basic understanding of financing lower carbon infrastructure projects. 
• Outline what civil engineers can bring to the table when financing the transition to net zero, by designing and building decarbonised infrastructure as the rule, not the exception. 

Ultimately civil engineers need to be able to answer questions potential investors may have about potential low carbon infrastructure investments before they feel confident enough to commit their capital. ICE highlights the fact that “many infrastructure projects are abandoned at the planning stage, or cannot attract finance, because they have failed to adequately assess and make provisions for climate change risk and the need to achieve net zero”. Indeed, civil engineers possess the design and asset performance information that can de-risk projects and attract green finance. 

As Rohit Das, Executive Director at climate change investment and advisory firm Pollination and former Green Finance Senior Advisor at the Environment Agency says: “The importance of the role of engineers in the green finance space is often overlooked. Financial decision-makers are not often from a technical background. The financing community has less of an understanding of the possibilities of an infrastructure project than engineers do. 

“For civil engineers, a key competency in the future will be the ability to justify, calculate and communicate the costs and benefits of designing in resilience and decarbonisation to non-technical people. This is how these projects will be understood by the finance community. This is a core competency that needs to be developed. 

“The civil engineering community really needs to start thinking about this,” Das continued, “from graduates all the way to senior leadership. It is a huge challenge we face.”

Alex Doyle, Deputy Chief Impact Officer at the UK Infrastructure Bank (UKIB), reiterates how important engineers are to improving the climate risk profile of a project. She says that engineers are “one of the most important parts of the green finance story – because ultimately everything comes back to the asset, and the asset is always designed with an engineer.”

“If the UKIB wants to invest in an infrastructure project, we will look at the engineers’ reports,” she explained. “If the engineers did not define that the project met a certain environmental standard or did not design it to be resilient and compatible within a lower carbon system, then it is hard to amend these standards at the point of financing.” 

The ICE report looks at some of the ways in which the finance community is reacting to climate change, and the questions they want answered before lending money to an infrastructure project. “Civil engineers can help to facilitate money flowing into projects,” the report concludes. “We can be aware of what financiers want and need in a net-zero economy, and how we can help to make projects commercially attractive….We can collaborate with financiers to deliver projects that generate clear revenues and pay-back as a result of investing in decarbonisation.

“Decarbonisation requires us to stretch our abilities and to challenge norms,” the ICE report concludes. “The decarbonisation we deliver now will create major social, environmental and economic benefits for centuries to come.”

Producing the report

The project team interviewed members of the finance community; infrastructure project developers; government agencies; ICE regional representatives; construction contractors; the legal profession; and stakeholders from the transport, water and energy sectors, among others in order to produce the report. 

The questions they asked included: 

• Do civil engineers need to know about green financing? If so, why? If not, why not? 
• How can engineers de-risk the low-carbon infrastructure sector for investors, making it a more attractive and viable proposition? 
• What are the factors behind one low-carbon infrastructure initiative failing to attract investment and another succeeding? Can civil engineering expertise help to get more projects over the line?