Is sustainable infrastructure more expensive to build?

The answer depends on many interlinked factors. These include: the type of asset involved, the asset’s location, the maturity of domestic markets for green and clean technologies, labour costs, building material costs, government subsidies for green technologies, the availability of concessional lending for green construction and other similar considerations.

In many countries, sustainable infrastructure does call for high capital outlays. Many sustainability proponents argue that some of these capital costs can be recovered during the operations phase, though how much can be recovered depends on various factors, such as fixed and operating overheads, including labour costs.

The real issues that underpin this challenge are twofold. First, those who finance and build infrastructure are not those who use and operate it. Public and private financiers look to minimize capital expenditures and the costs of raising capital and are not involved in occupying, managing or maintaining assets. They do not need to address issues such as increased productivity, lower operating costs, lower social costs of carbon and the other gains that sustainable infrastructure brings.

Second, many environmental, social and economic risks continue to be externalities in financial markets, but because they are not considered in traditional financial valuations, business-as-usual approaches to these assets mistakenly seem cheaper to finance and build. When these risks are identified and their costs quantified, however, the financial attractiveness of sustainable infrastructure becomes clear and increases significantly.

SAVi addresses this challenge by valuing the cost of environmental, social and economic risks across the asset life cycle, again demonstrating why sustainable infrastructure can be more financially attractive than business-as-usual alternatives.