Dec 30, 2021

December 30, 2021 - Advertisement - Judith Rodin is a past president of the Rockefeller Foundation and the University of Pennsylvania and has served on nine public-company boards. She . is the author of Resilience Dividend: Being strong in a world where things go wrong. - Advertisement - Transportation Secretary Pete Buttigieg recently told an audience that the new federal infrastructure dollars would be aimed at “shovel-worthy, not shovel-ready” projects. - Advertisement - It’s an important distinction, as legislation passed in November slashes federal infrastructure spending to its highest share of GDP since the early ’80s. As promised in the law, will the money help make the country more environmentally resilient and industrially competitive? And how should financial markets and decision makers determine what qualifies the investment shovel? The choices that investors and policy makers make now will determine how effective this once-in-a-generation investment will be. Investors piled up in infrastructure stocks after the bill was passed in the House. But three factors suggest that a significant and significant strategy change is needed. - Advertisement - First, after the COP26 United Nations climate summit, investors say they want to ratchet up finance mixed with public money promoting private investment. Much of the infrastructure funding stipulated in the law provides a substantial return for sustainability-focused investor capital. But there must be significant innovation in how the government and the private sector work together to produce the desired multiplier effect. Second, as federal funds flow to state and local governments over the next five years, there are significant risks. Our ports are closed, our roads need repair, and our bridges are failing. Our regional public transport has gone far ahead of other countries. All of these act like a tax on business and our economy, as the New York Times keep this , Solutions can start with government investment. But we have seen how local infrastructure projects are heavily delayed and cost escalating. The right government partners who have shown they can deliver, as well as rigorous project selection and management oversight, will be important to investors. On the other hand, mayors and municipal commissioners often pioneered innovation. To cite just one example, in Tallahassee, Fla., several hundred acres of undeveloped land at the airport were turned into one. solar farm Power supply for city hall, airport terminal, a sewage treatment plant, and more. Miami-based Origins Energy owns and operates the system after it was installed on airport property. The infrastructure bill allocated $25 billion for airports, promising many more similar innovative partnerships. Third, both COP26 and the Infrastructure Act emphasize climate adaptation and resilience. Nevertheless, a new report Wellington Management notes that the investment community has been slow to focus on adaptation, with its traditional focus on short-term profits at the cost of long-term survival. But the climate crisis is no longer a distant threat. Citing one of the growing weaknesses, McKinsey Prediction Companies may face supply-chain disruptions for at least one month every 3.7 years. More attention is needed to both transparent risk-disclosure standards for investors and strong resilience planning for decision makers and asset owners. Measuring a full range of resilience variables is important to determine climate impacts or, indeed, the ability to withstand any crisis. For example, many business-continuity plans are inadequate when the location makes infrastructure, such as local power-supply lines or transit options, vulnerable to heavy winds, floods or wildfires. Some of the environmental assessments in “E” of the ESG account for these challenges. That’s why I’ve argued for adding “R,” flexibility, to this metric. New resilience-measurement frameworks and industry practices are emerging. For example, Boston Consulting Group has developed a “source, make, deliver” framework to help companies build resilience across global supply chains. This approach requires diversifying manufacturing and supply networks and establishing more options for regionalisation, adding more backup production and distribution capacity, and re-optimizing inventory. When I was at the Rockefeller Foundation, we supported the development of resilience tools such as the City Resilience Index, which identifies 52 metrics that contribute to urban resilience. It can be easily customized for companies and investors. Our work with the World Bank Group resulted in the creation of a “flexibility screen” that helps investors evaluate infrastructure projects. Excellent AI-based data-mining tools, such as those developed by One Concern, are also emerging to measure resilience. How we invest in and build new types of infrastructure to withstand more inclement weather, more failing systems, and more complex shocks will determine whether this infrastructure legislation and all that private capital spent will be our future. will create both greater resilience and greater economic growth. , Trading as always is a risk which we cannot afford. Such guest comments are written by writers outside of Barron’s and Marketwatch newsrooms. They reflect the perspective and views of the authors. Submit commentary proposals and other feedback to [email protected] ,