Poster #118 - Did the UN 2030 Agenda and the Paris Agreement Affect Sustainable Infrastructure Financing?

• In Event: Friday Poster Reception

Abstract

This paper examines how global sustainability agreements affect the financing of infrastructure projects in developing economies. The analysis is motivated by widespread expectations that international climate and development agreements would mobilize greater private capital for sustainable infrastructure, particularly in sectors such as renewable energy and environmental services. Understanding whether these expectations are reflected in project-level financing patterns is important for evaluating the role of global policy frameworks in shaping investment behavior. Using project-level data covering energy, water, sanitation, and waste projects, it analyzes how equity, private debt, and development finance are allocated before and after the adoption of the UN Sustainable Development Goals and the Paris Agreement.
The dataset is constructed primarily from the World Bank’s Private Participation in Infrastructure (PPI) database and complemented with country-level indicators from the World Bank’s Worldwide Governance Indicators (WGI). The original dataset contains more than 11,000 infrastructure projects, which were cleaned and reduced to approximately 1,160 projects with complete information on financing structures and project characteristics.
The analysis relies on detailed information on the composition of project financing and allows comparisons across sectors, technologies, and financing structures. By focusing on individual projects rather than aggregate investment trends, the paper examines how financing decisions are structured within the capital stack of infrastructure investments. Project-level characteristics (such as political stability, revenue structure, and government ownership) play a central role in shaping financing outcomes. These factors capture both the institutional environment in which projects are developed and the contractual arrangements through which revenues are generated. As a result, they help explain variation in the mix of equity, private debt, and development finance observed across projects.
Contrasting with aggregate financing figures, the results show no evidence that either international agreement triggered a discrete increase in private lending to sustainable infrastructure at the project-level. Non-renewable SDG-aligned projects exhibit no systematic financing changes, while renewable energy projects experience a consistent shift away from multilateral development bank debt after 2016. Comparisons of funding levels and capital-stack shares indicate that reduced multilateral bank debt was offset primarily by higher local development debt and equity, rather than by private debt.
Results suggest that expectations regarding automatic crowding-in effects should be taken with caution. More blended finance operations may not be incentivizing private banks to take larger stakes in renewable projects, even if private lenders lend larger aggregate amounts to the renewables sector.

Author

• David Talavera Zabre, University of Maryland, College Park
  Presenting Author