Contracts for Sustainable Infrastructure: Ensuring the economic, social and environmental co-benefits of infrastructure investment projects

Infrastructure—including transportation, electricity, telecommunications, water and sanitation—is essential to the achievement of the sustainable development goals (SDGs) and to the success of the Paris Agreement on Climate Change.

However, to achieve the SDGs and address climate change, the infrastructure to be upgraded and built must be sustainable—it must be specifically designed to mitigate economic, social and environmental risks, and to generate economic, social and environmental co-benefits.

Public–private partnerships (PPPs) are among the modes that government may adopt to structure infrastructure projects. The PPP contract forms a significant part of the normative framework governing the relationship between the government and the investor, allocating responsibilities and risks. For PPPs to lead to the development of sustainable infrastructure, governments and private parties must ensure that sustainability criteria are embedded in the project from its inception and appropriately reflected in the PPP contract.

The 2017 edition of the World Bank Group’s Guidance on PPP Contractual Provisions presents sample contract language that governments may adopt for PPPs. However, as pointed out by Foley Hoag LLP, the guidance frequently offers advice that restrains government measures aimed at achieving the SDGs, and misses an opportunity to consider how infrastructure projects can contribute to sustainable development.

Complementing the analysis by Foley Hoag LLP, this report seizes the opportunity missed by the World Bank Group’s guidance. Bridging IISD’s experience in public procurement and infrastructure finance and investment, it defines sustainable infrastructure, outlines its expected characteristics and co-benefits, and presents why governments must and how they can integrate sustainability into infrastructure contracts.