Financing for Natural Infrastructure Projects

The report examines the infrastructure funding gap in Canada, specifically within the water sector of the Canadian Prairies, and proposes a shift toward natural infrastructure. It identifies several private financing instruments—including carbon and biodiversity credits, outcome-based financing, natural asset companies, and insurance mechanisms—while emphasizing the need for intermediary organizations to coordinate stakeholders and the importance of Indigenous involvement in the reconciliation process.

• The Canadian Prairies region faces a growing water-related infrastructure gap, with an accumulated deficit of approximately CAD 3 billion between 2017 and 2021 because investments have not kept pace with depreciation.
• Natural infrastructure can be more cost-effective than grey infrastructure; global estimates suggest it could cover 25% of investment needs in water and sanitation sectors and be 50.7% more cost-effective.
• Outcome-based financing is identified as a promising model where beneficiaries pay for specific verified results, such as water quality improvement or carbon sequestration, which generates returns for investors and diversifies cash flow.
• Carbon credits are a strong potential tool for the Canadian Prairies due to existing provincial and federal protocols, though the market is plagued by concerns over the quality and verification of offsets.
• Biodiversity credits are an emerging but challenging instrument because there is no standardized definition of a biodiversity 'unit' and a lack of a credit registry for the Prairies.
• Insurance mechanisms can de-risk natural assets through parametric insurance or trust funds, though a lack of long-term performance data makes it difficult to offer discounted premiums for risk reduction.
• Natural Asset Companies (NACs) are a new asset class that allows for the raising of capital via IPOs based on the sustainable use of ecosystem services, but they carry risks of 'privatizing nature' and infringing on Indigenous land rights.
• Intermediary organizations are essential for the success of blended finance models to coordinate stakeholders, bundle project outcomes to attract large institutional investors, and negotiate prices with outcome buyers.
• Scaling up private financing for natural infrastructure involves ethical risks, including 'green grabbing' of Indigenous lands and the potential for land speculation to drive up the cost of conservation.

APA

Puzyreva, M., Carlucci, E., Uzsoki, D., & Méthot, J. (2024). Financing for Natural Infrastructure Projects. International Institute for Sustainable Development. https://www.iisd.org/system/files/2024-05/financing-natural-infrastructure-projects.pdf

Chicago

Puzyreva, Marina, Edoardo Carlucci, David Uzsoki, and Josée Méthot. Financing for Natural Infrastructure Projects. International Institute for Sustainable Development, 2024. https://www.iisd.org/system/files/2024-05/financing-natural-infrastructure-projects.pdf.

Wikipedia

{{cite report |last1=Puzyreva |first1=Marina |last2=Carlucci |first2=Edoardo |last3=Uzsoki |first3=David |last4=Méthot |first4=Josée |title=Financing for Natural Infrastructure Projects |publisher=International Institute for Sustainable Development |date=May 2024 |url=https://www.iisd.org/system/files/2024-05/financing-natural-infrastructure-projects.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{puzyreva2024financing, author = {Puzyreva, Marina and Carlucci, Edoardo and Uzsoki, David and Méthot, Josée}, title = {{Financing for Natural Infrastructure Projects}}, institution = {International Institute for Sustainable Development}, year = {2024}, month = may, url = {https://www.iisd.org/system/files/2024-05/financing-natural-infrastructure-projects.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }