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Green Infrastructure Investment : Implications for Insurance Regulators - Presentation at the Advisory Finance Group (AFG) Semi-Annual Workshop and Network for Greening the Financial System (NGFS) Stakeholder Outreach (Inglês)

Prudential regulation of infrastructure investment plays an important role in creating an enabling environment for mobilizing long-term finance from institutional investors, such as insurance companies, and, thus, gives critical support to sustainable development. However, the resilient credit performance of infrastructure is not reflected in the standardized approaches for credit risk in most regulatory frameworks (which tends to be guided by the historical default experience of corporate exposures). The presentation is based on recent research, which explores the possibility of a differentiated regulatory treatment of infrastructure investment under the Insurance Capital Standard (ICS). The ICS has been developed by the International Association of Insurance Supervisors (IAIS) and is expected to be implemented after the end of 2019 after extensive field-testing. The analysis of new data on the credit dynamics of infrastructure project loans, with a focus on industry sub-sectors that would satisfy the “use of proceeds” eligibility criteria of ICMA’s Green Bond Principles (GBP), suggests that current capital charges, would decline significantly if infrastructure debt, especially for “green projects,” were treated as a separate asset class. The analytical approach builds on a previous report (Jobst, Andreas A., 2018, “Credit Dynamics of Infrastructure Investment: Considerations for Financial Regulators,” Report No. 124720, March 22 (Washington, D.C.: World Bank Group), available at http://documents.worldbank.org/curated/en/606411522326750586/pdf/124720-PUBLIC-Infrastructure-Regulation-Report-Mar28.pdf).

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