Industry leaders and governments launch certification for infrastructure project sustainability around the world. But what is Blue Dot and will it work?
Tackling the climate crisis, recovering from the pandemic and reconstruction of disaster zones are generating an unparalleled demand for new and renewed global infrastructure. The big challenge now is how industry proves its worth – literally – by verifying the value and sustainability of projects.
To achieve that, the OECD’s Blue Dot Network has issued its prototype for comprehensive certification. So what is it, can it work, and will it do enough to reassure investors that their money is well spent?
What is Blue Dot?
Blue Dot – so named because it is how the Earth appears in space – is a partnership between the USA, Australia and Japan, working with the OECD, to develop calculable metrics and methods for certification of infrastructure impact and sustainability.
Its development has seen the OECD work with a group of over 170 senior leaders from the private sector, civil society and academia to provide high-level and technical guidance. The outcome is a comprehensive certification that can be recognised as a global standard for market-driven, transparent and financially, socially and environmentally sustainable projects.
Jose W. Fernandez, under-secretary of state for economic growth, energy, and the environment at the U.S. Department of State, said at the launch: “The world needs not just more infrastructure, but better infrastructure. It must be transparent, inclusive and sustainable to bring the economic benefits that our citizens deserve.”
Why is Blue Dot needed?
Dr Nelson Ogunshakin, OBE, FIDIC CEO and a member of the OECD Executive Consultation Group on Blue Dot Network, spoke to Infrastructure Global before taking part in the latest discussions. He explained: “The need for a global certification framework is very critical if we are to address the infrastructure funding gap required to meet the UN’s Sustainable Development Goals (SDG) and Net Zero challenge.”
That need is multi-faceted. Along with a need to make infrastructure sustainable, organisations that might invest in infrastructure have to feel confident that their investments will be well directed. That is especially crucial for the fast-growing green finance sector, which needs to verify that its investors’ money is being spent on truly ‘green’ projects.
This represents a potential challenge for much of the infrastructure sector right now. Nicholas Gould, a Partner at legal specialist Fenwick Elliot, explained to infrastructure Global last year that: “Sustainability disputes will certainly arise. Disputes are more likely where parties are unclear of their obligations. It will benefit parties to be very explicit about sustainability obligations.”
So the new Blue Dot prototype is certainly well timed but how does it work?
How does Blue Dot work?
The Blue Dot Network’s prototype provides a set of essential requirements – derived from international standards – for determining the basis for awarding a certification.
It creates a scoring system that translates compliance with individual requirements, for assessment of each project as a whole. Then it offers an efficient and credible review process for verifying a project’s alignment with the requirements.
OECD secretary-general, Mathias Cormann, said at the launch: “The Blue Dot Network aims to further empower low-and-middle-income economies by mobilising quality infrastructure investments in well-designed projects, developing skills and creating jobs locally, and building resilience for a sustainable future. Its proposed design puts the values we share – market-based economic principles, transparency and accountability, the rule of law, gender equality, the protection of human rights and the promotion of environmental sustainability – at the heart of future infrastructure development.”
So the launch has set out how Blue Dot will work. The next question is will it work?
Will Blue Dot it work?
To be successful, certification will need to be widely adopted. The new prototype has the backing of three major industrial nations (Australia, Japan and the USA). It also has the support of a global network of companies and industries and has the OECD administering it. That level of backing is cause for optimism, but perhaps the most important positive step is its development as a prototype for real-world testing.
In the EU a very different approach is being attempted. The Sustainable Finance Taxonomy is supported by some of the world’s biggest governments too, though rather than a market-led certification, it establishes a regulatory regime for what investors can and cannot report as ‘green’ investment.
These very different approaches mean there is no reason the two huge and ambitious programmes should conflict. But controversies and complications may yet arise, as the taxonomy has shown when it was criticised in early 2022 for suggesting a limited number of gas investments could qualify as ‘green’ – albeit only if they replace coal as the only alternative.
The prototype approach is likely to help Blue Dot identify and address such on-the-ground challenges.
Dr Ogunshakin explained: “I believe the need for a recognised gold certification standard of sustainable value in global infrastructure is clear. It is vital to securing the unparalleled investment needed, and to ensuring the environmental sustainability and governance (ESG) the world demands. But that can only be achieved if the gold standard is itself sustainable. It must be built to adapt and accommodate both rapid and gradual change in the political and environmental conditions for many years to come, and I am optimistic we can do that.”
So what happens next?
While there may be some impatience across the infrastructure industry to see a tool like Blue Dot become widespread quickly, the success of Blue Dot will be dependent on continuing to bring experts together to get things right as it is adopted.
Some aspects of the industry will need to adapt. Investors will need to adopt the certification as the gold standard it intends to be, while engineers and contractors will need to demonstrably verify their practices and project outcomes. This will likely require auditing and legal expertise.
Dr Nelson Ogunshakin, OBE, offered an example of this as he offered his organisation’s support through the next phase. “I am pleased to note the OECD is driving forward the Blue Dot Network initiative and would like to see how FIDIC’s world class contracts and business practice standards can be incorporated into the new infrastructure certification process.”
This sort of practical support and application is the biggest step now needed to establish Blue Dot as a genuine global certification standard.