26 2.4 THE FINANCING TOOLS ALREADY EXIST BUT NEED TO BE MODERNIZED Participants highlighted that the investment mechanisms that account for risk pricing already exist. Established underwriting, risk-pricing and insurance mechanisms can be leverged to identify and make resilience opportunities investable. Representatives from major infrastructure funds highlighted investment mechanisms that are deployed today across different asset types that should be leveraged more specifically for resilience: • Individual asset investments: Investors price the risk at the asset-level and negotiate with counterparties who in-turn decide if the price of resilience is worth it. This can include for instance investments in new pipelines or datacenters. The market is effectively pricing those risks. • System-wide investments: Pricing these risks is more complex than the asset-level risks. This is observed most visibly in the electric grid, where resilience requirements don’t sit in a single asset. The common approach to finance these investments has been to socialize the cost across the system’s players through tools such as incentives and government mandates. In such cases, political and regulatory support is required to support decision making. • Strategic asset investments: This covers investments in assets that are not economical in the established base case scenario but provide a UNATTRIBUTED QUOTE UNATTRIBUTED QUOTE “THE TOOLS TO FINANCE RESILIENCE ALREADY EXIST.” “THE SHORTAGE IS NOT IN CAPITAL, BUT IN BANKABLE PROJECTS.” broader public value. This includes for instance strategic petroleum or gas reserves and reserve power generation capacity. In this case, private capital can work, but it is typically deployed under a capacity payment model. Governments are typically counter parties paying for the asset. The challenge is therefore not a lack of capital or financial mechanisms but creating partnership structures that make resilience investable and allocating its costs appropriately. At the asset level, resilience can be incorporated into conventional underwriting. At the system and strategic levels, government intervention, regulation or public- private partnerships may be needed where the benefits extend beyond the individual investor. The opportunity is to modernize and deploy them effectively in the context of resilience, particularly in determining how costs are allocated across investors, governments and consumers. FINANCING LENS / WHO PAYS, WHO BENEFITS, AND WHAT IS BANKABLE? Asset-level resilience can be priced through project underwriting and operators’ own investment decisions; system-wide resilience may need regulated returns or capacity/availability payments; and strategic reserves or bypass infrastructure may justify government participation and cross-border agreements. Each opportunity should be tested against a beneficiary, a paying mechanism and a credible operator — not simply the size of the vulnerability.