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07

Investors should monitor environmental risks of infrastructure projects, say brokers

Open-access content Tuesday 26th July 2016 — updated 5.50pm, Wednesday 29th April 2020

Investors and stakeholders should assess and manage environmental risks when undertaking initial appraisals during the construction, operation, and maintenance of infrastructure projects, according to insurance broking firm, Marsh.

2


Based on a paper entitled Environmental Risks in Infrastructure Projects, Marsh argued that there was an "overt" link between the environmental performance of a project and the reputation of the project owner or contractor.

The document revealed a number of environmental risks and liabilities associated with global infrastructure development projects. These include: land contamination; construction risks; operational environmental risks such as wastewater treatment; and contractual risks and liabilities following mergers, acquisitions, and divestitures.

"The increased scope of environmental regulations and the strict liability regime in many countries now means that project companies could be held liable if they cause physical damage to the environment, as well as if they cause pollution," Marsh added. 

"Liability associated with causing property damage or bodily injury, or damage to the environment can be costly."

The firm also warned that failure to manage these risks could leave the project open to criticism from regulators.

For companies who handle the infrastructure projects, Marsh said they should work together to prevent damage to their reputations.

Edwin Charnaud, chairman of Marsh's Global Infrastructure Practice, said: "It's vital that project owners and contractors collaborate to manage the environmental risks involved with major infrastructure projects, to protect their balance sheets, their reputations, and ultimately our natural habitat."

This article appeared in our July 2016 issue of The Actuary .
Click here to view this issue

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