In response to the climate crisis, cities worldwide are investing their efforts in sustainable urban development

Prashant

Lisa

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<p class="reader-text-block__paragraph">Despite congestion, dwindling resources and a high cost of living, people flock to cities on the order of&nbsp;<a href="https://sdgs.un.org/topics/sustainable-cities-and-human-settlements">73 million</a>&nbsp;per year. Accountable for at least&nbsp;<a href="https://sdgs.un.org/topics/sustainable-cities-and-human-settlements">70 percent</a>&nbsp;of the world&rsquo;s GDP and for generating&nbsp;<a href="https://www.unep.org/explore-topics/resource-efficiency/what-we-do/cities/cities-and-climate-change">75 percent</a>&nbsp;of global greenhouse gas (GHG) emissions, rapid urbanization is challenging cities to innovate.</p>
<p class="reader-text-block__paragraph">In response to the urgent climate crisis, there are numerous examples of cities worldwide that are being recognized and acknowledged as game changers for their efforts in the field of sustainable urban development. These cities have ably demonstrated not only the impact of ambitious and transformative planning and policy measures but have also followed through with context-specific infrastructure initiatives to foster mutually beneficial relationships between climate change mitigation, economic productivity and the improvement of the quality of life of citizens. Indeed, the advantages of upgrading to a Green City are far-reaching.&nbsp;</p>
<h2 class="reader-text-block__heading2">Climate-smart cities around the world: key sectors</h2>
<p class="reader-text-block__paragraph">Cities around the world can and ought to learn from one another. While solutions are context-specific, cities that are already at the forefront of delivering on their sustainability goals can lead through example by offering cumulative knowledge and inspiring other cities to follow suit. Visionary leaders embarking on a greening journey for their city can turn to evidence-based examples of proven success stories that stand to provide a much-needed fillip and a sense of reassurance.</p>
<p class="reader-text-block__paragraph">Trendsetting sustainable cities demonstrate the power and payback of rethinking their approaches in key sectors. While department names representing key public infrastructure sectors can vary from one city to the other, we will refer to four: the built environment and energy, transportation, solid waste, and, finally, water and wastewater sectors.</p>
<p class="reader-text-block__paragraph">From which cities can we draw inspiration for their efforts in these four sectors? Let's look at a few examples.</p>
<h2 class="reader-text-block__heading2">Climate-smart cities: built environment and energy&nbsp;</h2>
<p class="reader-text-block__paragraph">Typically, cities inherit old, carbon-intensive infrastructure. One of the most viable measures a city can adopt is to retrofit existing buildings to improve energy efficiency, thereby reducing carbon emissions. The indoor work environment &ndash; temperature, lighting, sound, ambiance &ndash; matters and impacts a firm&rsquo;s productivity. Poor infrastructure, in fact, can reduce productivity by up to 40 percent.&nbsp;</p>
<p class="reader-text-block__paragraph">Singapore&rsquo;s green plot ratio (GnPR) incentive scheme encourages&nbsp;<a href="https://cde.nus.edu.sg/csac/research/developing-landscape-guidelines-for-the-application-of-green-plot-ratio-in-singapore/">increasing the surface area of greenery</a>&nbsp;as part of a Landscaping for Urban Spaces and High-Rises (LUSH) program. The function of external building surfaces becomes more than just structural; they become Landscape Replacement Areas (LRAs) &ndash; a growing medium for green space that impacts temperature and emissions, invites biodiversity and creates pleasant places to live and work.&nbsp;</p>
<p class="reader-text-block__paragraph">One of Singapore&rsquo;s 2023 green building targets is to green&nbsp;<a href="https://www.greenplan.gov.sg/targets">80 percent</a> of its buildings (by Gross Floor Area) in this manner, an ambitious but admirable goal that will benefit businesses, residents and visitors alike.</p>
<p class="reader-text-block__paragraph">Another tried and tested example that can serve as an inspiration for other cities is Jakarta&rsquo;s Green Building Code. This environment-friendly building code is a policy initiative designed to help Indonesia achieve a 29 percent reduction in GHG emissions by 2030. The code prioritizes&nbsp;<a href="https://www.thejakartapost.com/news/2013/04/13/jakarta-set-see-high-rise-green-buildings.html#:~:text=Jakarta%20Building%20Supervision%20and%20Regulation%20Agency%20head%20I,facilities%20that%20are%20bigger%20than%2010%2C000%20square%20meters.">greening the following building elements</a>:</p>
<ol>
<li>&ldquo;Behind-the-wall&rdquo; systems such as electrical and HVAC;</li>
<li>Outdoor and indoor landscaping;</li>
<li>Rainwater capture;</li>
<li>Construction materials and processes;</li>
<li>Operations and maintenance;</li>
<li>Water consumption; and&nbsp;</li>
<li>Indoor air quality.</li>
</ol>
<p><strong>Figure 1.</strong> Jakarta's green building code will help Indonesia achieve its Nationally Determined Contributions of a 29% reduction in GHG emissions by 2030</p>
<p class="reader-text-block__paragraph"><img src="https://illuminem.b-cdn.net/articlebody/17796a38adc995cfc16bcf30488db01030fe33ec.jpeg?" alt="Jakarta's green building code will help Indonesia achieve its Nationally Determined Contributions of a 29% reduction in GHG emissions by 2030." /></p>
<p class="reader-text-block__paragraph">Both Singapore&rsquo;s GnPR incentive scheme and Jakarta&rsquo;s green building code decouple economic growth and environmental impact to create a mutually reinforcing synergy between the two. Improving work and living spaces with greening measures and energy-reduction initiatives benefits productivity and attracts forward-thinking businesses to the area.&nbsp;</p>
<h2 class="reader-text-block__heading2">Climate-smart cities: transportation</h2>
<p class="reader-text-block__paragraph">Emissions from transportation are slated to increase at a&nbsp;<a href="https://blogs.worldbank.org/transport/how-can-we-explain-rise-transport-emissions-and-what-can-we-do-about-it">higher rate</a>&nbsp;than any other key sector between now and 2050, and it is difficult to&nbsp;<a href="https://documents1.worldbank.org/curated/en/766991634561185532/pdf/Understanding-Drivers-of-Decoupling-of-Global-Transport-CO2-Emissions-from-Economic-Growth-Evidence-from-145-Countries.pdf">decouple transportation-related carbon emissions</a>&nbsp;from economic growth. Broadly, this means that an increase in GDP typically correlates to an increase in travel pollution, which is a real challenge faced by cities who wish to boost their economy and, at the same time, attempt to shrink the environmental impact resulting from ambitious infrastructure initiatives.</p>
<p class="reader-text-block__paragraph">Implementing policy measures to decouple economic growth and the environmental consequence of travel is essential. That said, urban transportation is a sphere where even the most beneficial policies can be&nbsp;<a href="https://www.linkedin.com/pulse/how-make-your-citys-climate-action-plan-actually-work-prashant-kapoor">unpopular</a>&nbsp;with certain segments of the population. Success stories do exist, however, setting the stage for other cities to emulate.</p>
<p class="reader-text-block__paragraph">In Beijing, for example, a transport policy limited private vehicle driving to every other day. Supported by complementary policies (i.e. a quota on vehicle purchases, restrictions on the sales of used vehicles that failed to meet certain tailpipe emission standards, and increased investments in the public transit system), the every-other-day driving policy incentivized commuters to take advantage of public transit options, resulting in a <a href="https://blogs.worldbank.org/transport/can-policy-measures-reduce-environmental-impact-urban-passenger-transport">19 percent</a> reduction in air pollution.&nbsp;The Beijing example powerfully demonstrates the importance of a supportive policy landscape.</p>
<p class="reader-text-block__paragraph"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/5219445fa055cb34e38785067380ab9a38e85530.jpeg?" alt="The Beijing example powerfully demonstrates the importance of a supportive policy landscape" /></p>
<p class="reader-text-block__paragraph"><span style="font-size: 12pt;">Source: Wikimedia Commons</span></p>
<h2 class="reader-text-block__paragraph">Climate-smart cities: solid waste</h2>
<p class="reader-text-block__paragraph">People produce, on average,&nbsp;<a href="https://www.worldbank.org/en/topic/urbandevelopment/brief/solid-waste-management#:~:text=Compared%20to%20those%20in%20developed%20nations%2C%20residents%20in,practices%20create%20serious%20health%2C%20safety%2C%20and%20environmental%20consequences.">0.79 kilograms</a>&nbsp;of solid waste per person per day. By 2050, this figure is expected to increase by two-thirds. Management of solid waste is a concern that plagues many cities, and a staggering&nbsp;<a href="https://www.worldbank.org/en/topic/urbandevelopment/brief/solid-waste-management#:~:text=Compared%20to%20those%20in%20developed%20nations%2C%20residents%20in,practices%20create%20serious%20health%2C%20safety%2C%20and%20environmental%20consequences.">90 percent</a>&nbsp;of waste is unmanaged in low-income countries. Given the environmental, health and safety repercussions of poor solid waste management, it is increasingly important for urban areas to consider both upstream generation as well as end-of-pipe management solutions.</p>
<p class="reader-text-block__paragraph">The city of San Francisco offers an inspirational case study in solid waste management. Six short years following the implementation of an Environment Code, San Francisco cut its solid waste disposal&nbsp;<a href="https://www.epa.gov/transforming-waste-tool/zero-waste-case-study-san-francisco">in half</a>. This extremely effective Environment Code was based on the &ldquo;<a href="https://www.lawctopus.com/academike/precautionary-principle/#:~:text=The%20%E2%80%98Precautionary%20Principle%E2%80%99%20in%20the%20context%20of%20the,postponing%20measures%20to%20prevent%20environmental%20degradation.%20More%20items">precautionary principle</a>&rdquo;, which states that if there is a significant environmental risk, then a lack of scientific certainty cannot justify inaction.&nbsp;</p>
<p class="reader-text-block__paragraph">Well, this action allowed San Francisco to recover over&nbsp;<a href="https://www.epa.gov/transforming-waste-tool/zero-waste-case-study-san-francisco">80 percent</a>&nbsp;of its waste &ndash; exceeding its goal by 5 percent and 2 years early &ndash; and led to the adoption of an ordinance that required the recovery of construction and demolition debris. Seeing as the construction sector accounts for upwards of&nbsp;<a href="https://www.weforum.org/agenda/2021/01/planet-warming-emissions-buildings-construction-climate-goals-risk/">40 percent</a>&nbsp;of global GHG emissions, this was a policy action with measurable impact.</p>
<p class="reader-text-block__paragraph">Success begets success and the positive waste management feedback loop in San Francisco continued with the adoption of a mandatory Recycling and Composting Ordinance that has now been in place for 14 years. This further paves the way for the City&rsquo;s&nbsp;<a href="https://www.epa.gov/transforming-waste-tool/zero-waste-case-study-san-francisco">zero waste commitments by 2030</a>, a laudable goal for a city that has demonstrated the outcome of good policy in mitigating environmental impact by adopting strategic solid waste management measures.</p>
<p class="reader-text-block__paragraph"><strong>Figure 3.</strong> San Francisco has implemented innovative methods towards its zero waste commitment</p>
<p class="reader-text-block__paragraph"><img src="https://illuminem.b-cdn.net/articlebody/a778a4c6d7f1428549b7fd1b455ea88556cebde7.jpeg?" alt="San Francisco has implemented innovative methods towards its zero waste commitment" /></p>
<h2 class="reader-text-block__heading2">Climate-smart cities: water and wastewater</h2>
<p class="reader-text-block__paragraph">Water, the most precious non-renewable resource, is set to experience a&nbsp;<a href="https://www.nature.com/articles/s41467-021-25026-3#MOESM1">50 to 80 percent</a>&nbsp;increase in demand in cities by 2050. This means that urban water scarcity &ndash; where demand exceeds availability &ndash; stands to impact the health and socio-economic well-being of&nbsp;<a href="https://www.nature.com/articles/s41467-021-25026-3#MOESM1">up to an estimated 4 billion</a>&nbsp;urban residents by 2050.</p>
<p class="reader-text-block__paragraph">As with solid waste, water and wastewater management must be considered from upstream use through to downstream processing. This is particularly important for urban areas where consumption needs are undeniable &ndash; scores of people live in cities and everyone needs water! Instead of looking at water and wastewater as a linear stream, it is possible to consider it as a circular system of use, capture, treatment and reuse.</p>
<p class="reader-text-block__paragraph">In Namibia, the city of Windhoek distributes recycled wastewater as potable (i.e. drinking) water to its 350,000 residents and has done so for over a <a href="https://www.veolia.com/en/newsroom/news/drinking-water-recycling-wastewater-windhoek-namibia">half-century</a>. The novel treatment plant addresses both upstream and downstream concerns and reduces the consumption of water while also reducing pollutant discharge.</p>
<p class="reader-text-block__paragraph">Namibia receives only&nbsp;<a href="https://www.veolia.com/en/newsroom/news/drinking-water-recycling-wastewater-windhoek-namibia">250 mm</a> of rainfall per year on average. Given the hot climate, a mere 1 percent of this rainwater percolates into the scarce groundwater aquifer. The longevity of Windhoek&rsquo;s Goreangab wastewater-to-drinking-water treatment plant demonstrates both the power of challenging environmental circumstances as a catalyst to act, as well as the feasibility and impact of a decidedly low-tech solution.</p>
<p class="reader-text-block__paragraph"><strong>Figure 4. </strong>Windhoek is setting a global benchmark by producing drinking water from wastewater to secure its water supply</p>
<p class="reader-text-block__paragraph"><img src="https://illuminem.b-cdn.net/articlebody/684854cc7aed8d3ad049f8e2ca2430d508b75f9e.jpeg?" alt="Windhoek is setting a global benchmark by producing drinking water from wastewater to secure its water supply" /></p>
Source:&nbsp;www.veolia.com
<h2 class="reader-text-block__heading2">Climate-smart cities of the future: a valuable investment</h2>
<p class="reader-text-block__paragraph">When silos dissolve and boundaries flex, inter-departmental initiatives can take hold and mutually reinforce one another to bolster economic development. The idea is for the urban environment to function elegantly and in a streamlined manner in order to minimize congestion, waste and emissions so that it creates a robust, equitable and future-ready foundation on which to pin private-sector success and quality of individual and community life.</p>
<p class="reader-text-block__paragraph">Having looked at examples of a few trendsetting cities that have successfully implemented low-carbon measures across the four key sectors, it is important to note that it&rsquo;s not enough to look at a single sector in isolation. For optimum impact, city leaders need to consider the reduction in carbon emissions across all major sectors by prioritizing policy and planning measures and implementing appropriate actions according to geographical and financial contexts.&nbsp;</p>
<p class="reader-text-block__paragraph">The importance of complementary policies and enticing incentives is crucial. Cities that transition towards a low-or-zero carbon future should simultaneously foster both economic and environmental benefits. A good&nbsp;<a href="https://www.linkedin.com/pulse/climate-action-plans-what-caps-why-important-prashant-kapoor">Green City Action Plan</a>&nbsp;covers all key sectors, proposes high-impact solutions and accelerates financial pathways to&nbsp;<a href="https://www.linkedin.com/pulse/how-make-your-citys-climate-action-plan-actually-work-prashant-kapoor">overcome challenges</a> in order to realize projected benefits.</p>
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<div class="justify-flex-end mb4 clear-both"><em>This article is also published on the <a href="https://www.linkedin.com/pulse/green-new-black-trendsetting-climate-smart-cities-around%3FtrackingId=4q%252Bs8rEOKQjVMOrKEWCWpg%253D%253D/?trackingId=4q%2Bs8rEOKQjVMOrKEWCWpg%3D%3D" target="_blank" rel="noopener">APEX Green Cities blog</a>. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</em></div>

Green is the new black for trendsetting climate-smart cities around the world

The ability to meet the omnipresent challenges of financing, government access to expertise, and the right technological tools can make or break promises delivered in a Green City Action Plan

<p class="reader-text-block__paragraph">The roadmap to support green recovery, as outlined in a Climate Action Plan (CAP), is one thing. On-the-ground execution is another. This implementation gap must be bridged for successful outcomes &ndash; only then are measurable impacts realized on a city&rsquo;s journey to becoming green.&nbsp;</p>
<p class="reader-text-block__paragraph">To implement a CAP successfully, city officials must first tackle three crucial challenges:</p>
<ul>
<li>How to mobilize green financing?</li>
<li>How to leverage and strengthen institutional capacities?</li>
<li>How to change mindsets?</li>
</ul>
<p class="reader-text-block__paragraph">Overcoming these challenges is no small feat and these are by no means the only barriers to successfully greening a city through implementing carbon reduction measures. However, the ability to meet the omnipresent challenges of financing, government access to expertise and the right technological tools, as well as fostering positive public opinion can make or break promises delivered in a Green City Action Plan.</p>
<h2 class="reader-text-block__heading2">How to mobilize green financing</h2>
<p class="reader-text-block__paragraph">Green financing directs money from various public, private and non-profit sources to sustainable development initiatives. It is a key enabler in implementing a Green City Action Plan. By 2030, cities in emerging markets stand to unlock <a href="https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/climate+business/resources/cioc-ifc-analysis">over 29 trillion USD</a>&nbsp;in green finance investment across sectors identified in a CAP (i.e. renewable energy, public transportation, waste management, water security, electric vehicles and green buildings, among others).</p>
<p class="reader-text-block__paragraph">Navigating the green financing landscape and leveraging opportunities at scale demand robust public-private partnerships and collaborations with other stakeholders including green financing experts who can recommend funding avenues, help secure funds, and oversee implementation from a regulatory and compliance standpoint.&nbsp;&nbsp;</p>
<p class="reader-text-block__paragraph">In this regard,&nbsp;<a href="https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/home?cid=IFC_LI_IFC_EN_EXT">IFC</a>, a member of the World Bank Group, is uniquely positioned to help mayors and municipal leaders meet their cities&rsquo; green financing requirements. Through its&nbsp;<a href="https://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Infrastructure/Priorities/Cities/">Cities Initiative</a>&nbsp;&ndash; which combines investment and advisory expertise &ndash; IFC forges partnerships with cities around the world to meet pressing urban needs with private sector participation.&nbsp;</p>
<p class="reader-text-block__paragraph">In fact, one of its recent initiatives,&nbsp;<a href="https://www.apexcities.com/#/">APEX (Advanced Practices for Environmental Excellence) Green Cities</a>, leverages IFC&rsquo;s multilateral advisory and investment prowess to help mayors and other municipal leaders secure the appropriate expertise and funding to build sustainable, desirable, and climate-resilient cities.</p>
<p class="reader-text-block__paragraph">The graphic below demonstrates IFC&rsquo;s three-pronged approach that helps cities avail a broad range of advisory and investment solutions.</p>
<p class="reader-text-block__paragraph"><strong>Figure 1. </strong>IFC helps cities across a broad range of advisory and investment solutions</p>
<p class="reader-text-block__paragraph"><img src="https://illuminem.b-cdn.net/articlebody/4f11633d774feb770dc014968ef658f8d76dc843.jpg?" alt="IFC helps cities across a broad range of advisory and investment solutions." /></p>
<h3 class="reader-text-block__heading2">Here&rsquo;s how cities can benefit from IFC&rsquo;s multilateral approach:</h3>
<ol>
<li>IFC builds long-term partnerships through direct engagement with municipalities, subnational companies, and private sector solutions providers.</li>
<li>IFC brings to bear its extensive market reach and in-house technical expertise to help mayors and municipal leaders address urban infrastructure implementation and efficiency challenges.</li>
<li>Since 2004, IFC has invested and mobilized over 8 billion USD in more than 280 projects in the Cities infrastructure space.</li>
</ol>
<h2 class="reader-text-block__heading2">How to leverage and strengthen institutional capacities</h2>
<p class="reader-text-block__paragraph">With a host of competing priorities, cities often struggle to prioritize the hierarchy of sustainable development initiatives. The priority of greening actions impacts the financial landscape, and it can often be challenging for city officials and sector leads to ascertain which measures should be prioritized, and what financial mechanisms are available that will work optimally for a particular set of measures.&nbsp;</p>
<p class="reader-text-block__paragraph">One overarching question is whether cities are utilizing their existing public funds wisely. From the inside, it can be difficult to see the forest through the trees and to properly assess the impacts and costs of sustainability plans. Cities interested in developing a CAP would benefit from a solutions-based assessment tool that identifies investment pathways &ndash; including from the private sector &ndash; as well as highlights policy initiatives to lubricate green projects.&nbsp;</p>
<p class="reader-text-block__paragraph">Enabling policy environments opens doors to a greener future so that a Green City Action Plan can be implemented and have an impact. This includes fostering supportive relationships between national and local governments, as well as strengthening the city&rsquo;s ability to overcome bureaucratic hurdles. For a successful CAP to take hold, cities need the necessary expertise at various levels &ndash; from visionary leaders to pragmatic, on-the-ground knowledge &ndash; throughout the different phases of project development and implementation.</p>
<p class="reader-text-block__paragraph">Solutions-based digital applications, especially when backed by the necessary expertise and long-term partnership support, help arrive at a comprehensive roadmap. For instance, the APEX Green Cities Program leverages the APEX Online App that harnesses evidence-based research from global best practices.</p>
<p class="reader-text-block__paragraph">Informed by insights gathered from the APEX Online App, the APEX team of sustainable development and green finance specialists develop a Green City Action Plan that recommends how identified projects and policy interventions can be implemented.</p>
<h2 class="reader-text-block__heading2">How to change mindsets</h2>
<p class="reader-text-block__paragraph">While fact-based decisions may be difficult to contest, humans typically find a way! Pivoting a city to face a new direction and transforming institutional ways of working requires modifying mindsets, no matter how bright and beautiful a city&rsquo;s green outlook may seem.&nbsp;</p>
<p class="reader-text-block__paragraph">The popular perception of city development plans &ndash; from articulating a vision to modifying and constructing infrastructure on the ground &ndash; matters. As a matter of fact, even the most widely beneficial policies often face varying degrees of resistance from different groups. For example, congestion charges that fine drivers of certain vehicles within designated zones can be viewed as restrictive despite benefitting everyone. To garner support, city leaders must convincingly communicate the economic, social and environmental value of such policies.<strong>&nbsp;</strong>Popular opinion impacts a city&rsquo;s reputation, which, in turn, can influence obtaining financing and pushing project plans forward into a brick-and-mortar reality.</p>
<p class="reader-text-block__paragraph">To that end, public relations campaigns, public consultations and long-term partnerships working across interest groups can turn challenges into opportunities by identifying resources, joining forces with civil society and private players and, more generally, building goodwill with the people whom the city serve.</p>
<p class="reader-text-block__paragraph"><em>This article is also published on the author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</em></p>

How to make your city's climate action plan actually work

Three reasons why financial institutions should invest in green cities

<p class="reader-text-block__paragraph">Recent shocks in the global economy have made&nbsp;<a href="https://www.imf.org/en/Blogs/Articles/2023/01/26/global-economic-uncertainty-remains-elevated-weighing-on-growth">turbulence feel like the new normal</a>. To thrive in this&nbsp;<a href="https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/banking-industry-outlook.html">volatile economic environment</a>, financial institutions need to expand their thinking, innovate, and look for opportunities to widen their investment portfolios. The demand for green, resilient and sustainable infrastructure projects in cities in emerging markets is one such opportunity.</p>
<p class="reader-text-block__paragraph"><a href="https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/cities-climate-action">Cities in emerging markets are on the frontline of climate change and are under tremendous pressure to implement mitigation and adaptation strategies</a>. And while commercial banks have historically erred on the side of caution when it comes to lending to local governments in emerging markets, there is now a sizable investment opportunity for banks to harness: the climate-smart upgrade of cities through green finance.</p>
<p class="reader-text-block__paragraph">Here are three reasons why financial institutions should invest in green cities:&nbsp;</p>
<ol>
<li>Green and climate-smart city investments make good business sense.</li>
<li>Cities in emerging markets have significant untapped borrowing capacity.&nbsp;</li>
<li>Banks and cities can work together to aggregate green investments and generate more business.</li>
</ol>
<h2 class="reader-text-block__heading2">Green and climate-smart city investments make good business sense</h2>
<p class="reader-text-block__paragraph"><strong>Climate-smart growth presents a tremendous investment opportunity.</strong>&nbsp;IFC estimates that cities in emerging markets have a USD 7.6 trillion&nbsp;green city investment need between 2023 and 2030 (Investment Opportunities in Cities - An IFC Analysis Report 2019).&nbsp;<img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/8203c5aecca7ccb4874ee9595dd7ae5574d9ea2a.png?" alt="" /></p>
<p class="reader-text-block__paragraph">Green municipalities also have the potential to be more profitable entities than their non-green counterparts for the following reasons:</p>
<ol>
<li>Greening can help&nbsp;<strong>lower risks</strong>, both in terms of resilience in dealing with environmental crises and the ability to cope with energy and water shortages.&nbsp;</li>
<li>Green cities can earn&nbsp;<strong>additional revenues</strong>&nbsp;from land value capture, higher taxes, parking fees, congestion charges, on-site renewables, etc.</li>
<li>Greening offers ways to&nbsp;<strong>lower the cost of operations</strong>&nbsp;through efficient city management (waste collection, transportation, energy efficiency) and better planning (reduced sprawl).</li>
</ol>
<p class="reader-text-block__paragraph">By investing in&nbsp;<a href="https://www.linkedin.com/pulse/how-make-your-citys-climate-action-plan-actually-work-prashant-kapoor/">selective and evidence-based</a>&nbsp;climate-smart measures, generated returns can offset any preliminary impacts to the city&rsquo;s creditworthiness from assuming additional debt. When returns from cost-saving measures outweigh the cost of project finance,&nbsp;<a href="https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2022/11/IHLEG-Finance-for-Climate-Action-1.pdf">a city&rsquo;s creditworthiness</a>&nbsp;improves.&nbsp;</p>
<p class="reader-text-block__paragraph">Banks are already financing the greening of cities through the private real estate and construction sectors. To meet global pressures toward net zero by 2050, global investments between&nbsp;<a href="https://www.oecd-ilibrary.org/docserver/fa86b326-en.pdf?expires=1682499925&amp;id=id&amp;accname=guest&amp;checksum=43A47BB11CFEA171AEEEAD582F77774A">USD 5.2 and 5.4 trillion</a>&nbsp;will be required in the decarbonization of existing buildings alone. So, the demand for green infrastructure is there and banks are already providing financing mechanisms to leverage this demand. But there is scope to do significantly more.&nbsp;</p>
<h2 class="reader-text-block__heading2">Cities in emerging markets have significant untapped borrowing capacity</h2>
<p class="reader-text-block__paragraph">Despite the evident need, municipal finance flows remain constrained in cities in emerging markets &ndash; sometimes, but not always, due to regulatory hurdles and complexities. Some local and regional governments have not been inclined to borrow even though they possess ample capacity, and municipal bond markets are often non-existent in emerging economies, even in markets with clear regulatory pathways.&nbsp;</p>
<div class="reader-image-block reader-image-block--full-width"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/9b3db2675130e39d105b0f1b1fb58a34629f6c6a.jpeg?" alt="" /></div>
<div class="reader-image-block reader-image-block--full-width">&nbsp;</div>
<div>It is important for local governments to borrow for multiple reasons. Borrowing provides an additional funding source for cities to invest in projects and measures with the highest impact on their carbon budgets.</div>
<p class="reader-text-block__paragraph">Borrowing can also increase internal levels of scrutiny, maximize transparency and accountability, and lead to more flexible management of funds &ndash; for instance through moving expenses from off-balance sheets to on-balance sheets.&nbsp;</p>
<div class="reader-image-block reader-image-block--full-width"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/c7ba1e02eb4fcb2f6f7eb2fec06437b10df5095f.png?" alt="" /></div>
<div class="reader-image-block reader-image-block--full-width"><span style="font-size: 12pt;">Source: https://www.themayor.eu/en/a/view/helsingborg-is-the-first-municipality-to-issue-sustainability-linked-bonds-9810</span></div>
<h2 class="reader-text-block__heading2">Banks and cities can work together to aggregate green investments and generate more business</h2>
<p class="reader-text-block__paragraph">Cities with climate-change mitigation and adaptation goals typically have a&nbsp;<a href="https://www.linkedin.com/pulse/climate-action-plans-what-caps-why-important-prashant-kapoor">Climate Action Plan</a>&nbsp;(CAP) or a Green City Action Plan (GCAP) through which they identify and prioritize measures to reach target CO2 emissions reduction across key sectors or types of infrastructure.&nbsp;</p>
<p class="reader-text-block__paragraph">These climate-action measures represent their green investment opportunities. By aggregating these opportunities, it becomes possible to scale up and create &ldquo;green investment pipelines&rdquo; that encompass a range of initiatives. This surfacing market gap presents a significant opportunity for banks to tap into and secure substantial portions of its growth.&nbsp;</p>
<p class="reader-text-block__paragraph">An innovation of IFC,&nbsp;<a href="https://www.apexcities.com/">APEX</a>&nbsp;(Advanced Practices for Environmental Excellence in Cities) allows cities and banks to jointly accelerate at-scale financing of urban infrastructure projects. The APEX platform leverages IFC&rsquo;s well-established&nbsp;<a href="https://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Infrastructure/Priorities/Cities/">Cities Initiative</a>&nbsp;that combines investment and advisory services for cities, including through the provision of direct municipal financing. This, in essence, allows commercial banks to&nbsp;<em>grow</em>&nbsp;and&nbsp;<em>green</em>&nbsp;their investments.&nbsp;</p>
<p class="reader-text-block__paragraph">The APEX Green Cities Program partners with cities in emerging economies to help identify and prioritize high-impact carbon-reduction policy actions and infrastructure investments, as well as to identify and provide support in green financing pathways. APEX helps bridge the gap between banks and cities to identify investment pipelines eligible for green finance while also providing data for the necessary KPIs underpinning sustainability-linked loans or bonds.&nbsp;</p>
<p class="reader-text-block__paragraph">An example from&nbsp;<a href="https://ekurhuleni.gov.za/document/https-ekurhuleni-gov-za-council-reports-environmental-reports-5423-coe-gcap-summary-report-final-file-html/">Ekurhuleni, South Africa</a>, demonstrates how banks can work with cities to aggregate green investment opportunities by creating a significant pipeline for lenders.</p>
<div class="reader-image-block reader-image-block--full-width"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/49287fd122c56b29e715643ebe0db9f5ec35ca8f.jpeg?" alt="" /></div>
<p class="reader-text-block__paragraph">As the above example demonstrates, green finance opportunities for banks need not be on a project-by-project basis. Rather, banks can scale the opportunity by categorizing a city&rsquo;s proposed actions into public infrastructure, municipal buildings, private buildings and private transport. This allows banks to leverage the following opportunities at scale:</p>
<ul>
<li>Indirectly support the energy-efficient (EE) upgrade of existing buildings by providing finance for Energy-as-a-Service (EaaS) firms.</li>
<li>Provide performance-based financing such as Sustainability-Linked Loans or Bonds.</li>
<li>Partner with city municipalities to offer EE and renewable energy (RE) upgrades for home and property owners via Property-Linked Financing through which monthly repayments are collected via a small increase in property tax.</li>
</ul>
<h2 class="reader-text-block__heading2">Bank on green cities with confidence</h2>
<p class="reader-text-block__paragraph">Banking on green cities is a no-brainer; it is a win-win situation for banks and for cities. Local governments in emerging markets should be investing in themselves not only to make their cities resilient and future-ready but to encourage private sector growth. Financial Institutions can trust in the payback of green financing of cities and avail themselves of the opportunity to diversify and green their portfolios to invest in a greener future for all.</p>
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<p><em>This article is also published on the <a href="https://www.linkedin.com/pulse/banking-green-cities-three-reasons-why-makes-good-business-kapoor/?utm_source=share&amp;utm_medium=member_ios&amp;utm_campaign=share_via" target="_blank" rel="noopener">author's blo</a>g. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.</em></p>
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Prashant Kapoor

Prashant Kapoor

Green is the new black for trendsetting climate-smart cities around the world

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