Building a global bond market that will finance the development of low carbon and climate resilient cities
The world is a network of cities
Cities currently account for 70% of emissions and 50% of the global population. With city populations expected to rise to 70% by 2050, they are and will continue to be the main drivers of climate change, as well as extremely vulnerable to climate change impacts. The bulk of this growth will take place in cities in emerging markets and developing countries.
Massive infrastructure investment is required
Cities are projected to require at least USD 1.7 trillion a year for climate change mitigation and adaptation above business as usual in order to align GHG levels with those that limit global warming to 2°C and avoid the worst effects of climate change. Due to the higher upfront capital expenditure of low-carbon solutions compared with high-carbon solutions in the short term, access to capital at scale is critical for cities to realize low carbon and climate resilience transitions.
The green city bonds solution
Regardless of the climate challenge, policymakers and development banks in developed and emerging economies are facilitating more cities to tap into bond markets for their infrastructure requirements. Green city bonds tap into this on-going trend, and policy and strategic issuance are key.
Evidenced by a range of indicators such as; oversubscription, upsizing, as well as public commitments, green bond mandates and statements of expectation from investor groups, green bonds are also being used to successfully tap into the vast capital pool of institutional investors globally (US$88 trillion).
The dramatic growth of the green bond market demonstrates that investors are ready to invest when they are offered attractive options that fit their financial requirements for risk-adjusted returns. Likewise, capital is available in the low-carbon market if cities develop a pipeline of projects.
The Climate Bonds Standard is a screening tool for investors and governments which allows them to easily prioritize climate and green bonds with confidence that the funds are being used to deliver climate change solutions.
Support for cities
Climate Bonds Initiative and partners are working with cities to help them achieve their climate action potential. Regional and national green city bond coalitions are being convened to accelerate city mitigation and resilience actions.
Coalitions build cities’ capacity through an education program, providing cities with: tools; support by connecting them with organisations who can prepare them for green bonds issuance; and a platform for knowledge and best practice sharing between cities’ treasuries. Development banks provide strategic support for emerging and developing economies.
Who can issue a green city bond?
Issuers can be any entity with projects and assets relevant to greening cities: municipalities, utilities, public-private partnerships, and private companies building green infrastructure or green social housing.
For any queries or to get involved, please contact Diletta.