Climate Investment Opportunities in Cities: an IFC Analysis

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Climate Investment Opportunities in Cities: an IFC Analysis Climate Investment Opportunities in Cities An IFC Analysis About IFC © International Finance Corporation [2018]. All rights reserved. 2121 Pennsylvania Avenue, N.W. IFC—a sister organization of the World Bank and Washington, D.C. 20433 member of the World Bank Group—is the largest Internet: www.ifc.org global development institution focused on the private sector in emerging markets. We work with The material in this work is copyrighted. Copying and/or transmitting portions or all more than 2,000 businesses worldwide, using of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of our capital, expertise, and influence to create the work promptly, and when the reproduction is for educational and non-commercial markets and opportunities in the toughest areas purposes, without a fee, subject to such attributions and notices as we may reasonably of the world. In fiscal year 2018, we delivered require. more than $23 billion in long-term financing for developing countries, leveraging the power of the IFC does not guarantee the accuracy, reliability, or completeness of the content included private sector to end extreme poverty and boost in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, shared prosperity. For more information, visit typographical errors and technical errors) in the content whatsoever or for reliance www.ifc.org. thereon. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The contents of this work are intended for general informational purposes only and are not intended to constitute legal, securities, or investment advice, an opinion regarding the appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may have an investment in, provide other advice or services to, or otherwise have a financial interest in some of the companies and parties named herein. All other queries on rights and licenses, including subsidiary rights, should be addressed to IFC Communications, 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433. International Finance Corporation is an international organization established by Articles of Agreement among its member countries, and a member of the World Bank Group. All names, logos, and trademarks are the property of IFC and you may not use any of such materials for any purpose without the express written consent of IFC. “International Finance Corporation” and “IFC” are registered trademarks of IFC and are protected under international law. Cover photos: iStockphoto Back cover photos: Left: iStockphoto, Right: Bhoomi College Climate Investment Opportunities in Cities An IFC Analysis ii Climate Investment Opportunities in Cities Acknowledgements This report was prepared by the Climate Business IFC’s forthcoming publication “Cities, Urban Contributions for sections of the report were provided by Department (Alzbeta Klein, Director), Climate Finance Development and the Role of the Private Sector” Paul Nelson (100 Resilient Cities), Zoe Sprigings (C40 and Policy Group (Vikram Widge, Global Head). It was authored by Daniel Perea, Enrique Lora, and Monica Cities), Cristiana Fragola and Shannon McDaniel (Global written by Aditi Maheshwari and Ayesha Malik. Erika Almonacid has also informed this report. Covenant of Mayors), Simon Clement and Maryke van Rhoades and Ruth Quint Hupart provided support Staden (ICLEI), Prashant Kapoor (IFC), Fabio Duarte The authors would like to thank Bina Acharya on outreach and messaging. Yulia Guzairova managed and Erin Schenck (MIT Senseable City Lab), and Seth (Mayor of Rajkot), Tanya Müller García (Secretary of the budget. Sona Panajyan managed communications Contreras and Jessica Seddon (WRI Ross Center). Environment, Mexico City), Nuru Mugambi (Kenya and creative design. Layout and printing services were Bankers Association lead on Sustainable Finance), The report benefited greatly from the support and provided by the World Bank’s in-house printing and Oswar Mungkasa (Deputy Governor of Jakarta), Zoran feedback of a number of external experts including multimedia team, led by Gregory Wlosinski. Copy Radojicic (Mayor of Belgrade), and Yousef Shawarbeh Elizabeth Yee (100 Resilient Cities), Dovi Charles editing services were provided by Clarity Editorial, led (Mayor of Amman) for providing their perspectives on Amouzou and Stefan Atchia (African Development by Lara Godwin. the “deep dives” into their cities. These interviews and Bank Group), Oesha Thakoerdin (Asian Development Many World Bank Group colleagues and experts quotes were facilitated by Vanessa Bauza, Slobodan Bank), James Alexander and Claire Ferguson (C40 provided critical input that shaped this report, as well Brkic, Dima El Chafehi, Rashmi Malik, Ary Naim, Cities), Susan Goeransson and Nigel Jollands (European as feedback during review. Core support on sectoral, Dragan Obrenovic, Sandra Pranoto, and Dalia Wahba. Bank of Reconstruction and Development), Stefanie regional, and city context was provided by Adeel Abbas Lindenberg (European Investment Bank), Claudio We are grateful for the inputs of the Chief Resilience Syed, Liane Asta Lohde, Patrick Avato, Martina Bosi, Alatorre Frenck and Hilen Meirovich (Inter-American Officers and their teams: Cuong Dinh Quang (Da George Butler, Lisa Da Silva, Marc Forni, Sohee Gu, Development Bank), Denise Chan, Dan Dowling, and Nang, Vietnam), Arnoldo Matus Kramer (Mexico Youssef Habesch, Stephen Hammer, Prashant Kapoor, Corinna Hornwall (PwC), and Christopher Kaminker City, Mexico), Rodrigo de Souza Corradi and Marcela Saleem Karimjee, Thomas Kerr, Josef Lloyd Leitmann, (SEB). Their collective wisdom and contributions have Fernanda de Almeida Avila (Porto Alegre, Brazil), David Jean-Marie Masse, Shagun Mehrotra, Jim Michelson, improved the report’s comprehensiveness and potential Jácome Polit (Quito, Ecuador), Mohammad Luthfi Eko Rajesh Miglani, Sara Mills-Knapp, Manuel Moses, for impact. Nugroho (Semarang, Indonesia), and Kamlesh Yagnik Alexandrina Platonova-Oquab, Minakshi Seth, Vladimir (Surat, India). We also thank Nini Purwajati (100 Stenek, Bastian Stroemsheim, and Upasana Varma. Resilient Cities) for her help with coordination. iii Contents iii Acknowledgements vi Foreword vii Executive Summary 1 Cities and Climate Change 15 Urban Climate Resilience 37 City Deep Dives 38 48 58 Financing Climate-Smart East Asia and the Pacific South Asia Europe and Central Asia Investments in Cities 97 Jakarta, Indonesia Rajkot, India Belgrade, Serbia iv Climate Investment Opportunities in Cities Contents Annex 1: Methodology for Estimating Climate 118 Investment Opportunities Annex 2: City Investment 123 Support Initiatives Annex 3: Data Sources Informing Estimates of Climate-Smart 148 Investment Potential 151 Endnotes CROSS-CUTTING THEMES 6 Data: A Critical Lynchpin to 68 78 88 Climate Action 20 City-Specific Approaches to Urban Water Resilience Middle East and North Sub-Saharan Africa Latin America and 34 Economic, Social, and Africa Caribbean Nairobi, Kenya Environmental Resilience in Cities Amman, Jordan Mexico City, Mexico 46 Energy-efficiency in Urban Buildings 56 Achieving Clean Air in Cities 66 Green Urban Development 76 Tackling Climate Change through Green Public Procurement 86 Data-Driven Solutions for Climate-Smart Cities v Foreword he success of the Paris climate agreement rests on We estimate in this important report a cumulative climate many factors, but much depends on what happens investment opportunity of $29. 4 trillion in six urban sectors Tin cities. As we have seen in the Inter-Governmental in emerging markets cities by 2030. The bulk of these Panel on Climate Change’s reports, cities’ abilities to address opportunities — $24.7 trillion — rests with green buildings, climate change is critical to limiting global warming to which covers both new construction and retrofits. But there 1.5 degrees Celsius. also are trillion-dollar opportunities in public transport infrastructure, electric vehicles, improved management of water There is no doubt that the magnitude of investment required resources, renewable energy, and better handling of waste. to fulfill growing commitment of cities to climate action far exceed public budgets. Clearly there will always be a need The report also describes various approaches and new and for public investment in green, resilient infrastructure and innovative models that cities can deploy to narrow the services. But much more attention now needs to be put financing gap for climate-smart investments, including Public- on enacting the right reforms to leverage private sector Private Partnerships, land value capture mechanisms, and Philippe le Houérou innovation, management know-how, and capital. As municipal green bonds. Chief Executive Officer, IFC governments create space for private companies to invest Cities are at the forefront of climate impact. We must do in reducing emissions and building resilience, there is also everything we can to support them in their ambitions to create growing
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