Money Talks: Daring Cities 2021 finance sessions highlight critical role of capital in bringing green infrastructure projects to fruition

Local and regional governments can talk all they want about tackling climate change, but at the end of the day, “nothing will happen on the ground without the financing… at least nothing of substance,” observes Nigel Jollands, the associate director of the European Bank for Reconstruction and Development (EBRD). “The only way we’re going to deal with the climate crisis is for us to completely replace all of our carbon intensive infrastructure… our cars, our refrigerators, our houses, our offices, our planes, our factories, energy delivery. All of that is capital infrastructure.”

Not surprisingly, Jollands, who will be presenting in both the Driving finance for urgent climate action on Tuesday, 5 October and the Multi-Stakeholder Collaboration session on Wednesday, 6 October, at the upcoming Daring Cities 2021 conference, is very much a numbers guy. And he cites three top of mind reasons why conference attendees should sit in on these sessions. Even if math was never your favourite subject.

“The first is that for those people who question whether finance is important or not, these sessions will certainly make it clear as to why capital funding is a necessary part of the climate solution mix. The second is that there may be some people who appreciate the importance of finance, but don’t understand how it can deliver. And the third is for people who are a bit more technical or more deeply involved in finance, to learn more about the detailed challenges of structuring a finance deal.”

Yet another motivator, is the compelling need for all levels of government to jump on board with initiatives that help to reduce carbon emissions while supporting at least some of the UN’s Sustainable Development Goals (SDG’s). Jollands underscores just how critical the fast-tracking of green infrastructure initiatives is given that “the world is now producing over 40 gigatons of CO2 each year.” and also outlines just what kind of financing is needed.  “The Cancun agreement in 2010 (at COP16) required that rich countries needed to give poor countries $100 billion dollars a year (for green infrastructure projects). So just do the numbers right? The EBRD does $10 billion a year and about 40 percent of that is climate financing.” Or the equivalent of about four-percent of the global funding target.

So on the one hand, EBRD alone is contributing a respectable amount of funding – considering it’s coming from a single organization. On the other, it’s still a fraction of the overall investment needed.

Despite these daunting numbers, Jollands is encouraged by the fact that institutions like the EBRD are strategically leveraging their funds in order to attract additional capital investments, coming from both the public and private sectors. In doing so, the group is helping to catalyze financial support for several more green infrastructure projects, involving a much higher dollar figure.

To date Jollands says, the EBRD has achieved a great deal of success working with the private banking sector in delivering intermediated finance or credit lines. Their approach is “if we give a hundred million to a bank, we say you can only use that money for energy efficiency or renewables. And then we put all sorts of checks and balances in place.” The AAA-rated EBRD will then offer the first tranche of that loan at lower lending rates “because we want to prove to them that their investments are sound for their business model.”

The EBRD started down that path in 2006 at a time when Jollands says the mindset of private banks was “there’s no way we’re going to invest in energy efficiency… we don’t see the business model.” But since then there has been a radical, 180 degree change in mindset to the point where “in the countries where we operate, we’ve got hundreds of banks involved. They’ve used our money (for past projects) but now they’re saying we’re going to carry on without your funds and do our own commercial ventures.”

EBRD’s Green Cities Portfolio is currently comprised of dozens of initiatives that intersect with such critical areas as urban transit, waste management, building energy retrofits, district heating and street lighting and Jollands says he plans on highlighting a few of these projects during his presentations. “Tbilisi in Georgia is a good example of how the GCAP (Green City Action Plan) has generated ongoing investments,” he says, tied to such initiatives as an EBRD commitment of up to 75 million euros to modernize the city’s metro system (including the purchase of 10 four-car trains). Such a move is consistent with EBRD efforts to  promote public transit as a more desirable way of getting about than using cars.

Apart from the obvious financial benefit of working with an institution like the ERBC, the group also offers strategic advice to private banks and LGMA partners. “It’s everything from negotiating terms and conditions, to (dealing with) procurement rules… which helps to explain why it takes 12 months or more to structure an investment around such things as improving energy efficiency in buildings or (embarking on) a bus replacement program.”

And he says the EBRC also does what it can to nudge cities in the direction of making greener infrastructure investments. One example he cites is with Amman, Jordan’s local officials who were initially intent on purchasing new diesel buses, even though the city is plagued by high air pollution levels.

Not unlike other local governments, Jollands says the Amman officials were initially put off by the higher purchase price of electric buses. “So we said we’ll do a feasibility study for you on the total cost of ownership for diesel, electric and hybrid buses (over the course of their lifetime) and then let’s see what you think.” Based on that study he says the city decided to devote a portion of their new fleet purchases to electric buses, opening the door for additional electric bus purchases in the future.

That experience intersects with another hot button that Jollands may touch on in his presentations: the importance of public engagement. It’s an area where the EBRC has excelled over the years, having conducted workshops for stakeholders ranging from local city officials and community groups to universities, utility companies and international organizations, with over 80,000 participants to date.

“The reason for those workshops is that we know how important it is to have citizen buy-in to climate planning, whether it’s to do with finance or other policy reforms. And it has been a fantastic element of our program, because it’s all about building capacity and awareness within cities.”

Cities which Jollands says otherwise, might not be contemplating green infrastructure projects in the first place.