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Ethical Performance: Investing in sustainable cities to spur economic growth
By Vikas Vij — In the next 15 years, more than two-thirds of total investment infrastructure will be made in cities. By 2050, about 66 percent of the global population will live in urban regions. Africa alone will have about 800 million more people living in cities than today.
The gap between the supply and demand for city infrastructure to meet the needs of a growing urban population is an estimated $1 trillion per year until 2030. Investing in efficient, connected and compact cities with more sustainable public transport systems can spur economic growth while also having a positive impact on the environment.
Research conducted by the New Climate Economy reveals that investing in sustainable urban infrastructure such as public transport, building efficiency, and waste management could generate energy savings with a current value of $16.6 trillion by 2050.
The next big challenge facing cities is to find ways to scale financing for more sustainable urban infrastructure. To meet this challenge, the first is to increase cities' access to private finance by improving their creditworthiness. At present, only four percent of the 500 largest cities in developing countries are considered creditworthy, hampering their ability to raise capital.
With the right policies, private sector investment could fill up to half of the infrastructure financing gap. Municipal green bonds are another way to attract capital. The municipal green bond market is relatively small, but fast growing. Last year, in the biggest issuance yet, Seattle's Sound Transit sold nearly $1 billion of green bonds that will help fund regional transit projects.
Public-private partnerships can also be an effective way for cities to improve access to private finance for urban infrastructure. Bangkok's Skytrain and Bogota's Bus Rapid Transit were both financed in part through such partnerships.
Cities, particularly in the developing world, can also tap into multilateral development banks and international climate funds. For example, the Global Environment Facility has a new $140 million program in 22 pilot cities expected to leverage $1.4 billion for smart urban development.
City-level action works best when supported by national policies that place urban infrastructure at the heart of economic development. A new global initiative – the Coalition for Urban Transitions, with experts from more than 20 of the world's leading urban-focused institutions – will help support national governments to develop these strategies.
In addition, city networks such as the C40 Cities Climate Leadership Group, ICLEI-Local Governments for Sustainability, and United Cities and Local Governments can share best practices, spread new technologies, facilitate new forms of finance and support project preparation.
Source and Image: CNN