African and Asian Cities must urbanise sustainably. Is Green Finance the solution?

Cape Town, 2010: one African city that has managed to issue a green bond. Image: Getty.

The world’s fastest-expanding cities are now in the global South. Rural to urban migration, combined with the effects of urban population growth, could add another 2.5bn to the world’s urban population by 2050. According to the UN, close to 90 percent of this increase will be in Asia and Africa.

At the same time, low-income countries are most affected by climate change and rarely have the means to finance resilience and adaption efforts. The cost of climate change adaptation in Africa has been estimated by the African Development Bank to be in the range of $20-30bn per annum over the next 10 to 20 years. The financial options available to cities in most emerging markets have not kept pace with the growth and looming threats.

Green Finance on the rise

Many are looking towards ‘green finance’ as a potential solution to help governments plug the climate change and infrastructure financing gap.

Green finance covers the funding of investments that generate environmental benefits as part of a broader strategy to achieve inclusive, resilient and sustainable development. Financiers are often willing to take slightly lower returns in return for better environmental outcomes, which can reduce the cost of financing from the perspective of borrowers.

Green finance can cover any financial instrument – for example insurance products or tax credits – In exchange for the delivery of positive environmental externalities that are real, verified and additional to business as usual.

Within the available instruments, Green Bonds are becoming increasingly popular.  According to the City of London’s Green Finance Initiative global green bond issuances have increased from $2bn to almost $55bn over the past 10 years.

Yet the Global South is forgotten

However, cities in the Global South are mostly left out. A 2013 World Bank report demonstrated that less than 20 per cent of cities in developing countries have access to local capital markets, and only 4 per cent are deemed creditworthy enough to access international capital markets.

The ability to access markets obviously a precondition for issuing a green bond. Hence, cities in the South have a steep road ahead towards launching the first Green Bond. 

To be clear, even in the North, cities make up only a small portion of the overall issuers of green bonds. The majority are issued by energy and utility companies, banks or (in the case of developing countries) development finance institutions such as the World Bank. Within sub-Saharan Africa, only Johannesburg and Cape Town have successfully issued a municipal green bond.

Analysis from the Climate Policy Institute shows that $2.3b in value is linked with city-based projects in developing countries, including urban mass transit systems, district heating and water distribution networks.

The key barriers

There are three key barriers that prevent cities in the South from issuing green bonds:

Weak enabling environment and unsuitable regulatory frameworks

Many low and middle income countries lack a transparent and sound regulatory framework for investment. This trickles down to the inability of the city to raise finance, as investors lack confidence that contracts will be upheld, that local governments will be protected from expropriation, and that commercial disputes will be arbitrated.

Additionally, the municipal policy and legal framework must make it legal and feasible for local governments to borrow and to mobilise the resources to repay credit. In many developing countries, the municipal law either does not allow for borrowing, or limits it to a very short term of a year or two.

Financial market rules prevent deployment of capital

The policy and legal framework of global capital markets limit most investors in municipalities in the global South. Large institutional investors such as pension funds and commercial banks in the global North are guided by strict fiduciary rules that govern the handling of funds. Most can only invest in assets that are rated ‘Investment Grade’ by the big three credit rating agencies (Standard & Poor, Moodys, Fitch).

Kenya’s B+ rating by Standard & Poor’s for example, puts the country into the ‘highly speculative’ bracket. This by default precludes most institutional investors from deploying capital there. There is little Nairobi or any other municipality can do.

Lack of bankable projects and skills

Cities must identify sustainable bankable projects as part of their capital investment plans. To demonstrate creditworthiness, local governments must:

(i) provide accurate information about the operational and financial activities of the local government;

(ii) identify and prepare sustainable bankable projects;

(iii) provide a strong repayment stream and demonstrate or mobilise local willingness to pay; and

(iv) manage the financed projects during the life of the bond issue or other financing to ensure continued operation and maintenance of the investments, and collection of associated revenues, where relevant.

This requires specialised technical and financial skills as well as strong management, evaluation and reporting processes which are often in short supply in local municipalities in the global South.


Overcoming these constraints will need concerted efforts and collaboration between cities, governments and the financial markets. Intermediaries such as non-government agencies and donors can play an important role in brokering these contacts, reducing risks and help municipalities in preparing for a green bond.

There are a number of cities that are in the process or have already accessed the financial markets through regular municipal bonds. Since 1999, for example, 12 municipalities in India  have issued tax-free bonds to finance road constructions and upgrade water supply systems. Most recently, the Pune Municipal Corporation launched a bond in late June 2017. 

Over the coming five years, the city plans to borrow a total of $350bn to help fund a major infrastructure program for universal residential access to water.  Other cities in India are similarly planning issuances, including Ahmedabad, New Delhi and Greater Hyderabad.

We have identified three immediate steps that cities could take to get ready to tap into the capital markets.

Creating an the enabling environment

Central governments in the global South should support their municipalities by reviewing and reforming legislation to create a more permissive environment. In particular, central governments need to clearly articulate that municipalities can borrow from local capital markets, how much they can borrow, in which currencies and with what collateral.

Without a clear legal framework, prospective investors will not be confident of the security of their investment. South Africa offers a good example to other countries.

Build the financial capacities of municipal authorities.

Cities themselves can improve their creditworthiness through improving the transparency and accountability of their financial arrangements. This includes adopting clear budgeting and reporting requirements, and clarifying internal administrative coordination between city departments.

Cities can work together through initiatives such as C40 Cities Finance Facility or the World Bank’s City Creditworthiness Initiative to learn how to package projects for investors and to engage with investors in a targeted way.

Form strategic partnerships to improve risk-return ratios

Investors assess all investments based on risk and return. However, few global investors are familiar with municipal projects or with investments in low-income countries, which makes the evaluation of return and risk often too difficult.

Cities can overcome this barrier by working with partners who can increase investor confidence: for example, USAID offered to guarantee municipal bonds issued by Dakar, Senegal. Municipalities can also interact with alternative investors such as faith-based organisations or impact investors, which are able to deploy capital to more risky locations and have longer time horizons for their investments.


Although the green bond market has had relatively little impact on cities in developing countries to date in terms of financial flows, it is growing rapidly, with more investors engaging and more domestic market actors participating. Cities should therefore consider how the issuance of green bonds may expand their access to regular, low-cost capital over the long-term. Even where cities may not be able to launch green bonds in the near future, there are immediate benefits to improving their revenue generation and financial management processes.

These early steps towards creditworthiness can increase trust in city planning and management, and therefore unlock larger investment flows for urban infrastructure. 

Katharina Neureiter is investment and political economy lead at the Infrastructure & Cities for Economic Development (ICED).

 
 
 
 

How the rise of anti-crime politics caused lasting harm to Black Americans

"I see an awareness that has developed in the Black community in the last 10 years or so about how deeply racist the criminal justice system has become," James Forman Jr. says. (David McNew/Getty Images)

The police killing of George Floyd, and the protest movement that emerged from it, has reinvigorated a national conversation around reinventing criminal justice policy in the United States.

At the same time, reports that violent crime is rising in many US cities have resurrected talk of the much-disputed “Ferguson effect,” a theory put forward by law enforcement professionals, and some researchers, who argued that police slowdowns in the wake of the first wave of Black Lives Matter protests resulted in elevated rates of violent crime. President Donald Trump is trying to weaponise this narrative, paired with images of federal officers clashing with protesters in the streets of Portland, to wage a 1968-style backlash election campaign.

“People who want to mobilise a lock-them-up style of either policing or prosecution have tried to weaponise those short-term increases,” says James Forman Jr., professor of law at Yale Law School. “Criminologists will say you have to be very, very cautious about short-term movement [in crime statistics]. We don't know whether or not what we're seeing right now [with violent crime increasing] is going to sustain itself. But the fact is, it's here and people are talking about it.”

In 2018, Forman won the Pulitzer Prize in nonfiction for his book Locking Up Our Own: Crime and Punishment in Black America. Drawing on his experience as a public defender in Washington, DC, he traced the emergence of anti-crime politics in late 20th century Black communities. Forman showed how newly empowered Black politicians fought for policies they believed would protect and uplift Black Americans, but inadvertently contributed to mass incarceration. 


CityMetric recently caught up with Forman to discuss crime trends, where he sees reason for hope in this moment and how the Black political class’s attitude toward crime and punishment has shifted since the latter part of the 20th century. 

This interview has been edited and condensed. 

There is talk right now about a resurgence of crime and violence in American cities. We saw similar, more localised concerns after the initial 2015 Black Lives Matter protests in Ferguson and Baltimore. Do you fear this could reinvigorate the kind of politics you describe in your book among segments of the Black community and political class?

I fear that it could be reinvigorated nationally and also in the Black political class. Look at the political conversations that are happening in Atlanta right now, for example, a city that also has seen a short-term uptick in crime as it is a site of a lot of protests about George Floyd and Breonna Taylor on the national level, as well as Rayshard Brooks and Ahmaud Arbery more locally in Georgia.

I think that you can already see in some of the language of the local elected officials this idea that we have to be very careful about pulling back. [They are saying] “while the protesters may make some valid points, we can't risk returning to the ‘80s and ‘90s.” Those decades really traumatised the United States, and particularly traumatised Black communities. There's a deep fear about returning to the levels of the violence that we saw in the crack years.

You write a lot about class divides among Black Americans, where middle income and elite Black people don't suffer as much from extremely punitive policies. They also have closer ties to the politicians who are creating these policies. There are very specific groups of people, even in marginalised communities, whose voices are heard.  As a result of these dynamics, you write about Black politicians fighting for things like mandatory minimum prison sentences or against decriminalising marijuana. Is there still that disconnect between those who suffer the most from criminal justice policies and those who are actually heard in political discourse?  

Let me just say a caveat, that when we talk about class divisions in the Black community it's important to hold two truths in our head at the same time. Bruce Western and others have shown the way in which class, educational status, income can dramatically reduce the likelihood of being hardest hit by the criminal system – namely incarcerated. Middle class and upper middle class Black people get some measure of protection. It's also true at the same time that Black people of all classes are worse off relative to their class counterparts in the white community. 

One area where class is least protective is policing and police stops. The police do not know how many degrees you have. They don't know how much money you have in your bank account. I want to be very clear that in making this point about class, I'm not making the argument that race or racism don't matter in this context. 

In terms of how it plays out now, I see an awareness that has developed in the Black community in the last 10 years or so about how deeply racist the criminal justice system has become. Twenty or 30 years ago they had a consciousness, but there's levels of understanding. Many of the people I write about in the book wanted to promote the interests of the Black community. They weren't motivated by indifference or callousness. When presented with mounting evidence of how awful this system has been in Black lives, they're reconsidering and recalibrating. 

Lots of former elected officials have said to me some version of “I didn't know at the time and I appreciate that you showed us in our full complexity. I appreciate that you showed the pressures we were under. If I had known then what I know now, maybe I would have been less quick to go along with some of these harsh measures.” 

The second thing that has affected the Black political class has been the emerging movements, led by Black people in particular and led by young people. They not only educated leaders, but pressured them and made them understand that there is a political cost. If you're not moved by the moral argument, then you'll be moved by the political argument. You'll be moved by the people protesting outside the office of District Attorney Jackie Lacey in Los Angeles, for example, where Black Lives Matter LA has held, I believe, a year of consecutive protests against a Black district attorney who has had really some of the worst practices.

From what I can tell, she's been pressured by the movement to change some of her positions on important issues like prosecution of low-level drug offenders, for example, and the aggressiveness with which she prosecutes police officers for acts of violence.

What do you make of the calls to defend or even abolish the police?

What I find so compelling about abolition, initially in the prison context and extended to the police as well, is that it shifts the conversation and forces us to go through experiments in which we imagine what it would take to build that world. I think that exercise is very important, because it pushes us further than we are naturally inclined to go. Cultivating a broader imagination is an incredibly important part of this work, because as you know from my book, often it was lack of imagination that caused people to fall back on [punitive policies]. 

That's what caused D.C. Councilmember David Clarke to call the police rather than public health experts when he was overwhelmed with letters about heroin addicts in public space. He was anti-drug war, but he couldn't imagine responding to a call for help with heroin addicts with anything other than police. That's a very common move from even really good and progressive people. 

People who are for defunding, for abolition, are absolutely right about reinvesting that money into alternative structures that support communities. But the reinvestment part doesn't follow naturally from the terms. We might want to come up with a term that captures the new stuff we want to do. I think that's particularly important because one of the reasons Black communities have ended up supporting more police is that Black communities have always wanted their fair share of the resources.

Then, the evidence suggests the United States has too many police officers doing prophylactic, preventative, or stop-and-frisk style policing. The style of policing that leads to district level harassment, pulling people over for no reason. But we have too little investment in the parts of police departments that investigate unsolved crimes. I'm talking about the investigator or the detective who comes to your house after there's been a robbery, an assault, a rape, or homicide. 

As compared to European countries, in the United States we actually underinvest in those parts of our police departments. Jill Leovy’s book Ghettoside shows this in dramatic detail. She describes an LAPD that's stopping and frisking Black drivers wantonly and yet the homicide detectives are still relying on a fax machine and the fax machine is broken. They have to go with their own money to Staples to buy a printer. Meanwhile, other aspects of the department are kitted out in this ridiculous riot gear that makes them look like they're in Fallujah. 

That under investment is particularly damaging to Black communities because we're disproportionately victimised by crime. Because of racism and this allocation of resources, the police are less likely to respond in Black communities. The kids I used to work with in the charter schools in DC, we talk about no snitching, but one of the reasons they would never call the police after they'd been victimised by crime is they would say, “They're not even going to come. You're wasting time.” 

I did a Q&A with Jill Leovy too and her argument is one I've struggled to articulate in our present moment. She argues the state doesn't have a monopoly on violence in low-income Black neighbourhoods, because investigations of violence are deemphasised and crime victims or their loved ones often take retribution into their own hands.  But right now, establishing or preserving the state's monopoly on violence isn't an appealing talking point. 

Yes, this is another thing nobody's talking about. Whatever we're going to do instead of the police has to be accountable to the public. The best, most direct way to have accountability is to have the individuals be public employees. As long as we have 300 million guns in this country at least some of those state employees are going to themselves be armed. It's unreasonable to ask them to do the job without it. Not as many need to be armed as are armed now, but some of them need to be. But they can't be hiding behind union contracts or civil service protections which make it impossible to remove even the worst performing, most abusive officers. 

We can not call them police if we want to. That's semantic, but maybe symbolism matters. But those people have to be state employees. They can work with community-based nonprofits, but there are also communities that don't have as robust of a nonprofit network, and they deserve protection too. These [community] groups have to be accountable to the state and, when they don't exist, the state has to be there. 

Progressives get all the points I just made when it's applied to education. The notion that things be public and accountable to the state is understood when it comes to schools. It's exactly why so many people on the left are opposed to charter schools, because they say they don't have public accountability. They want these things to be a state function. But this point about the difficulty in removing this entirely from the hands of the state is, I think, one that liberals and progressives understand from other contexts.

Jake Blumgart is a staff writer at CityMetric.