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FEATURE STORY

Asian Cities: Climate Focus Needed in Capital Investment Planning

May 15, 2014

At the Seoul Creditworthiness Academy, Asian cities worked to improve municipal finances, and highlight the need for climate-smart capital investment plans to achieve low-carbon development.

STORY HIGHLIGHTS
  • At the latest Creditworthiness Academy in Seoul, Asian cities discussed ways to improve municipal finances and access to capital to achieve low-carbon development.
  • One challenge that stood out was the need for a climate lens in developing capital investment plans – the policy tools used to forecast major capital projects and acquisitions, such as energy and water infrastructure.
  • The World Bank is working with others to develop a climate-smart capital investment planning methodology that will help cities prioritize municipal financing toward low-carbon, resilient, cost-effective infrastructure.

Asian cities are acutely aware of the need to manage climate risk, and information and advice about climate-smart capital investment planning were in high demand at a City Creditworthiness Academy workshop held in Seoul.

“Climate change affects us significantly, and it’s easy to see  – the effect of sea level rise on fresh water and flooding. Now we have a green growth strategy and a policy for the adaption and mitigation of climate change,” said Nguyen Trung Viet, manager of the Ho Chi Minh City Climate Change Bureau’s Climate Change Steering Board.

Keen to train staff, Nguyen participated with colleagues from departments including planning and investment and finance. “We learned a lot. Immediately, I will apply [climate-smart] capital investment planning. This is very important for Ho Chi Minh City.”

Other cities were under pressure to meet carbon emissions targets set by national governments but lacked the know-how for implementation. Some faced the challenge of managing population growth and pollution and asked for information on how to make conventional projects more climate-smart. 

 “I want my city to be clean and green, but we don’t have a sewage system, and our canals are polluted,” said a mayor from Sri Lanka. Officials from a city in Bhutan were proud of their efforts to protect the environment but had questions about monitoring to ensure their plans are working.

The Academy, part of the World Bank’s Low-Carbon, Livable Cities Initiative, aims to help cities improve their finances and access to capital so they can deliver better services and invest in low-carbon development.

At a workshop held in Nairobi last year, participants said they lacked access to technical assistance for planning climate-related infrastructure projects and structuring long-term finance options. In response, the Seoul workshop expanded its program with a new session on climate-smart capital investment planning.

Climate-Smart Capital Investment Planning

A capital investment plan is a policy tool used by local governments that forecasts major capital projects and acquisitions, such as municipal power plants, modernization of a water supply system, or the replacement of streetlights.

It allows governments to prioritize the funding and timing of urgent projects, while planning for others in the future. A well-designed plan may help local governments to get better bond ratings and lower interest rates on debt.

This process can be linked to meeting and implementing climate change goals and initiatives.

Governments can evaluate alternatives for each proposed project through climate-smart and cost effectiveness criteria, helping them understand how a project can have a lower carbon output compared to those designed through conventional methods.

Participants work on a self-assessment, using color codes to highlight financial management issues.

Open Quotes

Improving municipal finances and strengthening capital investment planning with a climate focus will help cities deliver better services and become more livable and resilient in the long term. Close Quotes

Sameh Naguib Wahba
Acting Director, Urban Development and Disaster Risk Management, World Bank

Group discussions during the Creditworthiness Academy enable participants to learn from each other to improve financial management.

“Climate-smart building is not just about making choices that lower the impact of carbon emissions or enhance resilience. It’s also a matter of making a choice that makes good financial sense,” said Jan Whittington, an assistant professor of urban design and planning at the University of Washington, who led the new session at the Seoul workshop.  

“Most energy saving technologies and smart energy choices also lower operating and maintenance costs. Over the long run, you can actually see what your return on investment will look like,” Whittington said. “And the same energy saving choices that reduce carbon also improves air quality, so if you’re concerned about health, you get co-benefits too.”

A New Methodology

The World Bank is currently developing a climate-smart capital investment planning methodology with Whittington that will help cities prioritize municipal financing toward low-carbon, resilient and cost-effective infrastructure investments.  

Quantifying the cost effects of implementing climate-smart projects was a revelation, said participants from the Philippines. “This is very timely,” said Angeles City Assessor Lea Dizon and her colleague, City Treasurer Juliet Quinsaat. Although they needed to produce and comply with comprehensive land use plans, development plans, and investment plans, there wasn’t much technical assistance or guidance.

 “Rapid urbanization has brought many challenges to city leaders to improve the quality of life for citizens, from creating jobs to providing affordable housing, while protecting the environment and building resilience against climate and disaster risk,” said Sameh Naguib Wahba, World Bank Acting Director for Urban Development and Disaster Risk Management. “Improving municipal finances and strengthening capital investment planning with a climate focus will help cities deliver better services and become more livable and resilient in the long term.”

“We’re very encouraged to see how Asian cities are committed to take action on climate change,” added World Bank Senior Environmental Economist Sebastian Scholz, who leads the Low-Carbon, Livable Cities Initiative. “With the City Creditworthiness Academy, we’re taking very concrete steps to help cities access financing for low-carbon development.”

The Seoul workshop was organized by the Bank’s Urban Development and Reilience Unit under the Low-Carbon, Livable Cities Initative and the Public-Private Infrastructure Advisory Facility (PPIAF) in partnership with the Korea Development Institute and Korea Green Growth Trust Fund. A total of 39 mayors, city officials, and technical experts representing 15 cities and provinces from 12 countries across Asia participated in the five-day workshop.