Milton Bevington is Senior Advisor to the City of Boston under the City Energy Project. He guest-authored this post on the City of Boston’s work on sustainable infrastructure finance.
This post is also featured on C40.org. The C40 Cities Climate Leadership Group (C40) is a network of the world’s megacities committed to addressing climate change. The City of Boston is a member of C40, and Mayor Martin J. Walsh currently co-chairs its steering committee. C40 helps cities collaborate effectively, share knowledge and drive meaningful, measurable and sustainable action on climate change.
The potential threat which climate change presents to the economy, public health, and structural integrity of cities worldwide has recently become hard to ignore. Mitigating climate change requires a significant reduction of greenhouse gas emissions, and adapting to its effects will require cities to prepare buildings and people for changes like sea-level rise and extreme weather events.
It happens that some of those strategies can reduce operating expenses as well: more efficient buildings use less energy, more resilient buildings reduce catastrophic costs associated with storms. A complicating factor is that those projects often require a sizeable capital investment, while governments everywhere are already challenged to fund basic social needs like education, public safety, and sanitation. As it turns out, finding sustainable ways to finance sustainability without raising taxes is quite difficult.
To address that issue, a small group of finance experts working around the world are developing promising new models of sustainable infrastructure finance -- that is, ways to fund necessary investment in upgrades to city infrastructure without raising taxes. The group recently met in Brazil to share ideas and work together to develop best practices. The City of Boston currently chairs this elite group, known as the C40 Sustainable Infrastructure Finance Network, and Boston Mayor Martin J. Walsh currently co-chairs the C40 steering committee.
This recognition is due in part to the inception of the City Energy Project in 2014, and Boston’s sponsorship of the Climate Finance Series, which aims to make the City a global center of climate finance excellence. A centerpiece of the City’s response to climate change is Renew Boston Trust, a market-based, self-funded finance program that aims to supercharge local investment in building efficiency, renewable energy, and climate resiliency.
At the recent Financing Sustainable Cities Forum, hosted by C40, the City of Rio de Janeiro, the Citi Foundation, and WRI Ross Center for Sustainable Cities, participants heard how cities in the Americas, Europe, and Africa are using the tools of finance to create more sustainable models of funding infrastructure, among them new ways of procuring, budgeting, contracting, and financing projects without the use of taxpayer funds. (Photo: Milton Bevington at the Financing Sustainable Cities Forum)
A key takeaway of the forum was that capital tends to flow where it is treated best, and there was consistent emphasis on improving cities’ access to private risk capital by enhancing the so-called bankability of projects. Translation: in order to attract private investors (the most sustainable financing model in the long run), infrastructure projects must guarantee them both a return on their money as well as the return of their money.
Bankable projects are characterized by guarantees and self-liquidating business models -- for example, a building efficiency project which generates more reductions in operating costs annually than is required to repay its construction loan and which carries savings and cost guarantees from a large multi-national with triple-A credit. For a city government, making that happen requires new ways of thinking about project development, implementation, and financing.
Even without climate change, a city’s infrastructure ages and it costs money to deliver important services. Perhaps the greatest value of more sustainable models of financing infrastructure is that so-called bricks-and- mortar investments compete far less with important mission-critical investments like fire fighting apparatus, squad cars, and textbooks. Instead, projects pay for themselves by capturing operating savings, relieving taxpayers of their normal responsibility to support that funding through their taxes.
For the benefit of current and future generations, the City of Boston intends to continue leading the effort to bring these new methods for financing sustainable infrastructure to light.
Boston is a leader in climate change mitigation and adaptation at the city level through its membership in other city-based organizations like 100 Resilient Cities and the Carbon Neutral Cities Alliance, and will host the US-China Climate-Smart/Low-Carbon Cities Summit in the Summer of 2017.