Improving Local Enabling Conditions for Private Sector Climate Investments in Cities

The report identifies barriers to private urban climate investment across macro, city, and project levels, and provides recommendations for city governments, public sector partners, and private/third sector entities to improve enabling conditions. It analyzes five case studies from Chile, Ecuador, India, South Africa, and Turkiye to highlight success factors such as bulk procurement, green bonds, and strategic partnerships.

• Barriers to private urban climate investments are categorized into three levels: the macro level (macroeconomic and institutional/policy context), the city level (policymaking, planning, capacity, and financial/asset management), and the project level (design, structuring, sector maturity, and technology readiness).
• Macro-level barriers include limited creditworthiness of cities due to currency risks and high domestic interest rates, as well as national regulations that may restrict private sector investment in municipal infrastructure like water, housing, or waste.
• City-level barriers often involve a lack of financial literacy among staff, poor coordination between finance and technical departments, and financial accounting practices that do not align with international standards like IPSAS.
• Project-level barriers include a mismatch between small project sizes and the larger 'ticket size' required by institutional investors, as well as high upfront transaction costs for innovative technologies.
• Successful urban climate projects often utilize innovative implementation mechanisms to reduce costs, such as bulk green procurement in Santiago, Chile, which reduced the unit cost of electric buses.
• External certification and verification are critical for building investor confidence in markets with underdeveloped regulatory environments, as demonstrated by Cape Town's certified green bond that raised approximately USD 67 million.
• Investment pooling and the use of Special Purpose Vehicles (SPVs) can offset high transaction costs and isolate project risks, as seen in the public street lighting project in Odisha, India.
• City governments are encouraged to shift their procurement focus from 'hardware' to 'services' to allow the private sector to propose more efficient, impact-based solutions.
• National Development Banks (NDBs) can play a vital role by providing specialized teams to support city governments in structuring bankable projects and by mainstreaming corporate climate governance.
• International Finance Institutions (IFIs) should move from project-by-project approaches to programmatic interventions and prioritize 'additionality' through risk mitigation instruments rather than just traditional lending.

APA

Apostolovic, M., Le Cornu, E., Masale, E., Maskrey, R., Schuler, N., & Teipelke, R. (2023). Improving Local Enabling Conditions for Private Sector Climate Investments in Cities. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/Improving-Local-Enabling-Conditions-for-Private-Sector-Climate-Investments-in-Cities.pdf

Chicago

Apostolovic, Milica, Emily Le Cornu, Eyerusalem Masale, Rebecca Maskrey, Nina Schuler, and Renard Teipelke. Improving Local Enabling Conditions for Private Sector Climate Investments in Cities. Climate Policy Initiative, 2023. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/Improving-Local-Enabling-Conditions-for-Private-Sector-Climate-Investments-in-Cities.pdf.

Wikipedia

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BibTeX

@techreport{apostolovic2023improving, author = {Apostolovic, Milica and Le Cornu, Emily and Masale, Eyerusalem and Maskrey, Rebecca and Schuler, Nina and Teipelke, Renard}, title = {{Improving Local Enabling Conditions for Private Sector Climate Investments in Cities}}, institution = {Climate Policy Initiative}, year = {2023}, month = may, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/Improving-Local-Enabling-Conditions-for-Private-Sector-Climate-Investments-in-Cities.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }