BW_SMART_CITIES_September_October_2016

While conceptualizing

Smart Cities Mission, Indian

government took many

cues from cities across the

globe. BW SMARTCITIES

look at some successful

funding models these cities

are adopting to become

financially sustainable

T

HE biggest barrier to implement-

ing smart city project programs is

access to finance. Globally cities

have been experimenting with different fi-

nancial models to make their projects viable.

As the Smart city projects vary widely in terms of size

of the investment and the duration of time which is re-

quired to implement projects, there is no standard

model for financing. Also given the various socio-eco-

nomic and demographic challenges there is no one size

that fits all. That is a reason cities across the globe are

continuously looking at innovative ways to raise funds

for their small and big projects.

The Green Fund: London

The London Green Fund was launched in 2009 with

the principal aim of supporting the city’s ambitious cli-

mate change objectives, including a target to achieve a

60% reduction in carbon emissions by 2025.

Its total budget is £100 million, of which £50 million

originates from the European Regional Development

Fund, £32 million from the Great London Authority

and £18 million from the London Waste and Recycling

Board. The Fund is part of JESSICA (Joint European

Support for Sustainable Investment in City) which is a

joint initiative by the European Commission, the Euro-

pean Investment Bank (EIB) and the Council of Europe

Development Bank, aiming at supporting sustainable

urban development and regeneration. To achieve this,

JESSICA enables Member States to allocate some of

their EU structural funds to Urban Development Funds

(UDF) which in turn support urban development pro-

jects through three financial tools; equity investments,

loans and guarantees that can increase private sector

engagement.

One of the key aspects of this model is the re-alloca-

tion of any returns from successful investments to other

urban development projects. The London Green Fund

(or London JESSICA) has two major focus areas: en-

ergy efficiency and waste infrastructure. In the former

case, the Fund aspires to provide decentralized energy

infrastructure as well as improve the sustainability of

public, private and voluntary sector buildings, mainly

via debt financing. Waste infrastructure such as waste-

to energy and recycling facilities are financed through

equity investments.

Green Bonds: Sweden

Based on a practice begun in Europe, green bonds are

instruments issued to raise capital for funding specific

clean power, carbon-reducing projects. Since 2008, the

Cover Story

GLOBAL

FINANCING

MODELS

FOR SMART

CITIES