Page 16 - Connecting cities and communities with the Sustainable Development Goals
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United for Smart Sustainable Cities
                              Connecting cities and communities with the Sustainable Development Goals

            1       Introduction

            1.1     Background
            This case study introduces two examples of cities that have issued green bonds, namely Gothenburg and
            Mexico City. The City of Gothenburg has in many terms been a positive example within the city green bonds
            market as a result of the city’s experience in green bond issuance since 2013, and the transparent design of
            its green bond framework. Mexico City offers an example of a more recent green bond issuance in a less
            developed Latin American market.

            Gothenburg, located on the western coast, is Sweden’s second largest city and home to Scandinavia’s largest
            port.  The  city  of  Gothenburg  was  originally  focused  on  heavy  industry;  however,  over  the  years  it  has
            successfully transformed into one of the global leaders on climate change issues, and became the first city in
            the world to issue a green bond. The city is currently experiencing a significant growth in population and it
            has been calculated that by the year 2035, the city will experience a 27% increase in its population. As the
            population grows, so does the challenge of providing all the necessary services to its residents. The challenges
            faced by the metropolitan area of Mexico city with over 20 million inhabitants, are not only focused on
            population  growth,  but  also  on  many  of  its  derivatives  such  as  pollution,  traffic,  insufficient  waste
            management, scarce water supply, lack of sustainable housing etc. In 1992,  the United Nations labelled
            Mexico City as “the most polluted city”, which for the first time set in motion the city’s environmental
            management efforts.

            The increased focus on environmental issues and sustainability in general has been a catalyst in increasing
            interest in green bond issuance. More recently, the Sustainable Development Goals (SDGs) and the Paris
            Agreement (COP21) are also being reflected in cities’ development plans. It is important to note that the
            concept of green bonds is specifically important to SDG 1, target 1.5 . Therefore, implementing this concept
            in cities will assist with the attainment of SDG 1.

            1.2     Challenge and response
            In the case of Gothenburg, the root of the problem that led to the design and implementation of the city’s
            green bond framework was related to the city’s industrial setup. The transition towards greener initiatives
            was set in motion in 1987 when Gothenburg’s Environmental Project was established. Since then, the city
            has adopted a number of environmental best practices and implemented sustainable initiatives in the city
            context. More recently, the population growth has extended the city’s needs for realizing sustainable city
            development projects. Mexico City has faced various challenges related to the geographical location of the
            city (as it is built on what used to be a lake), rapid growth of the population and city expansion, socio-
            economic situation (social inequality, poverty), natural disasters (earthquakes, floods) and the effects of
            climate change  (rains, floods, droughts, heat waves, landslides).
            After  setting  environmental  and  climate-related  goals,  Gothenburg  decided  to  allocate  funding  for  the
            achievement of their environmental goals. Likewise, to address the challenges the city faces today, Mexico
            City has had to consider innovative ways to access financing through capital markets. By issuing green bonds,
            cities  can  mobilize  capital  for  climate  change  related  investments  and  hence  promote  sustainable
            development that will improve the well-being of their residents.

            1    SDG 1, target 1.5: By 2030, build the resilience of the poor and those in vulnerable situations and reduce their
               exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks
               and disasters.
            2    According to the Mexico City Climate Action Program (PACCM) 2014-2020, approximately 5.6 million people in the
               city are vulnerable to the effects of climate change.

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