Page 114 - ITU-T Focus Group Digital Financial Services – Executive Summary

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 is Sweden’s second largest city and home to Scandinavia’s largest port located in the western
coast of the country. The City of Gothenburg was originally focused on heavy industry, however, over the
years it has successfully transformed from an industrial city to one of the global leaders in 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
habitants, 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, 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 catalyser in increasing
interest in green bond issuance. More recently, the adoption of the UN Sustainable Development Goals and
the COP21 Paris climate agreement in 2015 are also already being reflected in cities’ development plans.

1.2 Challenge and response
In the case of the City of Gothenburg, the root of the problem that led to the design and implementation of
a city’s green bond framework, were related to the city’s industrial set up. 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 population and city expansion, socioeconomic
situation (social inequality, poverty), natural disasters (earthquakes, floods) and the effects of climate
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change (rains, floods, droughts, heat waves, landslides).
After setting environmental and climate-related goals, the City of 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.

2 The Project(s)

2.1 Vision and content

Issuing green bonds allows cities to support the implementation of sustainable development projects with
the help of additional capital from the green bond market. The eligible projects under the City of
Gothenburg’s green bond framework closely follow the focus areas of the city’s strategy.

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12 According 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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