Page 116 - ITU-T Focus Group Digital Financial Services – Executive Summary

Although Mexico City was the first city in Latin America to issue green bonds, it was able to look into previous
experiences on green bond issuances, e.g. in Europe, for reference. A local Mexican development bank,
Nacional Financiera (NAFIN), issued its first green bond in November 2015, which also paved the way for the
issuance of the city’s first green bond. Also, the city’s urgent need for sustainable infrastructure (e.g. low-
carbon infrastructure, energy efficiency, water infrastructure) influenced the decision to seek financing
through issuance of a green bond.
For a city to be able to issue green bonds, it must be creditworthy enough to raise capital in the financial
markets. However, approximately 80% of cities in general do not have an investment grade credit rating,
which means that if they are interested in issuing green bonds, they must first consider options to increase
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their creditworthiness (e.g. credit enhancement, third-party guarantees). The City of Gothenburg and
Mexico City both had a sufficient credit rating for issuing green bonds, which made the process more straight-
forward.

The complexity of the implementation of a city green bond framework depends on the city’s initial
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circumstances i.e. mainly the legal set-up and city’s creditworthiness. For assistance on how to proceed in
the initial phases of green bond issuance, cities can closely monitor successful green bond schemes in other
countries. Following this, the city has to set eligibility criteria and identify the projects it would like to include
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under the framework. The Green Bond Principles are generally used as reference for determining the
general process under which the framework should operate, as well as details on reporting and transparency
requirements.

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15 South Pole Group, Climate Policy Initiative, ICLEI – Local governments for Sustainability and Climate Bonds Initiative;
Green Bonds for Cities,
http://local.climate-kic.org/wp-content/uploads/2016/09/160825_Flyer_Green-Bonds-for-Cities_LR.pdf.
16 For more information and guidance on cities’ options for accessing financial flows from the green bonds, see the
report “Green Bonds for Cities: A Strategic Guide for City-level Policymakers in Developing Countries”
https://climatepolicyinitiative.org/wp-content/uploads/2016/12/Green-Bonds-for-Cities-A-Strategic-Guide-for-
City-level-Policymakers-in-Developing-Countries.pdf.
17 International Capital Market Association ICMA, “Green Bond Principles, 2016 – Voluntary Process Guidelines for
Issuing Green Bonds”, http://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/green-bonds/green-
bond-principles/.

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