The city of Johannesburg has pioneered a municipal “Green Bond” in South Africa to raise funds to help respond comprehensively to climate change and to ensure the sustainable management of resources. The Green Bond issued by the city in June 2014 is worth ZAR1.5bn (approx. US$143m) and is funding projects across a range of sectors including 150 new dual fuel buses and converting 30 buses to biogas.
The Green Bond allows the city to show its commitment to environmental stewardship, while receiving a market-related financial return. The Green Bond has provided the City with a new funding source to improve and expedite the implementation of its climate change mitigation strategy and move Johannesburg towards low carbon infrastructure.
Reasons for success
Johannesburg had political leadership that was supportive of exploring innovative mechanisms to finance upcoming “green” projects. In addition, the city’s investment-grade credit rating helped them take the bond to market and for it to receive a very positive response. In addition, the city also benefited from international guidance, such as from the Green City Bonds Coalition, which – in cooperation with C40 – recently released the specialist Green Muni Bonds Playbook.xxxix
When/why a city might adopt an approach like this
The use of Green Bonds to finance low carbon buses (and green projects more broadly) offers the opportunity for creditworthy cities to access large-scale, debt finance to introduce clean buses into their BRT (and other city) fleets. The cost of finance will depend on the structure of the bond and the creditworthiness of the project or the issuer, but is generally a competitively priced source of long-term finance. It also offers cities the opportunity to grow and diversify their investor base, increase collaboration between city environment and finance departments, and publicly highlight a city’s long-term commitment to sustainable development.
C40 Good Practice Guides
C40's Good Practice Guides offer mayors and urban policymakers roadmaps for tackling climate change, reducing climate risk and encouraging sustainable urban development. With 100 case studies taken from cities of every size, geography and stage of development around the world, the Good Practice Guides provide tangible examples of climate solutions that other cities can learn from.
All references can be found in the full guide.
- Key Impact
- The Green Bond has provided the City with a new funding source to improve and expedite the implementation of its climate change mitigation strategy and move Johannesburg towards low carbon infrastructure
- Financial Savings
- Green bonds give creditworthy cities to opportunity to access large-scale, debt finance to introduce clean buses into their fleet