Author: World Bank, Beijing: Li Li; Washington: Nick Keyes
Category: Finance Facility
Published/Created by: The World Bank/KFW
The Green Urban Financing and Innovation Project will assist China in launching and operating an innovative financial intermediary facility—the Shanghai Green Urban Financing and Services Co., Ltd (FSC). The FSC will focus investments in three key urban environmental sectors: water, wastewater, and solid waste management. More than half of China’s population now lives in cities, and this is expected to grow to 70 percent by 2030. Cities face serious challenges of water quality and water shortages, with impacts on health for a continuously expanding urban population. Urban areas are also vulnerable to flooding, sea-level rise and other climate-related risks. China’s environmental infrastructure financing needs from 2014 to 2030 are estimated to be between RMB 40.3 trillion (USD 5.84 trillion) and RMB 70.1 trillion (USD 10.15 trillion). No single funding source can address this gap, so low-cost long-term financing mechanisms are urgently needed, especially for small cities and towns whose infrastructure needs are poorly served by current financing frameworks. Funds from the World Bank will cover early construction risks and repayment risks of subprojects, provide credit enhancement to the FSC to boost its credit rating, and build the capacity of the facility and of local authorities. Drawing on international best practices, the project will help create a new green urban finance institution for small cities by supporting the FSC in lengthening the credit terms and lowering the costs of loans, pooling demand, tapping capital markets, and adopting international green standards.
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