The World Bank has approved a $200 million USD loan to increase access to sustainable financing for green urban investments—with a focus on water, wastewater and solid waste management—that will benefit local governments in the Yangtze River Delta Region of China. The project will be co-financed by a loan of $172 million USD from the German Development Bank (Kreditanstalt für Wiederaufbau, KfW).
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 (US$5.84 trillion) and RMB 70.1 trillion (US$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.
“This project will bring international best practices to China to allow small cities and town to access commercial funding by pooling their investment demand,” said Martin Raiser, World Bank Country Director for China. “In this way it will bring innovative solutions to help China meet its environmental investment needs and achieve its climate targets under its National Determined Contribution.”
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.
Funds from the World Bank will cover early construction risks and repayment risks of sub-projects, 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.
“We will leverage China’s strong technical capacity and support the dissemination of successful examples of structuring, executing, and financing green urban environmental infrastructure projects,” said Alessandra Campanaro, World Bank Senior Urban Specialist and project team leader. “This project can have a strong demonstration effect and serve as an innovative model for other regions of China and other developing countries.”
The project is part of the World Bank’s long-term engagement to support sustainable infrastructure development and efficient urbanization in China.
Photo of Shanghai (which is in the Yangtze River Delta) is via Adobe Stock.