Private sector financing can accelerate a green recovery for cities

Serbia’s Vinca landfill is the largest unmanaged landfill site in Europe. The landfill handles 90% of the waste collected in Belgrade. Despite taking up as much space as roughly 180 soccer fields, the landfill is running out of capacity. It is also the source of frequent fires and leaks liquid pollutants into nearby waterways.

In 2019, with IFC and MIGA support, Belgrade authorities and the French-Japanese consortium SUEZ-ITOCHU began construction of a new sanitary landfill, incinerator, and waste-to-energy plant. The consortium also began closing and rehabilitating the existing Vinca landfill. This project is the first large-scale PPP in solid waste management in Serbia and the Balkan region. IFC’s PPP advisory team helped build local capacity, promote reform of key regulations, and design a bankable PPP structure. Revenues are generated from a new waste treatment charge levied on users, as well as electricity and heat payments.

Stephane Heddesheimer, CEO of Recycling and Recovery at SUEZ in Asia, points out the innovation of the approach at Vinca, where the remediation of an existing landfill was financed by combining remediation efforts with revenue-generating waste management services. This was key to making the project bankable for the private sector, and it was enabled by a procurement approach that leveraged private sector expertise.    

“Competitive dialogue was the most efficient procurement method for this project … This process is quite helpful to achieve a contract that is balanced, bankable, and biddable.” – Stephane Heddesheimer, CEO of Recycling and Recovery Asia, SUEZ in Asia

The recovery choices that cities make today will set urban agendas for years to come

To implement a green road to recovery, cities can leverage green financing instruments like sustainability-linked loans. Sustainability-linked loans provide a financial incentive for borrowers to achieve targets linked to the United Nations’ Sustainable Development Goals.

Although it can be challenging for cities to tap into sustainable financing instruments, essential urban infrastructure services are well tailored to leverage sustainable financing, as they provide multiple positive environmental and social benefits, according to Roberto Barbuti, CEO of the water utility of the State of Rio Grande do Sul in Brazil, Companhia Riograndense de Saneamento (Corsan).

IFC recently supported Corsan with a sustainability-linked loan of BRL300 million (around USD56 million). The loan will enable Corsan to reduce water losses from 44% to 35% by 2024. If the target is achieved, the loan’s interest rate will decrease. The loan sets an important precedent in a country where 16% of the population lacks access to potable water and 50% lack access to sewerage.

IFC’s loan to Corsan is the first sustainability-linked loan in the Brazilian water sector.  However, since the issuance of its first green bond in 2015, Brazil has established the largest green bond market in Latin America. According to Gustavo Pimentel, Managing Director of SITAWI, the Brazilian sustainable financing market is evolving from green bonds to sustainability linked-products, which now account for more than USD10 billion. 

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