Nature Positive Financing the Tranisition in Cities

5.4 Using MDB creditworthiness programmes, guarantees and partnerships with credit rating agencies Credit guarantee programmes help to derisk borrowing for cities that are not creditworthy; fewer than 20% of the world’s 500 largest cities in the developing world are deemed creditworthy.65 For cities to limit their reliance on national governments for funding for urban development, they must take steps towards increasing their creditworthiness. Cities should use guarantee funds, technical support and creditworthiness initiatives developed by MDBs, or form partnerships with credit rating agencies such as S&P and Moody’s to develop new risk scores for climate and biodiversity. Opportunities for cities There are a range of interventions that cities can adopt to move towards attaining an investment grade credit rating. These include: –Conducting a baseline assessments of conditions, which can be done through the World Bank self-assessment tool. –Using a guarantee fund to raise credit rating and gain access to better borrower terms. –Developing capital investment plans, ensuring procedures and budget cycles align. –Coordinating with central government to improve the enabling environment (e.g. policies and governance). –Developing project pilots to test proposals and scale successful solutions. –Incorporating credit rating agencies into strategic planning processes, ensuring goals and milestones are tied to agency objectives. –Improving credit risk management processes through regular financial reviews of statements, cashflow projections and incorporating risk mitigation strategies. –Improving investor relationship management to highlight credit rating and actions to improve credit ratings. –Optimizing debt financing to enable accessing of debt at lower interest rates. –Conducting regular benchmarking and peer comparisons to evaluate performance and monitor ratings. Actions to improve creditworthiness from speculative to investment grade are shown below. Conduct performance monitoring Speculative gradeInvestment gradeUse performance-based concessional financingCapital investment planningGovernance structure changes Greater access to international capital marketsMarket-based loan with credit enhancementsLand-value capture mechanismsImplement sound debt policiesPilot PPP project Assess baseline financial management processesIntroduce hybrid financingActions to improve creditworthiness score from speculative to investment grade FIGURE 11 Source: World Bank. (n.d.). The Path to Credit Worthiness; World Bank. (n.d.). City Creditworthiness Initiative; C40 Cities Climate Leadership Group. (2016). Good Practice Guide to Creditworthiness. Nature Positive: Financing the Transition in Cities 36