Summary of Good Practice of Successful Project Preparation ... · This report analyses project preparation tools, approaches, main bottlenecks, and solutions, by pre-senting three

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SummaryofGoodPracticeofSuccessfulProjectPreparationFacilitiesFebruary2018Authors:BasilOberholzer,GlobalInfrastructureBaselFoundation(GIB)KatharinaSchneider-Roos,GlobalInfrastructureBaselFoundation(GIB)CharlotteBoulanger,FMDV,GlobalFundforCitiesDevelopmentMarykevanStaden,ICLEI,LocalGovernmentsforSustainabilityAdditionalcontributor:DariusNassiry,OverseasDevelopmentInstitute(ODI)

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AcknowledgmentsTheauthorswould like to thank forall the invaluablecontributions fromexpertsandpractitionerswhostimulatedourthinkingandhelpedproducethisreport.SpecialthanksgotothePPFrepresent-ativeswhoprovideduswiththecompletedquestionnairesandtheexpertsservingasinterviewpart-ners, including Brian Capati, Barbara K. Buchner, Andreas Wohlhüter, Shigefumi Kuroki, StephenHammer,GadCohen,KlausLiebig,DariusNassiry,MichaelLindfield,JorisVanEtten,andDhrubaPur-kayasta.Moreover,wearegratefulfortheimportantcontributionsoftheCCFLAProjectPreparationWorkingGroup(PPFWG),theCCFLASecretariataswellastheorganizersandallparticipantsoftheFirstProjectPreparationPractitioners’Forum1on14November,2017,duringCOP23inBonn.The CCFLA thanks Global Infrastructure Basel (GIB) and Deutsche Gesellschaft für InternationaleZusammenarbeit (GIZ) GmbH for providing financial support to this report. GIZ through FELICITY(FinancingEnergyforLow-carbonInvestment–CitiesAdvisoryFacility(FELICITY)ajointinitiativebyGIZandtheEuropeanInvestmentBank(EIB)andtheC40CitiesFinanceFacility(CFF), implementedbyGIZandtheC40CitiesClimateLeadershipGroup(C40).Bothprojectssupportcitiesinthedevel-opmentoftheirclimaterelevant infrastructureprojectsandaimtocontributetoglobalknowledgemanagementintheareaofprojectpreparationsupport.

1http://www.citiesclimatefinance.org/2017/12/press-release-the-first-project-preparation-practitioners-forum/2 http://www.citiesclimatefinance.org/2016/12/ccfla-mandated-by-local-and-regional-leaders-at-marrakech-to-localize-climate-finance/

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ExecutiveSummarySignificantinfrastructureinvestmentsareneededfortheworldtoachievetheSustainableDevelop-mentGoals (SDGs) and the Paris Agreement 2015 on climate. Yet, there is a tremendous gap be-tween investment requirements andactual current global investment. To close it, bothpublic andprivatefinancesourcesarerequired.Moreover,moreclimatefinanceshouldbechanneledfromthenationaland international level to the localandregional levelwhereproject implementationtakesplace.Inreality,however,manyinfrastructureprojectscannotbelinkedtofinanceduetoanumberofreasonssuchasa lackofbankability, insufficientprojectdevelopment,andhighriskattheearlystageofprojectdevelopment.Thisiswhyprojectpreparationiskeytomakingprojects“investmentready”.Thisreportanalysesprojectpreparationtools,approaches,mainbottlenecks,andsolutions,bypre-sentingthreecasestudiesaswellashighlightsfromexperts’interviews.Eachcasestudyfocusesonaprojectpreparationfacility(PPF)thatisactiveatthesubnationallevelineitherLatinAmericaorAsia.ThePPFsof interestaretheCitiesDevelopmentInitiativeAsia(CDIA),theUSIndiaCleanEnergyFi-nance Facility (USICEF) and the Emerging and Sustainable Cities Initiative (ESCI). Aligningwith theTermsofReference(ToRs)ofthisResearchproject,thesethreePPFswereselectedbyconsensusbyCCFLAProjectPreparationWorkingGroupmembers.Althoughverydifferentintheirscopeandscale,theyprovidequiteawideinsightofthepossibleservicesandactivitiesthatarebeingdevelopedtosupportsubnationalprojectpreparationinLatinAmericaandAsia.Assuch,theyappeartoperfectlyfit into the realizationof task 1of theResearch study aiming atReviewingof existing subnationalPPFsinLatinAmericaandAsia.The results show that they all have developed sophisticated approaches addressing all relevantphasesof theprojectpreparationprocess. Emphasisonprojectprioritizationensuresefficientandeffective employment of the PPFs’ financial and human resources. “Sustainability” appear to bemainstreamedandplaced as an integral part of their tools as a strategy tomitigate the risks per-ceivedby investors inemergingordevelopingmarkets.However, theuseof riskmitigation instru-ments such as guarantees remains limited. Concerning the type of financial support provided byPPFs,itisapparentthatprojectpreparationsupportstillremainsmostlydependentongrantsmostlyprovidedbypublicinstitutionsandthatthesubnationalclimateprojectsthemselvesarestillalsofi-nancedbydevelopmentinstitutionsorotherpublicdonorsandonlyrarelybytheprivatesector.Likeinotherareasoftheworld,therearefurtherremainingchallengesconcerningalackofinstitutionalcapacityoflocalandregionalgovernmentsaswellascurrentlegalframeworksoftencreatinganon-enabling environment. Furthermore, the nature of many infrastructure projects (e.g. social infra-structure) implies that their returnsmaybe insufficientand thusnotable toattractprivate sectorinvestment.

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This report explores solutions anddevelops recommendations throughexpertdiscussions showinghowriskmitigationinstruments,projectstructuringandfairPPPmodelsmaybecombinedandtai-lor-made to specific project characteristics. In addition, suggestions for new PPF approaches aremade.Asummaryofthesemainfindingsispresentedbelow.Information sharing among PPFs and also including project developers and finance institutions isidentifiedaskeytospreadingsuccessstoriesandsharingsuccessfulapproacheswhichwillleadtoanacceleration and improvement of project preparation support. This statement confirms the im-portanceof theCCFLAProjectPreparationworkinggroup’smainpurposeandcoreactivitieswhichincludetheorganizationofaPPFForumeveryyear.

Mainbottlenecks,solutionsandrecommendationsinprojectpreparation

Bottleneck Relevantlevel Solution Relevantscope Recommendation

Fundingcon-straintsforpro-jectpreparation

Local,nationalandregionallevel

Scalingupfundingsources

Enablingna-tionalpolicies

• Nationalgovernmentsshouldcon-tributetoPPfunding

• FinancialincentivescouldencourageprivatesectorinvestmentsinPP

Projectlevel ScalingupPPFca-pacity

PPF:approach-esandbusinessmodels

• Projectpreparationcostscanbemadepartofprojectloans;

• PPFsmaydevelopmorecommercialbusinessmodelswhenappropriate(RE/EEsectors)

Politicalbuy-in Localandre-gionallevel

Makingneedofclimate-resilientinfrastructuretransparent

City:commit-menttoclimatefinance

PPF:accesstolocalauthorities

• Climaterisksshouldbecomeinte-gratedpartofcities’developmentplansanddecisionprocesses.

• Localexpertsmayfacilitatecollabo-rationwithcities

• Strongdomesticfinancialinstitutionsmayensurethelinkagebetweenalllevels

Projectlevel Inclusionoflocalauthoritiesandstakeholders(in-cludinglocalfinan-cialinstitutionsandcivilsociety)inpro-jectdevelopment

PPF:inclusiveapproaches

PPFsshouldincludecitiesandstake-holders((includinglocalfinancialinsti-tutionsandcivilsocietyorganizations)fromthebeginningofprojectprepara-tion.

Lackofprivatesectorparticipa-tion

Projectlevel DevelopmentofPPPmodels

PPF:projectstructuring

• Solidlocalfinancialintermediariesshouldbesupported;

• Cities’andPPFs’capacityforprivatesectorcollaborationshouldbestrengthenedsincetheearlystageofPP;

• PPFsshoulddemonstratetogov-ernmentsthatqualitytechnicalas-sistanceinprojectpreparationre-ducesinherentrisksandimproveschancestoattracttheprivatesectorandachievefinancialclosure

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Financialrisks,lowcreditwor-thinessofmu-nicipalities

Locallevel,projectlevel

Applicationofrisk-mitigationinstru-ments,reductionofearly-stagerisksbyprojectpreparation

PPF:riskmitiga-tionthroughproject

• PPFsshouldmakeuseofriskmitiga-tioninstrumentsincollaborationwithdevelopmentfinanceandpri-vatesectorfinance;

• PPFsshouldsharesuccessstoriesandlessonslearntwithriskmitiga-tioninstruments.

• PPFsmaycreateandsharetrackrecordofsuccessfulprojectstoraisecreditworthinessofcities

Insufficientpro-jectorganization

Projectlevel Improvingcapacityofprojectdevelop-ers

PPF:projectmanagement

• PPFsshouldbeengagedthroughoutthewholeprojectpreparationstage;

• PPFsshouldcarefullyselectsectors,regionsandscopeofactivitiestode-velopsufficientexpertise;

• Localexpertsshouldbehired.

Nationalandinternationallevel

Improvingcapacityofprojectdevelop-ers


• Nationalhubsofexpertisecouldprovidetherighttechnicaladvisesandensurethelinkagewiththeade-quatesourceoffunding;

• Identifysimilarprojectinitiativesathigherlevelstoavoidduplicationofworkandfragmentedplanning

Legalobstacles Nationallevel Legislativereforms Legalframe-work

Nationallegalframeworksshouldbeimprovedtoraiseallocationofclimatefinanceatthecitylevel.

Lackofinstitu-tionalcapacityatlocalandregionallevel

Localandre-gionallevel

Improvingcapacityoflocalandregionalgovernments

PPF:capacitydevelopment

• PPFsmaycombinepreparationwithcapacitybuildingforlocalandre-gionalgovernments.

• Coordinationbetweendifferentlev-elsofgovernment

Economicandpoliticalrisks


Providingfinancethroughdevelop-mentinstitutions

Generalenvi-ronment

PPFsanddevelopmentfinanceshouldlowerthehigheroverallriskbyprojectpreparationandfinanceandcrowdinadditionalfinance.


Coordinationbe-tweendifferentlevelsofgovern-mentacrosstime

PPF:accesstolocalauthori-ties;Generalenvironment

PPFsshouldpromotecontinuityandcoherenceofprojectsamidstcontinu-ouspoliticalandinstitutionaltransi-tions

Sustainability Projectlevel

MakingESGas-sessmentspartofPPFapproaches

PPF:ESGduediligencewithinprocurementrules

PPFsshouldmakesupportconditionaluponsustainabilityrequirements

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Content1 Introduction.............................................................................................................................................72 Background–TheNeedforInfrastructureInvestment.............................................................................93 CurrentChallengesandSuggestedSolutionsinProjectPreparation.......................................................113.1 WhatisaProject?.......................................................................................................................................113.2 AchievingBankability..................................................................................................................................123.3 TheScopeofProjectPreparationFacilities................................................................................................133.4 OverviewofexistingPPFs...........................................................................................................................153.5 LiteratureReview–ChallengesandSuggestedSolutionsinProjectPreparation......................................194 CaseStudies–IdentifyingSuccessfulProjectPreparationApproaches...................................................234.1 CDIA–CitiesDevelopmentInitiativeAsia..................................................................................................24

4.1.1 GeneralInformation........................................................................................................................244.1.2 Methodology...................................................................................................................................254.1.3 BottlenecksandRecommendations...............................................................................................264.1.4 SuccessFactors...............................................................................................................................274.1.5 ProjectPreparationClosureandProjectFinance...........................................................................28

4.2 USICEF–USIndiaCleanEnergyFinanceFacility.........................................................................................284.2.1 GeneralInformation........................................................................................................................284.2.2 Methodology...................................................................................................................................294.2.3 BottlenecksandRecommendations...............................................................................................304.2.4 SuccessFactors...............................................................................................................................304.2.5 ProjectPreparationClosureandProjectFinance...........................................................................31

4.3 ESCI–EmergingandSustainableCitiesInitiative.......................................................................................314.3.1 GeneralInformation........................................................................................................................314.3.2 Methodology...................................................................................................................................324.3.3 BottlenecksandRecommendations...............................................................................................334.3.4 SuccessFactors...............................................................................................................................344.3.5 ProjectPreparationClosureandProjectFinance...........................................................................35

5 Discussion..............................................................................................................................................355.1 SummaryoftheProfilingResults................................................................................................................355.2 CanPPFsCopewithExistingProjectPreparationChallenges?...................................................................365.3 RemainingChallengesUpforDiscussion....................................................................................................37

5.3.1 ParticipationinProjectFinance......................................................................................................385.3.2 FundingofProjectPreparation.......................................................................................................415.3.3 OrganizationalOptimizationofPPFs...............................................................................................42

6 Recommendations.................................................................................................................................43References....................................................................................................................................................47Annex...........................................................................................................................................................51

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1 IntroductionInfrastructureisthebackboneofanyeconomy.Toimprovepeople’swell-beingandachievetheUNSustainableDevelopmentGoals(SDGs)andthegoalsoftheParisAgreement,tremendousamountsofinvestmentarenecessary.Asignificantpartoftheseinvestmentsisrequiredforinfrastructureinurbanareas.However,betweeninvestmentneedsandactualinvestment,thereisanimmenseglob-alfinancialgap.Closingthisgaprequiresthedevelopmentofapipelineofwell-preparedinfrastruc-tureprojectscontributingtosustainabledevelopmentingeneral,butespeciallyalsoconsideringcli-matechangemitigationandadaptationneeds inparticular. In this context, localgovernmentsandcitiesplayacrucialrole.Allovertheworld,inurbanareasthepressureforinclusive,fairandefficienttransportsolutions,renewableenergyandbasicsocialservices likehousing is increasingandthis iswhereclimateresiliencehastoberealizedandwhereinvestmentconsiderationsshouldtargetalowemissiondevelopment.Mostoftheseinvestmentswillbemadeincitiesbycities.Additionally,climatefinanceandthe implementationofclimatepoliciesareoftennotwellaligned,thusformingasecondgapwithregardstourbaninfrastructurefinance. Internationalagendas liketheSDGsandtheNewUrbanAgenda(seeHabitatIII,2017)underlinetheimportanceofbothlevels,nationalandsubnationalfortheirachievement.Yet,financingfortheimplementationofsuchagen-das,and inparticular climate finance, is still largelyoperatingat the international levelwhile localand regionalgovernmentsareoftenexcluded.Toclose this secondgap,efforts tochannel financetowardscitiesandurbanareasarerequired.ThisneedhasbeenlargelyexpressedbyLocalGovern-mentsthemselves,whichoftenstruggletoaccessclimatefinance.Asaresponse,in2016,attheoc-casionofCOP22inMarrakech,LocalLeadersadoptedtheRoadmapforActionofMarrakech2duringtheClimateSummitofLocalandRegionalLeadersSummit.Thisstrategicdocument,whichmandatestheCitiesClimateFinanceLeadershipAlliance(CCFLA)foritsimplementation,addressesindetailthecomplexoverallfinancialissues–includingprojectpreparation–tosupportclimateactionatthelo-callevel.Infact,projectpreparationhasbeendefinedin2015byCCFLA,asoneofitstopfiveprioritiestolo-calizeclimatefinance,and,consequently,asthethematic focusofthe2017-2018CCFLAworkplan.Asthealliance(CCFLA,2017,p.6)observes,“therecognitionoftheneedfor‚localizing’globalagen-dashasbeengrowing,andpromisesasignificantaccelerationineffortstomakethefinancingoflocalclimateactionapriority“.Thisrequires“investment-ready”infrastructureprojects,thuspointingtothe importanceof supportingdevelopersof infrastructureprojects in thepreparationprocess.Theroleofsubnationalprojectpreparationfacilities(PPF)iskeyinthisregard.Inaddition,CCFLAstatesthat,throughtheaggregationofcooperationeffortsandcommitmentscomingfromawiderangeofstakeholders, “project preparation also serves as a key enabler of the delivery process for settingneweffectivefinancingarchitectures,modelsandchannelsforlocalandregionalgovernments’lowcarbonprojectsanddevelopmentplans”(ibidp6).Inthiscontext,renewingprojectpreparationun-

2 http://www.citiesclimatefinance.org/2016/12/ccfla-mandated-by-local-and-regional-leaders-at-marrakech-to-localize-climate-finance/

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derstandingandsupportforactionatthesubnationalleveliskeyforthedeliveryoftheParisAgree-ment.Eventhoughtherearecountless ideasandplans for infrastructureprojectsbyboththepublicandtheprivatesector,asolidpipelineofbankableprojectsthatcaneffectivelyaddresstheclimatechal-lengeisstill lackinginmostcountries.Especially, localandregionalgovernmentsindevelopingandemergingcountriesdonothavesufficientfinancialresourcestokeepupwithactualinvestmentre-quirements.Theterm“bankability”iscriticalandtherearefactorsthatinfluenceaproject’sbanka-bility,whichgobeyondthereachofPPFs.However,comprehensiveapproachestoprojectprepara-tion have a considerable potential to increase the number of projects ready for implementation.Moreover,thedefinedobjectiveofPPFsistolinkprojectstofinancebythepublicorprivatesector,nationalandinternationaldevelopmentbanks,climatefunds,andpotentialotherdonors.Thus,sub-nationalPPFsarefundamentallyimportantinsettingupprojectpipelineswithhighqualitybankableinfrastructureprojectsandindirectingfinanceattheinternationalornationalleveltothelocalandregionallevel.Additionally,PPFsmaybehelpfulinbuildinglastingcapacitiesandmakingthegeneralenvironmentforprojectinvestmentandrealizationmoreenablingbysharingitsexpertiseandexpe-rienceaswellasbyfosteringcollaborationsandpolicydialoguesacrosslevelsofgovernment.Alargeamountofscientificliteraturehasaddressedtheneedforbetterunderstandingthestructur-ing,processes,resultsandimpactsofPPFsworkingon“traditional”infrastructuredeals(largescale,severalhundredmillionsbudget,basedonnationalprioritiesandwithnationalinterlocutors).How-ever,almostnopreciseanalysishasbeenputforward inrelationtotheprojectpreparationsupplyand demand dynamics when it comes to the specifics of local and regional levels of action. Aknowledgegaponneedsandbarriers,existingexperiencesandfinancialtrackrecords,onbothsidesof the “local” equation (local clients, PPFs for subnational infrastructure investment) remains andneedstobeanswered; includingwithaviewontheclimatelensintegrationonthedesignof infra-structureinvestmentdeals. WiththisthematicfocusCCFLAaimstotacklethenumerouschallengesthatProjectPreparationFa-cilities(PPFs)faceatthelocalandregionallevelwhileatthesametimeprovidingaplatformforthesharing of experiences of project preparation practitioners and raising awareness on financing re-quirementsforurbaninfrastructureprojects.ThisreportwaspreparedasaresultofthefirstProjectPreparationPractitionerForumorganizedbyCCFLAduringCOP23.Theobjectiveofthisreportistoidentifyfactorsforsuccessfulprojectprepara-tionandhelpfultoolsandmethodologiesaswellastoproviderecommendationsforfurtherresearchanddebatestobefacilitatedbytheCCFLAProjectPreparationWorkingGroup.The resulting conclusions and recommendationswill hopefully stimulatenewactivities and informapproachesofexistingandnewlyemergingprojectpreparationfacilities(PPFs).ThisreportcompilestheprofilingofthreesubnationalPPFsandconversationswithexpertsfromdif-ferentinstitutions,formerorcurrentPPFstaffmembersaswellasindependentconsultants.Outof

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this,severalconclusionscanbemadeconcerningcommonalities,differences,successfulapproachesandremainingbottlenecks. Thereportisstructuredasfollows:Chapter2describesdetailsoftheinfrastructureinvestmentgapasthebaselineproblem.Chapter3providesandoverviewontermsanddefinitionsrelevantforPPFsand contains a literature review on subnational project preparation challenges. In Chapter 4, thethreePPFsarepresentedincasestudies.Chapter5makespreliminaryconclusionsthat leadtotheexpertdiscussion,which isalsosummarized inthischapter.Thefinalrecommendationsareformu-latedinChapter6.

2 Background–TheNeedforInfrastructureInvestmentGlobaldemand for infrastructure is rising.Themain reasons for this trendare:populationgrowth,economicgrowth, increasing industrialization,andnotably,urbanization.These factorsareparticu-larlyacute indevelopingcountriesandemergingeconomies.Globally,upto1.4millionpeoplearemovingintourbanareaseveryweek(Ijjasz-Vasquez,2017).Suchrapidmigrationisleavingmanyre-gionswithanextremelyhighproportionoftotalpopulationinurbanareas,forexample,80percentof LatinAmericanandCaribbeanpopulationsand58percentofEastAsianandPacific)populationcurrently live in urban areas (WorldBank, 2016). This demonstrates the increasing need for infra-structureandalsoexplainswhycitieshaveanoverwhelmingly importantrole inthedebatesaboutinfrastructureneedsandproject implementation.Demandforinfrastructurenotonlyimpliesacer-tainquantityofinfrastructureprojectsisrequired,butalsomeansthatthequalityofinfrastructureprojects isessential to improvements inpeople’swell-being, includingclimate resilienceandsocialprosperity.Anothercloselyrelatedaspectfurtherhighlightingtheimportanceof infrastructuredevelopment isitsrole intheachievementoftheSustainableDevelopmentGoals (SDGs)andgoalsset intheParisAgreement. Climate changemitigationandadaptationare closely tied to theway infrastructure isdesignedand implemented (seee.g.OECD,2017,pp.89–120). Individualprojectsaswellas largerinfrastructuresystemssuchastransportnetworkswillplayakeyroleinthetransitiontowardsalow-carbon economy. The usually energy-intensive and asset-heavy nature of infrastructure, however,alsoimpliesthatalargeamountoffinanceisneededtocreatechange.AccordingtoBhattacharyaetal.(2015,p.1),“amajorexpansionofinvestmentinmodern,clean,andefficientinfrastructurewillbeessentialtoattainingthegrowthandsustainabledevelopmentobjectivesthattheworldissettingforitself”.Connectingtheseobjectivesagaintocities,areportbyC40CitiesandArup(2016,pp.52–72)clearlyshowsthesignificantpotential forreduction incarbonemissions incitiesandthedirectand indirectkey roleof infrastructure toachieve the low-emissionpath. Indeed, the reportarguesthatcitiesmayreducetheiremissionsbyalmost50percentuntil2050comparedtothebusiness-as-usualscenariobyexploitinglocalopportunitiesandbuildingpartnershipsatthecitylevel(ibid.,pp.79–80).

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Estimatesoftherequiredinfrastructureinvestmentvolumedifferdependingonthemethodsappliedbutallsourcesconvergeontheimmensityoftheamountneeded:TheWorldEconomicForum(WEF,2013,p.4),suggestsaglobalannual investmentneedofUSD5trillionuntil2020.AccordingtotheGlobal Commission on the Economy and Climate (2014, p. 19), total investment needs from2015until2030isUSD93trillion.AmorerecentstudybyMcKinsey(2016,pp.2–3)estimatesinvestmentrequirementstobeUSD6trillionperyearoverthenext15years.TheUNConferenceonTradeandDevelopment(UNCTAD,2014,p.140)statesanestimatefordevelopingcountriescalculatinganan-nualneedforinvestmentexpendituresofUSD3.3to4.5trillionbetween2015and2030.Inthespe-cificcontextofcities,theCityClimateFinanceLeadershipAlliance(CCFLA)(2015,p.14)estimatesofUSD4.1to4.3trillionannualurbaninfrastructureinvestmentswouldberequired,wherethequalityof infrastructurecomplieswithabusinessasusualscenario. Ifurbaninfrastructure istobeclimateresilientandemission-reducing,theestimateofrequiredinvestmentwouldbeincreasedby9to27percent(ibid.).Thecurrentvolumeofinvestmentsfallwellshortofthoserequired.AccordingtotheWEF(2013,p.4)andMcKinsey(2016,pp.2–3),currentinvestmentvolumerangesbetweenUSD2.5and3trillionperyear,andfordevelopingcountries,UNCTAD(2014,p.140)providesanestimateofUSD1.4tril-lionperyear:wellshortofanyoftheestimatesofrequiredinvestmentstatedabove.Inaddition,areportoftheInternationalInstituteforEnvironmentandDevelopment(IIED)estimatesthatonly10percentofclimatefinanceactuallyeffectivelyreachesthelocallevel(Soanesetal.,2017,p.14)alt-houghglobalclimatefinancehasbeenslightlyrisingintheaverageoverthepastfiveyears(seeCli-matePolicyInitiative,2017).Consequently,thereisalargeinfrastructureinvestmentgapofbetweenUSD 1 trillion (WEF, 2013, p. 4) and 3 trillion (McKinsey, 2016, pp. 2–3) annually. For developingcountries,theinvestmentgapisbetweenUSD1.9and3.1trillion(UNCTAD,2014,p.140;Morgado&Casado-Asensio,2015).Forthetworegionsthisstudyfocuseson,LatinAmericaandAsia,thenumbersarealsostartling:in-frastructure financingneeds indevelopingAsia includingclimatechangemitigationandadaptationcostsamounttoUSD1.7trillionannuallyfrom2016to2030,leavingagapofalmostUSD500billionperyear (ADB,2017,pp.12,15). InLatinAmericaandtheCaribbean,annual infrastructure invest-mentofUSD120to150billionisrequiredandanadditionalinvestmentofUSD30billionperyearisneededtomitigateandadapttoanticipatedclimatechange(Serebriskyetal.,2015,p.8).Whilethesenumbersmakethedimensionofthechallengeobvious,theyalsohighlightthepotentialfor investors. The International Finance Corporation (IFC, 2016, p. 2) notes that the commitmentsmadeintheParisAgreementimplyacceleratedeffortstowardsclimatesolutions,includingrenewa-bleenergy,energyefficiency, sustainable cities, forestmanagementandclimate-smartagriculture.Anassessmentof21developingandemerging countries reveals that there is a so-called “climate-smart”investmentpotentialofUSD22.6trillioninvarioussectorsfrom2016to2030.Currently, liquidity in global financialmarkets is available in abundanceand thishasbecomeevenmoresointhecourseofthefallintheinterestratelevelaftertheglobalfinancialcrisisandthesub-

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sequentunconventionalandultra-expansivemonetarypoliciesinindustrialcountries.Thus,Itwouldbewrongtosaythatwhatisneededismoremoney,butratherviableinvestmentopportunities.Theglobal level of interest rates being so low, investors are looking for profitable investment alterna-tives.TheNewClimateEconomy(NCE,2017)estimatestheamountofassetsundermanagementbya rangeofprivateand institutional investors to reachalmostUSD120 trillion. Infrastructurecouldpotentially provide a solution tomany investors. However, there are several obstacles preventinginvestment from flowing to infrastructure, suchas limitsdue to regulationand investors’portfoliodiversificationstrategies(seee.g.Nassiry&Nakhooda,pp.18-19).Anotheroneisrisksthatarespe-cific to certain infrastructure sectors. Besides these factors,oneof themainbarriers is the lackofwell-preparedurbanprojects. Thus, successful project preparation is also of critical importance tocreateapipelineofprojectssuitableforsuchinvestment.Thisisthefocusofthisreport.

3 CurrentChallengesandSuggestedSolutionsinProjectPreparation

3.1 WhatisaProject?Definingwhatismeantbytheterm‘infrastructureproject’isanon-trivialmatter.Dependingonsec-tor, individual infrastructure projects differ significantly in size, purpose, environmental setting,ownership,and financingmodalities. In reality there isagreyzoneofwhatcanandcannotbede-finedasaninfrastructureproject.Forthepurposesofthisreport,an‘infrastructureproject’canbeconsideredasthephysicalanddigitalcomponentsofsystemsthatprovideservicesrequiredtoena-ble,sustain,orenhancesocietallivingconditions.Examplesofinfrastructureprojectsinclude:

• Water(includingharvesting,storage,management,distribution,treatmentandrecycling);• Energy(includinggeneration,storageanddistribution;energyefficiency)• Solidwastemanagement(includingcollection,distribution,processing,recyclingand

storage)• Transportnetworks,nodesandfleet(includingpedestrian,bicycle,vehicular,rail,water-

borneandairtransportation)• Communicationnetworks(includingtelephone,cellularanddata)• Socialinfrastructure(includingeducation,healthcare,sportsandrecreation,law

enforcement,fireandemergencyservices)• Foodsystems(includingagriculture,storage,processinganddistribution)• Miningandextractiveindustries(includingminesandprocessingfacilities)

Whilecommunicationnetworksservecommercialpurposes,ahospitalasanexampleofsocialinfra-structureprovidesbasicservices.Asaconsequence,ownershipofsuchdifferentprojectsoftendif-fersaswell(privatevs.publicownership).Intheenergysector,gasproductioninfrastructureismuchmore capital intensive than decentralized solar power plants,which can be owned, operated andpotentiallyalsofinancedbyprivatehouseholds.Dependingonthecharacteristicsofaproject,PPFs

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have to emphasize different aspects while project developers need different capacities to bestrengthened.Importantly,differentfinancingmodelsareappropriateaccordingtodifferentcircum-stances. As all PPFs profiled in this study agree, it is not possible to apply highly standardized ap-proachesbecauseallinfrastructuresectorsaredifferentandfacetheirownuniquechallenges.AsaconsequenceandforthepurposeofthisstudyandfutureworkofCCFLA,aclarificationofthepro-jectspectrummaybeneededtoavoidanyconfusionandenablebothstandardizationanddifferenti-ation.

3.2 AchievingBankabilityInmanyregionsoftheworld,successfulprojectpreparationisfraughtwithdifficulties.Therearealargenumberofprojectplansrequiringfinancing,andalargevolumeofcapitalavailableforinvest-ment,buttheinvestmentgapisnotbeingclosed.Thereareseveral importantreasonsforthis.Forinfrastructureprojectstobefinancedeitherbypublicsectorcapitalorprivatesectorcapital,severalconditionsneedtobefulfilled.Theycanbesummarizedbytheterm“bankability”.Thismeansthatprojectshavetobeprepareduptoastagewhereaninvestoriswillingtoengage.Factorsrequiredtodemonstratebankability includeproofofprojectfeasibility,projectdevelopment,financialviability,demandplanning,fundingofoperation,acceptanceinthecommunity,regulatoryapprovals,andle-galcompliance).Countlessprojectsfailtoachievebankability,fornumerousreasonswhichinclude:

• Insufficientprojectdevelopment:inmanyprojects,businessplansareunrealistic,legal,fi-nancial,procurementandotherbaselineworkisinsufficientlyprepared.

• Missinglinktothefinancialsector:projectsneedaccesstothenetworkoffinanceinstitu-tions.

• Insufficientreturns:foraprivateinvestortostepin,aprojecthastogeneratearevenuestreamexceedingacertainminimumlevel.Bankabilitymaybasicallybeachievedwithlowreturns,butthenthefinanceproviderismostprobablyadevelopmentinstitutionoranotherdonor.Amajorreasonforweakrevenuesmaybethatusers,especiallyindevelopingcoun-tries,cannotaffordtopayfortheservices.

• Highriskinthedevelopmentphase:infrastructureprojectsareplannedforthelongterm.Thisinvolveshighriskparticularlyinthepreparationphasewhenmanyinfluencefactorsarestilluncertain.Manyinvestorsarethereforenotwillingtospendresourcesonprojectprepa-ration.

• Long-termnatureofinfrastructureinvestmentvs.short-termpreferencesofinvestors:thelong-termhorizonofinfrastructureprojectsrequireslargefixedcapitalinvestmentatthebe-ginningwhilereturnsaccumulatemuchslowerovertime.Thismaybeincontrasttoanin-vestor’sshort-termpreferences.

• Resistancefromthelocalcommunity:projectsmayexperienceresistancefromstakehold-ers,vulnerablegroupsorNGOsinthelocalcommunitypossiblyreducingreturnsandjeop-ardizingprojectdevelopers’andinvestors’reputation.

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Thereasonsforprojectbankabilityfailureshowthatproperprojectpreparation intechnical, finan-cial,legal,sustainability,andgovernanceregardsiskeytoachieveahighersuccessrateofprojects.Thus, the interest in this report is inapproachesandmethodologiesofPPFs toaddress theabovechallengesinthebestway.Theprocessofprojectpreparationfrominitialplanningtothebeginningofimplementationrequiresconsiderable financial resources.Dependingon respectiveestimates, the shareofprojectprepara-tioncostsintotalprojectcostsvariesbetween1and10percent(seeNassiry&Nakhooda,2016,pp.37–38). Ifthetotalglobal infrastructuredemandofUSD93trillionbetween2015and2030(GlobalCommission on the Economy and Climate, 2014, p. 19) is taken as a baseline, estimated projectpreparationcostsrangefromUSD930billionto9.3trillionintotalandfromUSD62to620billionperyear(Nassiry&Nakhooda,p.39).Forlow-andmiddle-incomecountries,estimatedprojectprepara-tioncostsperyeararebetweenUSD40and400billion(ibid.,p.39).

3.3 TheScopeofProjectPreparationFacilitiesThus, goodproject preparation is essential inmaking infrastructureprojects bankable. The role ofProjectPreparationFacilitiesshouldthusbeanalyzed,sincetheyplayacrucialpartinclosingthein-vestmentgap.ProjectpreparationitselfisawidefieldanddifferentPPFsdiffersignificantlyintheirscopeandareasofactivities.AllPPFsprofiledinthisreportdescribetheirmaintasktobetheprepa-rationofprojectstoabankablestageandtolinkthemwithfinancinginstitutions.GIZ(2017)startswiththegeneraltermof“projectfacility”.ProjectfacilitiescanbedividedintoPro-jectFinanceFacilities(PFF)andProjectPreparationFacilities(PPF).CCFLA(2017a,p.29)takesanal-ternativeapproachanddistinguishesbetweenPPFsandProjectPreparation Initiatives (PPI),wheretheformerusuallysupportsprojectpreparationthroughallitsphaseswhilethelatterprovidesbroadsupportnotspecificallytiedtoprojectpreparationphases.AccordingtotheGIZdefinition,PFFsmayprovideprojectpreparationsupportthroughtechnicalassistancebuttheirmaincharacteristicalsoistoincludeanownfundtofinanceprojects.Inmostcases,thisappliestobanksbeingpartoforhost-ingaPFF.PPFs,incontrast,arefocusedontechnicalassistanceandprovidingfundingfortheprojectpreparationprocess.However, theydonot includea financingentity.Rather,PPFsconsider them-selvesasbeingafacilitatortolinkaprojecttoacertainexternalsourceoffinance.PPFactivitiesmaygo beyond technical assistance in its narrowest sense and often also include capacity building forproject developers, establishing effective implementation frameworks and advocating for an ena-blingenvironment.GIZfurtherdistinguishesbetweenPPFswiththefollowingproperties:

• Cityfocus:somePPFshaveanexclusivefocusoncities.Inmostcases,thosewhodonotsharethischaracteristicdonotexplicitlyexcludeactivitiesincitiesbutdonotemphasizethemnecessarilymorethanruralareas.So,PPFsmaybecharacterizedaseither“exclusivelyurban”or“inclusivelyurban”.

• Geographicfocus:somePPFsaregloballyactivewhilemanyofthebigfacilitiesarefocusedonaspecificworldregion,suchasseveralcountries,continentsorpartsofcontinents.

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• Thematicfocus:basically,aPPFmayjustworkontheobjectiveofimplementingprojectssuccessfullysuchthatoperationcanstart.However,manyPPFshavespecificobjectiveslikeclimateresilienceorclimatechangemitigationandadaptation,provisionofbasicservices,energyefficiencyorpovertyreduction.MostofthelargePPFshaveaconsiderablenumberofobjectivesincludedintheirmethodologies.

• Outputfocus:aspartofpreparationfordirectprojectimplementationandalsogoingbe-yondthefocalpointofasingleproject,PPFscanextendtheiractivitiestoaconsiderablenumberofdifferentoutputs.Theymaybeengagedindevelopingframeworkslike,amongothers,nationallegislationandinstitutions,urbandevelopmentplansorsectoralstrategies.Asalreadymentioned,capacitybuildingformunicipalitiescanbeanotheremphasis.Withre-gardtofinancelinkage,PPFsmayeithertargetdevelopmentfinancingfromdevelopmentin-stitutionslikemultilateral,bilateralornationaldevelopmentbanks,orfromprivatesourceslikecommercialbanksorcapitalmarketinvestors.Additionaldonorsmaybeincluded,espe-ciallywhenprojectshaveaclearfocusonsustainability.

• Partnershipstructure:PPFscanalsodifferintheirpartnershipstructure.Theycanbecreatedandhostedbyasingleentitybutaswellbetheproductofamulti-partnercollaboration.

ForthethreePPFsprofiledinthisreport,allofthemhaveaclearregionalfocus,twoareexclusivelyurbanwhileoneis inclusivelyurban.Thematically,twoPPFshaveaquitebroadsustainabilityfocusincludingenvironmental,socialaswellasgovernanceissueswhileoneofthemhasanexclusivefocusonrenewableenergy.Withrespecttotheoutputofprojectpreparationsupport,allperformmani-foldactivitiesinthenarrowprojectpreparationprocessthatisdirectlyfocusedonaproject.Twoofthemalsoprovidecapacitydevelopmentservices.AsisgivenbytheverybasicdefinitionofaPPF,allthree of them consider the linkage of project developers and investors as their very central goal.Concerningthepartnershipstructure,onePPFwasestablishedandishostedbyasingleentitywhiletheothertwoareamulti-partnerfacility.OneFacilityconsidersitselfasaPFF.However,asexplainedabove,PFFsmaywellincludecomprehensiveprojectpreparationservicesjustasPPFs.Withintheprojectpreparationprocess,thereisnodefiniteanduniquewayofproceeding.However,severalstagescanbedistinguishedasacommondenominator(CCFLA,2017a;GIB,2014):

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Pre-feasibilityplanning:thisstageincludesthefirststepsinvolvingprojectselectionandthedeci-siontofurtherdevelopaproject.Pre-feasibilitystudies,costestimates,fundinganalysesandtest-ing of alternative approaches can be part of pre-feasibility planning. First consideration of envi-ronmentalandsocialfactorstakesalsoplaceinthisphase.Feasibilityplanning:thisphaseproceedstoamoretechnicallevelandinvolvesmoreconcretepro-jectaspectslikefeasibilitystudies,demandplanning,engineering,sustainabilityandresilienceas-pects,technicalplanning,institutionalandprocurementarrangements,businessplan,environmen-talandsocialimpactassessment.Operationphaseplanning:long-termplanningimpliestakingtheoperationphaseofaprojectintoaccount.Therefore,thisstageemphasizesthedevelopmentofpublicandprivatedeliveryoptions,formalquantitativeanalyses,markettestingandselectionofprocurementapproach.Processingandapproval:inthisphase,financial,administrative,legal,procurementandriskman-agementarrangementsaremade.Moreover,supportinprojectapprovalisprovided.

Even though there is considerableheterogeneityamongPPFsprofiled in this report, theydescribetheirmaintasktobethepreparationofprojectstoabankablestageandtolinkthemwithfinancinginstitutions.

3.4 OverviewofexistingPPFsIn themappingof itsmemberorganizationsand initiatives,CCFLA(2017a,pp.29–30) identifies27PPFs,ofwhich11operateinAsiaand/orLatinAmericaand15haveanexclusivelyurbanfocusand25operateatthesubnationalorprojectlevel.Mostofthemareengagedinearlystagedevelopmentactivities like improving the environment or strategic planning. Only a few are active in post-preparationphasessuchasimplementationorpostimplementation.ThemorePPFsaccumulateex-perience insuccessfulpreparation, themore theyareexpected toalsoengage inpost-preparationactivities.ThissectiongivesanoverviewofexistingPPFsinAsiaandinLatinAmerica.Theirmainpropertiesandfieldsofactivityaredescribed.NotethatsomeofthemarePFFsaccordingtotheabovedefinitionbyGIZ(2017).However,asexplained,PPFsandPFFssharemanycommonfeatures.Manyofthemaretiedtodevelopmentbanks,whichalsoserveasafinancesourceinmostcases.Whilesomehaveapuredevelopmentfocus,othershaveincorporatedaspecificemphasisonclimate.Itisalsoremarka-blethatalargenumberofthemisexclusivelyfocusedoncities.Eventhoughmostofthemarefund-ed by national or international institutions, they are subnationally oriented in their collaborationwithcitiesandprivatesectorpartners.PIDGisalsoactiveinAfricabutisinTable1becausealargeproportionofitsresourcesareengagedthere.CFFdoesnothavearegionalfocusbuthasbeenactiveexclusivelyinLatinAmericasinceitscreationsothatitisexhibitedintheTable2.FELICITYwillalsobeengagedinChinabutisexhibitedinTable2duetoitsfocusonMexicoandBrazil.Dataonnumber

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of projects and average financial support per project areprovided for those facilitieswhere infor-mationisavailable.Table1 SummaryofsubnationalPPFsinAsia

Description Specificinformation

CDIA–CitiesDevelopmentinitiativeforAsia Leadorganizations:AsianDevelopmentBank(ADB)&GIZSince:2007Facilitytype:PPFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusPartnershipstructure:multi-stakeholderNumberofprojectssupported:morethan70Averagesupportperproject:USD250,000

- Projectpreparationsupportinmedium-sizedcities- Prioritizationofurbaninfrastructureinvestments- Pre-feasibilitystudies- Linkingtofinance

ACCCRN–AsianCitiesClimateChangeResilienceNetworkOnbehalfof:RockefellerFoundationSince:2008Facilitytype:PPFCityfocus:exclusivelyurbanThematicfocus:climatefocusPartnershipstructure:multi-stakeholderNumberofprojectssupported:35Averagesupportperproject:USD350,000

- Membership-basedplatform- Supportofindividualpractitioners- Generatingandsharingknowledgeabouturbanclimate

changeresilience

UEIF–UrbanEnvironmentInfrastructureFundLeadorganization:ADBSince:2009Facilitytype:PFFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusPartnershipstructure:singleactorNumberofprojectssupported:about40Averagesupportperproject:USD200,000

Grantsfortechnicalassistanceandinvestments

UFPF–UrbanProjectFinanceInitiativeLeadorganization:ADBSince:2011Facilitytype:PFFCityfocus:exclusivelyurbanThematicfocus:climatefocusPartnershipstructure:singleactor

- PooledgrantsfromUEIF- Pooledgrantsfromotherurbantrustfunds- Frameworkagreementswithfinancingpartners- Knowledgeprovisionandexchange

AAPP–Adapt-AsiaPacificProjectLeadorganization:USAIDSince:2009Facilitytype:PPFCityfocus:inclusivelyurbanThematicfocus:climatefocusPartnership structure: single actor (extensive partner net-work)

- Facilitatingaccesstoclimatechangeadaptationfinance- Buildingnationalcapacityforadaptation- Technicalassistance- Organizingfocusedtrainingandpeer-to-peerlearning- Promotingregionalnetworkingandtraining

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Table1 continued

AP3F–AsiaPacificProjectPreparationFacilityLeadorganization:ADBSince:2014Facilitytype:PPFCityfocus:inclusivelyurbanThematicfocus:nosectoralfocusPartnershipstructure:multi-stakeholder

- Financialassistanceforpublicsectoragenciesofmem-bercountriestosupportfinancial,legalandtechnicaladvisoryservices

- Supportforenablingreformsandcapacitybuilding:- upstreamsectorreform- duediligenceofprojectstructuring- preparationofinformationmemorandaandmarket-

ing- preparingprojectdocumentationandfinancial

models

USICEF–USIndiaCleanEnergyFinanceFacilityLeadorganizations:ClimatePolicyInitiative&IndianRenewableEnergyDevelopmentAgencySince:2017Facilitytype:PFFCityfocus:inclusivelyurbanThematicfocus:renewableenergyPartnershipstructure:multi-stakeholderNumberofprojectssupported:5Averagesupportperproject:USD250,000

- Providingtechnicalassistance- Linkingprojectstofinance

PIDG–PrivateInfrastructureDevelopmentGroupLead organization: autonomous governance, membership offiveEuropeanandAustralianministriesaswellasdevelopmentfinanceinstitutionsSince:2002Facilitytype:PFFCityfocus:inclusivelyurbanThematicfocus:nosectoralfocusPartnershipstructure:multi-stakeholderNumberofprojectssupported(byInfraCoAsia):12Averagesupportperproject:USD500,000(2–10millionincaseofco-developmentandjointventurepartner)

- Mobilizationofprivatesectorinvestment- Groupofsubsidiarycompaniesfocusedon- Technicalassistance- Provisionofguarantees- Facilitationofprivatesectorparticipation- Provisionofdebt

Source:GIZ(2017),PIDG(2017),CCFLA(2017)

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Table2 SummaryofsubnationalPPFsinLatinAmerica

Description Specificinformation

CSC–PlatformofSustainableandCompetitiveCitiesLeadorganizations:IDB,FindeterSince:2012Facilitytype:PPFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusOwnershipstructure:multi-stakeholder

- Planningsustainablestrategiesforcities- Technicalassistance- Providingresourcesforprojectpreparation- Partnershipswithpublicandprivateinstitutions

ESCI–EmergingandSustainableCitiesInitiativeLeadorganization:IDBSince:2011Facilitytype:PPFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusOwnershipstructure:singleactorNumberofsupportedprojects:morethan50Averagesupportperproject:fundingisraisedbycities

- Supporttonationalandsubnationalgovernmentsindevelopmentofcityactionplans

- Projectprioritization- Technicalassistance- Pre-feasibilityplanning

InfrafundLeadorganization:IDBFacilitytype:PFFCityfocus:inclusivelyurbanThematicfocus:transportsectorOwnershipstructure:singleactor

- Identification,developmentandpreparationofsustainableinfrastructureprojects

- Linkingprojectstofinance- Providingresourcestohirespecializedconsulting

services

CFF–C40CitiesFinanceFacility Leadorganizations:GIZ&C40Facilitytype:PFFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusOwnershipstructure:multi-stakeholderNumberofsupportedprojects:2

- providingsupportforclimatechangemitigationandadaptationprojects

- Technicalassistance- Projectstructuring- Capacitydevelopment

FELICITY–FinancingEnergyforlow-carbonInvestment–CitiesAdvisoryFacilityLeadorganizations:EIB&GIZFacilitytype:PPFCityfocus:exclusivelyurbanThematicfocus:nosectoralfocusOwnershipstructure:multi-stakeholder

- guidanceontechnical,financialandeconomicfeasi-bilityofinvestmentsincities

- capacitydevelopment- facilitationofknowledgeexchange

Source:GIZ(2017),CFF(2017),EIB(2017),CCFLA(2017)

TherearefurtherPPFsandPFFsactive inAsiaandLatinAmerica.TheyarenotdepictedseparatelyherebecausetheydonothaveanexclusivefocusonLatinAmericaand/orAsiabutareengagedinmanyworldregionsincludingatleastoneofthetworegionsofinterest.Additionally,theiroutputisoftensomewhatdifferentwhereasTables1and2depictPPFsinamorenarrowsense.SomeofthemmaybeconsideredasPPIsaccordingtotheCCFLAdefinition.Thefollowinglistgivesanoverviewofsomeofthem:

• R20RegionsofClimateAction:identification,structuring,financingandevaluationofclimateprojects(R20,2017)

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• GlobalPlatformforSustainableCities:platformforknowledgesharinganddevelopmentofcityactionplans,notactiveatthelevelofanindividualproject(WorldBank,2017)

• LowCarbonCityLab:carbonemissionimpactassessment,investmentfacilitation,capacitybuilding(LoCaL,2017)

• IFCInfraVentures:fundingofserviceslikefeasibilitystudies,ESGassessments,financialstruc-turing,stakeholderengagement(IFC,2017)

• TransformativeActionsProgram:enablingbetteraccesstoclimatefinanceforcities,linkingsubnationalauthoritiesandfinancingbodies,designingtransformativeandbankableclimateactions(TAP,2017)

• GlobalInnovationLabforClimateFinance:identification,designandpilotingofclimatefi-nanceinstruments;labsinIndiaandBrazil(ClimateFinanceLab,2017)

• LocalClimateAdaptiveLivingFacility(LoCAL):technicalsupport,capacitybuildingsupporttolocalauthorities(GlobalClimateChangeAlliance+,2017)

3.5 LiteratureReview–ChallengesandSuggestedSolutionsinProjectPrepa-ration

Researchliteratureshowsthatsuccessfulprojectpreparationisademandingtask.Thissectiongivesashortoverviewbyfocusingonthecommonlyencounteredchallengesthatsuccessfulprojectprep-arationneedstoovercome.AreportpublishedbyAfricainvestor(Danso&Samuels,2017,pp.4–6)concludes,basedonasurveyamongprojectdevelopers inAfrica, that themajor impediments forefficientprojectdevelopmentare1)higherrequiredratesofreturnforprojectsindevelopingcountriesthanforthoseinadvancedeconomies.Thisisduetothehigh-riskperceptionofpotential investors.Accordingtothatstatistic,Africafeatureshighestrequiredratesofreturn.However,projectownersinAsiaandLatinAmericaalsohavetopaysignificantlyhigherinterestratesthanthoseinadvancedeconomies.First,projectsindevelopingandemergingcountriesrelymoreonpublicsupportthanprojects in industrialcoun-tries.Second, riskmitigationand funding fornon-economic infrastructurearemore importantandpoorercountries.Third,likewise,itismoredifficulttosecurequalifiedprofessionalstaffindevelop-ingandemergingcountries than inadvancedeconomies.Fourth, the roleofprivatesectorprojectdevelopers ismoredemanding indevelopingregionsduetoconcernsabout,amongotheraspects,negotiatingwith governments, securing riskmitigation, project design, and structuring of finance.TheprojectsuccessratesinAsiaandLatinAmericaareestimatedat27percentand25percent,re-spectively,comparedto46percentforindustrialcountries.3Thereportcomesupwithasetofrec-ommendationscontainingthefollowingones(ibid.,p.9):

3Thesenumbersdependonwhatisdefinedasprojectfailure,whichmaydifferaccordingtoindividualconsideration.How-ever,itisrathertherelativedifferencesinregionalperformancethatisrelevanthere.

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- Newpartnershipsininfrastructureprojectdevelopmentbetweenthepublicandprivatesec-torshouldbecreatedtoachieve“infrastructure-enablingenvironments”;

- Governmentprogramsshouldbeestablishedtosupportprojectdevelopment;- Increasinguseofriskmitigationinstruments,guarantees,andfinancefacilitiesshouldbe

employedtoensureaccesstoneededlong-termfinance.

AnotherstudyonbehalfoftheG20DevelopmentWorkingGroup(2014,pp.39–41)identifiesseveralkeyrecommendationstoachievebetterprojectpreparationresults.TheyareexhibitedinTable3.Insummary,theyaddresstheneedforamoreenablingenvironmentfor infrastructuredevelopment,forscalingupprojectpreparationcapacitiesandfunding,andforbetterinclusionoftheprivatesec-tor,particularlywithregardtofinancingmodality.Table3 G20recommendationstoachievebetterprojectpreparationoutcomes

• Priorityshouldbegiventostrengtheningdevelopingcountrygovernments’capacityforupstreamac-tivitiesthatprovideanenablingenvironmentandleadtotheidentificationofprioritizedinvestmentprograms.

• Thescaleofprojectpreparationneedstoberampeduptosupportenhancedinfrastructuredevelop-ment.

• Fundingforprojectpreparationshouldberationalizedandincreased.

• Thereshouldbeaclearpathforcountriestotransitionfromreceivinggrantsupportforprojectprepa-rationtoeventuallybeingwillingandhavingthecapabilitytofinanceitthemselves.

• Thecommonpracticeofselectingthefinancingmodalityforaprojectpriortofeasibilitystudyshouldideallybereversed,butotherwisenecessitatesbetterupstreamprojectinvestigationandflexibilityduringprojectpreparation.

• Improvedeffortsareneededtomakebetteruseoftheprivatesectorforinfrastructuredesign,fund-ing,deliveryandlong-termoperationandtoleveragetheoverallbenefitsofprivatesectorparticipa-tion.

Source:G20DevelopmentWorkingGroup(2014)

ApublicationoftheADB(ADB,2017)developsanapproachforprivateinvestmentmobilization.Inaso-calledGreenFinanceCatalyzingFacility (GFCF),sovereignanddevelopmentfinancegrants loanstoprojectsunder thecondition that theycomplywithspecific sustainabilitycriteria.Thismitigatesrisksandenhancesbankabilityofprojects.Risk reductionallowsprivatesector financetocrowd inand tocompleteproject financeneeds.Blended finance leveragesgiven financial resources,whichmaybededicatedtoachievingprojectbankability.AsFigure1shows,incontrasttothecommonap-proachtogreenfinancewheregreenfeaturesareaddedaftertheprojectisprovidedwithfinance,thenewapproachrequiresprojectstobegreenfromtheoutsetasaconditionforsecuringfinance.

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Figure1 ApproachoftheGreenFinanceCatalyzingFacilitySource:ADB(2017,p.56)

USAID’sDevelopmentCreditAuthority(DCA)comesupwithasetoffinancialguaranteemodelsthathavetriggeredacreditamountofmorethanUSD5billionsince1999(DCA,2017b).Similarly,Guar-antCo,acompanyofthePrivateInfrastructureDevelopmentGroup(PIDG),hasenabledaboutUSD4.6billionsofar(GuarantCo,2017).Whetheramunicipalityisgivenaloanorissuesbonds,theinsti-tutionsprovideguaranteescoveringupto50percentoftheborrowedamountsincasethecityde-faultsonrepayment.Thismeansthataguaranteecovershalfofthelossesinthedefaultcase.Guar-anteeshelpmitigatefinancialriskparticularlyatthecitylevelwherecreditworthinessisusuallycon-sideredaslow.A further exampleof a riskmitigation approach is Climate InvestorOne (2015, p. 1–2),which is acompositionofthreefacilities.Adevelopmentfundprovidesfundingforprojectpreparationandde-velopment.Thesecond facility isaconstruction finance fundconsistingof three tiersofwhich thefirstcoverspotentiallosses.Thesecondtieristakenupbydevelopmentfinanceinstitutionsandpo-tentiallycommercial investors.Commercial investorswhoserisk is reducedduetothe firstandse-cond tiers contribute the third tier. In caseaproject is successfully implemented,projectdevelop-mentcostsfundedbythedevelopmentfundsbecomepartoftheproject’sequitytobeboughtoutbytheconstructionfinancefund.Third,are-financingfundhasrightoffirstrefusalforupto50per-centofprojectdebtafter theprojecthasenteredoperation.Thanksto long-termriskreductionofinfrastructuredebt,newcommercialinvestorsmaybeattracted.Figure2showsmoredetailsofCli-mateInvestorOne’sstructure.

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Figure2 DesignoftheClimateInvestorOneFacilitySource:ClimateInvestorOne(2015,p.2)

Inadditiontotheabovetechnicalandinstitutionalapproaches,theestablishmentofabroaderdo-mestic framework aswell as a high level political buy-in can support investments in climate infra-structure.In the framework of the possible establishment of a PPF inWest African Region, some guidelinesweredrawnbyFMDVandICLEIwiththesupportofClimateKICasanattempttoovercomethemainbottleneckforsuccessfulprojectpreparation(ICLEI,FMDV&Climate-KIC,2016).AlthoughspecifictotheWestAfricanregionalcontext,theserecommendationscanbetakeninabroadercontext.Theyinclude:

• Up-streamdue-diligencetoavoidthatthe“usualsuspects”receivethePPFsupport.• Sufficientinstitutionalcapacityandbuy-in:InthecaseoftheDevelopmentBankofSouthern

Africa(DBSA)projectpreparationunit,oneoftherequirementsissufficientinstitutionalca-pacityoftheprojectsponsor,whichformspartoftheapplicationassessment.Furthermore,thereshouldbeevidenceofbuy-inathighestlevel,anditisarequirementthatadedicatedprojectofficewithinthesponsoringentitybecreatedtooverseeprojectimplementation.

• Cost recovery:Requiringsome levelofcost-recovery isawayofmakingthePPFmoresus-tainablebymakingitrotatingandself-replenishing.

BasedonGlobalClearinghouse forDevelopmentFinance (GlobalDF,2017)andtheCCFLAMapping(2017b)extensiveevidence-basedanalysisofinfrastructureprojectfinancingdeals,keypropositionsillustratesomeoftheleverstopullforclimateactionatdomesticlevel, integratingthesubnationalcomponent,andinaconstrainedagenda.Themostimportantpropositionsare:

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• Develop localized marketplaces: that will enable tosuccessfully identify, develop, and fi-nanceprojects.

• Establishknowledge&financehubsofskilledprofessionals(international,regional,national,local)toprovideexpertsupportforthedevelopmentofnationalandsubnationalsustainabledevelopmentplans,andthedevelopmentandfinanceofpriorityprojects.

• Pilotsofdemonstrationprojectsmobilizinglocalfinancewithinnovativefinancetechniques:• Performancetrackingandreportingatcountrylevelasatechnicalonlinetooltocapturesuc-

cesses,lessonslearned,securesupportandbuildmarketconfidence,momentumandlearn-ing.

ThechallengesandrecommendationspresentedherecanbeclassifiedasinternaltothePPF,whentheyfocusonprojectpreparationapproachesandtools,andexternaltothePPF,whenpolicylevelissuesandthegeneralenvironmentareconcerned.Intheremainder,thecasestudiesandthesub-sequentdiscussionsareelaboratedconsideringonbothinternalandexternalfactors.

4 CaseStudies–IdentifyingSuccessfulProjectPreparationApproachesInthefollowing,theresultsofthePPFprofilingarepresented.Forthis,theyweresentaquestion-nairecontainingquestionsonthefacilities’backgroundinformation,theirscopeofactivities,supportservices,andregionalfocus.Inthemainpart,theyarerequestedtoprovideinformationontheirap-proachesandtools,theirrelationshipstomunicipalities,privatesectorinvolvementaswellasmainchallenges and bottlenecks. In the next section, questions about financial issues are asked. ThesequestionsconcernthefundingstructureofthePPFs,aswellasthewaystheinfrastructureprojectsthemselvesarefinancedandtheriskmitigationinstrumentsthatareused.Inthefinalpartofthequestionnaire,PPFsareaskedabouttheirspecificwaystosuccessfulprojectpreparation.Forthis,fivesuccessfactorsaredefined,whicharebasedonareportofTheInfrastruc-tureConsortiumforAfrica (ICA,2012,pp.64–72)butpartiallymodified forourpurposeto includethecontextofcitiesandESGaspects.Thefivesuccessfactorsare:Successfactor1:relevancyandeffectivenessDothemanagedprojectsmatchtheinfrastructurechallengesintherespectiveenvironment?

Successfactor2:efficiencyHowdoesthePPFensurethatfinancialandhumanresourcesareemployedinthemosteffectiveway?

Successfactor3:co-benefitsHowcanco-benefitsforlocalcommunitiesandtheprojectpreparationprocessbecreated?

Successfactor4:financialviabilityofprojectsHowisfinancialviabilityandbankabilityofprojectsachieved?

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Successfactor5:sustainabilityHowareenvironmentalandsocialaspectstakenintoaccount?

4.1 CDIA–CitiesDevelopmentInitiativeAsia

4.1.1 GeneralInformation

TheCitiesDevelopment Initiative forAsia (CDIA) is an internationalpartnershipestablishedby theAsianDevelopmentBank(ADB)andtheGovernmentofGermany,withadditionalcorefundingsup-port from the governments of Austria, Sweden, Switzerland and the ShanghaiMunicipal Govern-ment.ADB,GIZandKfWpartnerforitsimplementation.CDIApursuestheoverallobjectiveofdevel-opingstrategiesandapproachestoenhancesustainabledevelopmentandreducepoverty.Theinitia-tiveprovidesassistancetomedium-sizedAsiancitiestobridgethegapbetweentheirdevelopmentplansandtheimplementationoftheirinfrastructureprojects.The operational objectives of CDIA are to improve urban infrastructure services andmanagementthrough:

• Providingtechnicalassistanceinstructuringpriorityinfrastructureprojectstoastagewheretheycanbefinanced;

• Helpingcitiesstructuretheirprojectstoattractmarket-basedinternationalprivateinvest-ment;

• Strengtheninglocalinstitutionalprerequisitesfordevelopmentofcapitalinvestmentinfra-structureprojectsandurbanservices;and

• PromotingregionaldialogueandcooperationonurbanmanagementinAsiatoenhancecross-learningfromgoodlocalpractices.

CDIAwascreatedinOctober2007andcurrentlyhasateamof18staffmembersfromADBandGIZ.Theactive infrastructuresectorsarewater,energy, solidwastemanagement, transport,andsocialinfrastructure.WiththegeneralregionalfocusbeingonAsiaandthePacific,currentprojectsareon-going in Georgia, Tajikistan, Pakistan, China, Cambodia, Indonesia, Vanuatu, andMongolia. CDIA’stargeted beneficiaries are the city administrations of medium-sized cities with a population of250,000to5million.Sofar,thefacilityhasbeenworkingwith138cities.Partnershipsareestablishedwithlocalorregionalgovernmentsaswellasnationalpartnerorganizationssuchasnationalminis-triesandagencieswithasimilarmandatetoCDIA.Theactivitiesthemselvescanbesummarizedbytechnical assistance through project prioritization, capacity development, and project preparation.FinancialassistanceforprojectimplementationisnotprovidedasCDIAengagesonlyinprojectprep-arationandaimsat linkingprojectstofinancial institutions.Projectpreparationsupportconsistsofcomprehensivepre-feasibilityand/orfeasibilityplanning.Howevermostprojectsarebeinglinkedtofollow-up finance straight after the pre-feasibility study. In some cases, CDIA provides additionalsupporttoensuresuccessfulprojectfinancing.Onaverage, ittakesaboutfivemonthstoprovidea

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projectwiththesupportneededandrangesfromaboutUSD50,000to600,000.Inmostcasescitiesalsocontributeownresourcesbutmostlyasin-kindcontributions.WhiletheADBsideofCDIAfocusesonprojectpreparationanddirectliaisonwithprojectdevelopers,GIZ complements these activities through capacitydevelopment. 77CDIA-supportedprojectshavebeenlinkedtofinancingtodate,withanexpectedinfrastructure investmentvolumeofUSD6.8bil-lion.

4.1.2 Methodology

Forthepurposeofprojectprioritization,CDIAdevelopeditsowncomprehensiveapproachcalledtheCityInfrastructureInvestmentProgrammingandPrioritization(CIIPP)Toolkit(CDIA,2015).Itconsistsof investment budget analysis, project prioritization, and investment programming and has beenusedin52casessofar.Inordertoavailofprojectpreparationsupport,a localgovernmenthastosenda letterofprelimi-naryenquiryforCDIAsupport.Whileitisrarethatcitiesdirectlyapplyforsupport,theyusuallyap-proach CDIA through partner organizations. Joint discussions on project priorities, developmentplansandcityvisionsfollow.Threeselectioncriteriamustbefulfilled:

• Thecitymustbeamedium-sizedcity(populationof250,000to5million);• Thecitymusthaveanurbandevelopmentplaninplace;• Therehastobeanendorsementletterfromthecentral/statelevelindicatingin-principle

supportforthedevelopmentofanurbaninfrastructureprojectsportfolioanditsfinancingandtheassistancerequestapplicationtoCDIA.

Afterpreliminaryenquiry,CDIAconductsafact-findingmissiontoassessifthecityisabletocomplywiththeselectioncriteria.Furthermore,specificinfrastructureinvestmentsandpotentialimpactsoftheprojects,requiredcommitmentsandtherolesofkeystakeholdersintheprocessareidentified.Giventhattheinitialassessmentispositive,thecitypreparesaformalsupportrequestapplication.Thepre-screeningprocessassuresthecitiesreachthelevelrequiredfortheprojectpreparationpro-cess.Projectpreparationsupportmostlyconsistsofpre-feasibilitystudies.Atthislevel,asteeringcommit-teeiscreatedwhichisusuallychairedbythecitymayorandcomposedoftheheadsofrepresenta-tivecitydepartmentsaswellasCDIAstaff.Thesteeringcommitteehastheresponsibilitytooverseetheprojectandparticipateswithexecutivedecision-makingauthorityonhowtosteertheprojecttoaccomplishagreedandestablishedgoals.Thisdecision-makingcompetenceisaremarkablefeaturewhereCDIAdiffersfromotherPPFs.Thecity’sinputisfurthermoresoughtanddocumentedduringthe entire project preparation phase through the steering committee. After completion of a pre-feasibilitystudy,CDIAmaintainssupportandcommunicationwith thecity through liaisonwithna-tionalministriesandagenciesaswellasfundinginstitutions.Thishelpslinktheprojecttofinancing.

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Privatesectorparticipationalsoformspartoftheprojectpreparationphasesinceimportantprojectmilestonesarepresentedtokeystakeholders.Moreover,CDIAcollaborateswiththePPPCenter inthePhilippinesandPTSMiinIndonesiainordertofosterprivatesectorparticipationinthosecoun-tries.

4.1.3 BottlenecksandRecommendations

Confrontedwiththequestionofwhatthemainbottlenecksinprojectpreparationandthemostim-portant challengesare,CDIAmentions several aspects.Aspartof theprojectpreparationprocess,thefollowingshortcomingsarerankedasmostfrequentandimportant:

• Neglectingconsiderationofinstitutionalarrangements;• Neglectingrequiredoperationandmaintenancecapacities;• Lackofcoordinationbetweendifferentlevelsofgovernment;• Non-identificationofsimilarinfrastructureprojectinitiativesathigherlevels,whichleadsto

duplicationofworkandfragmentedplanning;• Insufficientengagementofstakeholders;• Poorphasingofinvestments.

Inaddition,thereareconstraintsinthepolitical,economicandsocialenvironmentsurroundingtheprojectpreparationprocess.Assuch,threemainbottlenecksarise:

• Legalobstacles;• Insufficientprojectorganization;• Fundingconstraints.

Furthermore, in contrast to project preparation at national level, subnational project preparationoften features different priorities. CDIA quotes the example of flood and drainage projects to im-provenaturaldisaster resilience:whileanationalproject tends toaddress thebasinor catchmentareas,acityormunicipalitywillfocusonlocaldrainageproblems.Inresponsetotheexistingchallengesandbottlenecks,CDIAformulatesfiverecommendationstobetakenintoaccountintheprojectpreparationprocess:

• Ensurefinancialandtechnicalviabilityofaproject;• AddressESGaspects;• Addresstheneedsoflocalgovernment,vulnerablegroupsandprojectstakeholders;• Projectsneedtobeinlinewithnational/regionalprograms;

Inrecentyears,theconsiderationofurbanresilienceingeneralhasbecomepartofallnewprojectpreparationservicesbyCDIA.Itisaquestionaddressedineachprojectpreparationstudy.Thisfacili-tates the identification, segregationand isolationof resiliencecomponentsofprojects.Asanotherimportantaspect,projectpreparation support is generallyadaptedaccording to thecharacterand

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stateofaproject inordertoachieveaflexibleprocessandtodevelopaprojectsuitabletothere-quirementsofthedownstreamprojectfinancer.

4.1.4 SuccessFactors

Anevaluationreportforthethreeyearsfrom2013until2015overallconfirmedCDIAasaremarka-blesuccess story (GIZ,2016,p.3): twoof threeobjectives indicators (concerning thecreationofapartnernetworkandthenumberofcitieswhereCDIAispresent)werefulfilledor,respectively,evenoutperformed.Theareawhere theobjectiveswerenotmetconcerned theuseof innovative toolsandprocessesbycities.Withregardtothesuccessfactorsthatthisreportdefinesaskindofqualita-tivesuccessassessment,CDIAaccountsforthemindifferentways.

Successfactor1:relevancyandeffectivenessAllprojectpreparationteamsarecomposedofbothinternationalandlocalspecialists.Thelocalspe-cialistsprovideagoodunderstandingofthelocalchallengesandcontext.Togetherwithstakeholderinclusionthroughoutthewholeprocess,thisensuresprioritizationofrelevantprojects.Secondly,allspecialistshiredfortheconductofPPSarerequiredtospendthemajorityoftheirinputson-site,toencouragebetterunderstandingofthelocalcontextandfacilitateconstantanddirectexchangewithstakeholders.Inthisway,inquiriescanbeaddressedandmeetingswithstakeholderscantakeplace.Importanttonote,thankstoawideregionaloutreach,itispossibletoclustercitieswithsamesectorprioritiesandchallenges.Synergiescanthereforebeexploitedandprojectpreparationactivitiescanbescaledup.

Successfactor2:efficiencySoundand systematic processes, like theCIIPP Toolkit, to select and approve city applications im-provestargetingoftherightprojectsandprioritizinginvestmentsinordertoemployfundsandhu-manresourcesefficiently.Theseprocessesendeavourtolinkwithdownstreamfinancingpriortocityapplication approval. Thereafter, there is full-timemonitoring of the preparation process and thecloseliaisonwithfinancinginstitutionsisongoing.

Successfactor3:co-benefitsSinceCDIAisco-managedbytheADBandsinceCDIAandADBshareofficespace,directcommunica-tionandcontactparticularlywithregionaldepartmentsisfacilitated.Essentially,itreducesthechal-lenge of linking projects to financing. Another benefit arises in favour of the local government byprovidingcapacitydevelopmentandinstitutionaldevelopmentif identifiedasnecessarybyaneedsassessment.

Successfactor4:financialviabilityoftheprojectFinancialanalysisisacentralpartoftheCIIPPToolkit,butCDIAalsodirectlyengagesfinancinginsti-tutionsbylinkingthemwiththecityadministrations.Thisenablesacomprehensiveassessmentofa

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project’s financial viability from a third party. Since bankability is the crucial level that has to beachievedbyprojects,potentialinvestorsareinvolvedfromthebeginningofprojectpreparation.

Successfactor5:sustainabilityEnvironmentalandsocialduediligencearepartofeachprojectpreparationstudy.Moreover,andasmentionedabove,aresilienceassessmentidentifiespotentialshocksandstresses.Stakeholdersareincludedinallprojectmilestonepresentations.Theyhavetheopportunitytogivefeedback,whichisdocumented. In theeventofpossibledisagreement,meetingsanddiscussionsarearranged,whenapplicabletoresolveit.

4.1.5 ProjectPreparationClosureandProjectFinance

Projectsareconsideredassuccessfullycompletedoncetheyarelinkedtoafinancinginstitution.ThefollowingnumbersgiveanimpressionofsuccessinCDIA’sactivities:76projectshavebeenlinkedtofinance. In 29 projects, construction has started, in five of them construction is fully completed.Thereisaconsiderablefinancialleverof1:107meaningthatonaverage,for1USDspentbyCDIAforprojectpreparation,USD107aretriggeredasinfrastructureinvestment.TheaimofalmostallPPFsisthelock-inofprivatesectorfinance.However,thetrackrecordofCDIAprojectsshowsthatthisdoesnothappenthatoften.AsthePPFishostedbytheADB, it isobviousthatmost projects finally are financed by the ADB. Other important financing institutions are theWorldBankandtheLocalFinanceInitiative(LFI).PPPsarequiterareandamounttolessthantenofthemorethan70managedprojects.AccordingtoCDIA,morecapacitybuildingwouldbenecessary,especially for cities, in order to develop balanced and fair public-private relationships. As towhatconcernsprivatesectorprojects,itisfoundthatmanyapplicationsfromtheprivatesectorhavenotmetthequalitystandardrequired.LeveragedfinanceisgenerallynotusedbyCDIAasprivatesectorparticipationisrare.

4.2 USICEF–USIndiaCleanEnergyFinanceFacility


TheUSIndiaCleanEnergyFinanceFacilityisaninstitutioncreatedandledbytheClimatePolicyIniti-ativeandthe IndianRenewableEnergyDevelopmentAgency.At firstglance,USICEFdoesnot looklikeapreparation facility,accordingtotheabovedefinitionsanddistinctionbetweenPPFandPFF.However,ontakingacloserlookatitsactivitiesandsupportservices,itisobviousthatitcanbecon-sideredasaPPF.Moreover, this is in linewith thedefinitionsusedheresincemanyactivitiescon-ductedbyPPFsaredonebyPFFsaswell.USICEFisfundedbytheMacArthurFoundation,theWilliamand Flora Hewlett Foundation and the Good Energies Foundation and the Ministry of New andRenewable Energy (Government of India). A further partner is theUSGovernment’s developmentfinanceinstitution(OPIC).Thefacility’smainobjectivecanbedescribedasdevelopingapipelineofdistributed renewable energy projects in India and preparing projectswith technical assistance in

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engineering,commercial,financialandlegalaspectsforfinallyaccessingdebtfinancefromOPICandinthefuturealsofromotherpublicandprivatefinancinginstitutions.Byprovidingadequateprojectinformation to lenders, their transaction costs toprovide smaller ticket size loans canbe reduced.ThisservestheoverallobjectiveofexpandingaccesstodistributedcleanenergysolutionsinordertobenefitdisadvantagedcommunitiesinIndiaontheonehandandtocontributetoIndia’sambitiousrenewableenergyandenergyaccessgoalontheotherhand.USICEFwascreatedinApril2017andhasfivestaffmembers.Sinceitisquitenewinthemarket,theexperiencefromtheirtrackrecordisnotcomprehensiveasyet,butitcanstillgiveseveralimportantinsights.thefacilityisfocusedononesinglesector,orevenasub-sector,thatis,renewableenergy.Withinthis field,mini-andmicro-gridpowergenerationprojects,marketbasedsolutions likesalesand distribution or energy access provision as well as renewable energy infrastructure catalyserssuchasprojectsto improveinfrastructurearesupported.USICEFhasbeenengagedinfiveprojectsso far. Its beneficiaries are generally the disadvantaged communities in general. In the specificpreparationprocess,however,targetedclientsareprivatecompaniesaswellasbothdomesticandforeign investors. USICEF provides mainly technical assistance, financial and legal advice, andcomprehensive feasibility planning ranging from feasibility studies, demand planning, engineering,technicalplansaswellassupportininstitutionalandprocurementissues.ThepreparationprocessisfundedbygrantsfromUSICEF,whichamounttoUSD250,000inaverage.Thefacilityhasthecapacitytomanagetentofifteenprojectsatatime.

4.2.2 Methodology

USICEFdoesprojectpreparationinaspecificway:itincludestheprivatesectorfromthebeginning.In fact, the facility isessentiallyanetworkofserviceproviders. It invitesprivatecompanies to jointhenetworkbypublicannouncement.TheycanapplyandhavetobeselectedbytheClimatePolicyInitiative.Oncetheyareaccepted,theycanbeengagedbyprojectdeveloperstoprovidetheirser-vicesintheirrespectivefieldofexpertise.Withservicesrangingfromfeasibilitystudies,productde-velopment,socialandimpactassessmentstolegalandfinancialadvisoryservices,thewholeprojectpreparationprocess iscovered.Giventhatservicesaresuccessfullydelivered,theserviceprovidersarepaidbytheprojectdevelopers,whichareprovidedwithgrantsbyUSICEF.Currently,thenetworkconsistsof30 serviceproviders specialized in technical assistance, feasibilityplanning, engineeringandlegalissues.SoUSICEFitself,takeninitsnarrowsensewithouttheserviceproviders,isessential-lyacoordinatingbodyandisconcernedwithlinkingprojectstofinancinginstitutions.Projectdeveloperscanapply forpreparationsupport.Applicationandselectiontakestwotothreemonths.Tobeawardedwithagrant,projectdevelopershavetomeetthefollowingcriteria(USICEF,2017):

• Focusonsolarpowergenerationanddistributionforexternalcommercialconsumption;

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• UseoftechnologiescommerciallyprovenandtestedbytheMinistryofNewandRenewableEnergy;

• NoblacklistingbyanyIndiangovernmentorpublicsectoragency.


Whenaskedaboutprojectdevelopers’mostfrequentweaknessesandthemajorchallenges,USICEFnotesthefollowingaspects:

• Lackofprofessionallypreparedbusinessplansandinvestmentproposals;• Inadequateriskassessmentandcreditinformationforduediligenceonofftakersandenergy

customers;• Lackoflegalreviewofcontractsandpaymentsecuritymechanisms.

Asmainbottleneckswithintheprojectpreparationphase,thefollowingtwopointsareraised:

• Inadequatepresenceoffinancialinvestorsinequityforrooftopandoffgridprojectstoscaleuptoreachcommercialdebtfinancing;

• Off-gridsectorshavelackofpolicyclarityandusuallyinsufficientscaleforfinancingbycom-mercialdebt.

Ontheonehand,thesepointsarecloselytiedtotherenewableenergysector.Ontheotherhand,theyrepresentchallengesthatarealsofoundinmanyothersectorsaswhenthefocus isonsmall-sizedprojectsorwhentheinsufficiencyofbusinesscasesorhightransactioncostspreventlocking-inofinvestors.USICEFcomesupwithasinglemainrecommendation:policymakershavetobeconvincedthatgoodtechnical assistance in project preparation is not a waste of resources but rather leads to higherchancesoffinancialclosureforsociallydesirableprojects.Wrongperceptioninthisregardoftenpre-ventsgovernmentsfrompayingforprojectpreparation.


Successfactor1:relevancyandeffectivenessAccording toUSICEF’sestimation, itmaybe theonlyPPF fordistributedenergy in India.This isbyitselfastatementthattheneedforprojectpreparationinrenewableenergyinIndiaisnotsufficient-ly accommodated, which is a strong indicator of the facility’s relevance and effectiveness. This isstrengthenedbyon-the-groundpresenceastheprogrammanagementteamisbasedinIndia.How-ever,USICEFalsoraisestheconcernthattherearehighersystemiclevelchallengeslikegridstabilityandnetmeteringthatremainandcannotbeaddressedbyaPPFofthesizeandstructureastheonedescribedhere.

Successfactor2:efficiency

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USICEFhasaprogramteamwiththreetofourdedicatedstaffmembers.Theyfocusonthesupportofprojectdevelopersandensurethatcontinuoushandholdingthroughthewholeprocessisguaran-teed.ItisbystructuringthePPFintheabove-describedmannerasanetworkofspecializedserviceprovidersthatefficientemploymentoffinancialandhumanresourcesisenabled.

Successfactor3:co-benefitsThefacilityisindependentlymanagedbuthasastronglinktoOPICasafinanceinstitutionaswellasapartnershipwiththegovernmentofIndiathroughtheMinistryofNewandRenewableEnergy.Thisislikelytoproducesynergiesandefficiencygainsintermsofknowhowandnetworking,whichcanbeusedtosupporteffectiveprojectpreparation.Ontheotherhand, incontrast to theotherPPFsprofiled,USICEFdoesnotprovidecapacitybuilding.

Successfactor4:financialviabilityoftheprojectFinancialduediligenceispartofeverypreparationprocessbeforeaprojectistogetaccesstoOPICoranyotherfinance institutions.Thereareserviceproviders,whicharespecificallydedicatedtofi-nancialviabilityassessment.Financialriskmitigationinstrumentslikeguaranteesorblendedfinancearenotusedcurrently.However,theenvisagedcatalyticfinancefacilitymayintroduceguaranteesinthefuture.

Successfactor5:sustainabilityProjects are assessed for environmental and social impacts, even though they are expected to bemarginal indistributedcleanenergyprojects themselvesbeing contributions to improvedenviron-mentalperformanceinenergyproduction.USICEFnotesthatminigridprojectsareusuallyrealizedwithwidecommunityacceptance.StakeholderinclusionisexpectedtobecomeanintegratedpartofthePPF’sactivitiesoncetheprogramisdisseminatedatlargerscale.


Atthemoment,projectsarefinancedbyOPIC.Inthefuture,privatecommercialfinanceisenvisagedtobeamajor sourceof finance.Currently,USICEF isworkingonanot yet established catalytic fi-nancefacilityaimingtoreducecreditrisk.Byprovidingguarantees,riskmitigationwillhelpcrowdincommercialfinancefromotherbothdomesticandinternationalsources.Duetothesmallsizeofmostdistributedrenewableenergyprojects,classicalprojectfinanceisinap-propriate as the high transaction costs are too high. For this reason, the projects access financethroughcorporatefinancelending.Thisenablesaggregationandthecreationofscalingupoflendingfromfinancialinstitutions,whichthencanbestandardizedmoreeasily.

4.3 ESCI–EmergingandSustainableCitiesInitiative


TheEmergingandSustainableCitiesProgram(ESC),oftenreferredtoasanInitiative(ESCI),ishosted

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andfundedbytheIDB.Inaddition,ithasawidenetworkofpartnershipscontainingcountrydonors(China, Italy, South Korea, Spain, Nordic Development Fund, Denmark, Finland, Iceland, Norway,Sweden,Chile,JapanInternationalCooperationAgency(JICA),Argentina),nationalandregionalde-velopmentbanks inNorthandSouthAmerica,anda largenumberofvariousacademic institutionsfromdifferentcontinents.The initiativeaimsat tackling themain roadblocks thatprevent thesus-tainable growth of emerging cities in Latin America and the Caribbean. The multidisciplinary ap-proach identifies, organizes andprioritizes urban interventions and is basedon threepillars: envi-ronmentalandclimatechangesustainability,urbansustainability,and fiscal sustainabilityandgov-ernance. The PPF relies on the principle that it is more sustainable and efficient to prevent un-plannedgrowthinadvanceinsteadoftryingtomitigatetheconsequencesthereafter.Citiesareac-companiedinprojectdevelopmentfromactionplanstolinkagetofinance.ESCIwascreatedin2011andcurrentlyemploys20staffmembers.Thefocusisonmedium-sizedcit-ieswithbetween200,000andonemillionpeopleinLatinAmericaandtheCaribbean.Thefacilityisactive in 26 countries. ESCI is active in most infrastructure sectors including water, energy, solidwastemanagement,transportnetworks,socialinfrastructureandhousing.Currentbeneficiariesandclients of the program are city administrations, community based associations, local and regionalgovernments,publiccompanies,andpublicdevelopmentbanks.ESCI’sareasofsupportaretechnicalassistance,capacitybuildingandprojectprioritization.Itworksoncitydevelopmentplans,compre-hensivepre-feasibilityandfeasibilityplanning.Ithasbeenengagedinmorethan50projectssofar.TheexpectedinfrastructureinvestmentvolumetriggeredbyESCIpreparationsupportisUSD1.4bil-lion(IDB,2016).

4.3.2 Methodology

ESCI’sprojectpreparationmethodology isdivided in twostagesandbasically fivephases (see IDB,2014,2017).Thefirststageconcernsthecoreofthemethodologyandinvolvesthedevelopmentoftheactionplan,whichlastsoneyear.Itcontainsthefollowingphases:

• Phase0(preparation):initiationofdatacollection,buildingofworkteams,stakeholderiden-tification,hiringoftechnicalexperts

• Phase1(analysisdiagnostic):cityoverview,completionofindicators,baselinestudies• Phase2(prioritization):applyingfilters:publicopinion,economiccost,climatechangespe-

cialists’expertise,criticalareasforthecity’ssustainability• Phase3(actionplan):formulatingactionplansforidentifiedstrategies,deliveryofinitial

study,creationandvalidationofdetailedactionplan

So,inthefirststage,acityoverviewisdevelopedaccordingtoasetofabout120indicatorscoveringthedimensionsclimatechangeandenvironment,urbandevelopment,fiscalandgovernability.Then,projectsareprioritizedthroughemploymentofthemultiplefiltersandembeddedintoasetofstrat-

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egiesandanactionplan.Thesecondstageisaboutactionplanexecution,lastsforaboutthreeyears,andconsistsofphases4and5:

• Phase4(pre-investment):preparationofpre-investmentstudiesinprioritizedsectorsonfea-sibilityaswellaseconomic,engineering,andsocialaspects

• Phase5(monitoring):designandimplementationofamonitoringsystem

Attheinitialstageofthewholeprogram,theIDBpaidfortheimplementationofthemethodologyinonecityineachcountry.Now,citieshavetopaythemselvesfortheimplementationservices.Thereareseveralvariations inthebusinessmodels.Usually, it iseithertheministriesofnationalgovern-mentsornationaldevelopmentbanksfinanciallysupportingthecitiessothattheycanfundthepro-jectpreparationsupport.Nationalentitiesare,however,notinvolvedinprojectpreparation,whichisapartnershiponlybetweenESCIandthecities.ThisfundingmodalitydifferssubstantiallyfromCDIAandUSICEFwhereprojectpreparation isusually fundedby the facilities. Even thoughnot contrib-utingfinancetotheprocess,ESCIinsomecasessupportscitiesingettingaccesstointernationalcli-matefinancesourceslike,forinstance,theGlobalEnvironmentFacility.Theprivatesectorisinvolvedbybeingpartofregularmeetingsduringtheprojectpreparationpro-cess. Additionally, there are collaborationswith the private sector on feasibility studies and infor-mationgathering.Likewise,engineeringfirmscanbehiredforspecificworks.Universitiesandotheracademicinstitutionsmayalsobeinvolvedforspecificcollaborations.


AccordingtoESCI, themost importantchallengesandaspectsobserved in themarketthatarenotsufficientlytakenintoaccountinprojectpreparationarethefollowingones:

• Selectionofprojectsoflowpriorityfromacityactionplanperspective;• Lackofinvolvementoflocalgovernments;• Nostakeholderinclusioninthepreparationprocess;• Lackofcapacitiesandresourcesatthelocallevel.

Ontheonehand,ESCIobservesthesefactorstobecausedbyinsufficientprojectdevelopment.Onthe other hand, insufficiently developed projects are just the outcome of these shortcomings. Asmainbottlenecksinthewholeprojectpreparationprocess,twomainpointsareraised:

• Linkingprojectstofinance:IDBcanprovideaccesstointernationalfundssuchasGEForGCFbutnotallprojectsachievethis;

• Coordinationwiththepublicsectorondifferentlevels:duetoregularelections,governmentskeepchanging,therebycreatingamodifiedpoliticalenvironment,whichitselfgivesrisetochangingstaffandfinallygapsincapacityatthelocallevel.

ESCI also remarks on the lack of ability to analyze and synthesize relevant information in projectpreparation.Inparticular,itidentifiesalackofunderstandingofclimatechangerisksatthecitylevel.

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Infrastructureprojectsinvolvehighrisksandrequirealotofpreparationandinvestment.Thesefac-torsareallrelatedtoclimatechangeinsomeway.Butsincetheawarenessofmanycitiesinthisre-gardisinsufficient,theydonotnecessarilyprioritizeclimaterelatedquestionswhendevelopingpro-jectsorcity-levelplans.Given these challenges, drawbacks and room for improvement, ESCI identifies threemain recom-mendations:Threerecommendations:

• Involvecivilsocietyfromthebeginning;• Respectenvironmentalandsocialsafeguards;• Haveasolidteamintheimplementationunitofthelocaladministrationwithsufficienteco-

nomicandlegalcapacityinthelocalgovernment.


Successfactor1:relevancyandeffectivenessBy sophisticatedprojectprioritizationand selection (e.g. aspartof citydevelopmentplans) asde-scribedaboveinthemethodologyaswellasearlystakeholderidentificationandinvolvement,itcanbeensuredthattherelevantprojectsareimplemented.Projectsthatdonotrespondtoaregion’sorcity’sinfrastructureneedsareruledoutatanearlystage.ESCIispresentonthegroundinallcitieswhereprojectsarerealized.

Successfactor2:efficiencyLikewise,itisthroughacomprehensiveapproachtoprojectprioritizationandselectionthattheeffi-cient employment of financial and human resources can be achieved, and resources will not bewastedoninappropriateprojects.

Successfactor3:co-benefitsESCImentions its statusasbeingaprogramof the IDB thatgives rise tomajorbenefitsbecause itfacilitatesaccesstofundingandparticularlyfinancingsources.Resourcesdedicatedtotheaccumula-tionofanetworkoffinanceinstitutionscanthusbeoptimized.Moreover,synergiesareproducedbypartnershipswithcities,academiaandtheprivatesectore.g.engineeringcompanies.

Successfactor4:financialviabilityoftheprojectTestingprojects for financial viability is an integral partof ESCI’sprojectpreparationmethodologywithoutwhichbankabilitycannotbeachieved.

Successfactor5:sustainabilitySocial and environmental safeguards as well as stakeholder inclusion are an integral part of themethodology.

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Projectpreparationiscompletedonceaprojectislinkedtoaninvestor.It isusuallyadevelopmentinstitution,thatis,theIDB.Insomecases,otherdonorsourcesprovidefinance.For14projects,thepreparationprocesshasbeencompletedwhileanotherfourarecurrentlyinthepipeline.Thefinan-cial lever canbecalculated inanalogy toCDIAand is1:120meaning thata1USDexpenditure forprojectpreparationgivesrisetoaninfrastructureinvestmentofUSD120(IDB,2016).ContributionofprivatesectorfinanceisagainquitelimitedandPPPsduetolimitedinstitutionalca-pacitiesatthecitylevel.ApossiblereasonforthelackofprivateinvestorsinthecaseofESCImightbethatthereisnotthesameopenapplicationprocedureasinthecaseofCDIAandUSICEF.Rather,thewholemethodologyisconstructedtomoreexclusivelytargetmunicipalities.Initscenter,thereisthedevelopmentofcityactionplansthataredevelopedincollaborationwithlocaladministrations.Thismaylimitthespacefortheprivatesectorasaprojectdeveloperapriori.TheotherPPFshaveanapplicationprocedurethatismoreopentoprivateprojectdevelopersfromthebeginning.

5 Discussion

5.1 SummaryoftheProfilingResultsThethreeprofiledPPFshavemanycommonfeaturesbutalsocertaindifferencesworthdiscussing.All facilitieshavedeveloped comprehensiveapproaches for their activities. The term“comprehen-sive”doesnotmeanthataPPFnecessarilyperformsallactivitiesinprojectdevelopmentonitsown.Itratherdescribestheobservationthatalloftheprofiledfacilitiesmanageprojectsfromtheinitialapplicationstageuptoitslinktofinance.CDIAusesitsCIIPPToolkit,ESCIhasaitsownmethodology,too,whileUSICEFoffersstandardizedtechnicalassistancebymeansofitsnetworkofprivatespecial-izedserviceproviders.Theapproachesingeneralcontainelementssuchasinitial(city-level)assess-ments, embedding the activities into city development plans, project prioritization and selection,preparation studies, technical assistance, capacity building, sustainability assessments, inclusion ofstakeholders, vulnerablegroupsand theprivate sector, andprojectmonitoring.USICEF is apartialexceptioninthisregard.Ononehand,thisisduetothefactthat,unlikeCDIAandESCI,itisnottiedto a development bank. On the other, ESG assessments and stakeholder inclusion exist but havelowerprioritycomparedtootherfacilitiessincesolarpowerplantsusuallyenjoyhighacceptanceinlocal communities, have a low impact on the environment and particularly contribute to climatechangemitigationontheirown.Asanotherpartialdifferenceworthmentioning,ESCIhasastrongerfocusonstartingwiththedevelopmentofactionplansatthecitylevelthantheotherPPFs.Ingeneral,projectpreparationprocessesarefundedbygrants.TheyareeitherprovidedbythePPFs,asinthecaseofCDIAandUSICEF,ormobilizedbythemunicipalities,aswithESCI(exceptatthebe-ginningoftheprogram,whenthefirstcitiesineachcountryoftheregionweregrantedthesupport).Yet,inthelattercasecitiesdonotpaythemselves.EventhoughtheyhavetocompensatethePPFfor

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itsservices,theygetthemfundedbyorganizationsatthenationallevel,mostlyministriesornationaldevelopmentbanks.Projectsaremainly financedbydevelopmentbanks,publicdonors,nationalgovernmentsorothernational development agencies (as for example OPIC). The use of riskmitigation instruments likeguaranteesandblendedfinanceisquitelimited.ThesameistrueforPPPs.As formain bottlenecks and challenges, the profiled facilitiesmention funding constraints, linkingprojectstofinance,inadequateriskassessments,andthelackofinvestorsinequity.Furtherbottle-necksareon thesideof themunicipalitiesasprojectdevelopers: changingstaff, changingpoliticalenvironment,alackofcommitment,insufficientorganization,andalackofcapacityatthelocalandregional level.Finally,additionalchallengesareatasystemic level:political impedimentsand legalobstacles.Inresponsetothis,PPFsidentifytheinclusionofcivilsociety,vulnerablegroupsandpro-jectstakeholders,considerationofESGaspects,theprovisionoflocalcapacitiesandanenablingen-vironmentasthemostimportantrecommendations.

5.2 CanPPFsCopewithExistingProjectPreparationChallenges?Relevance and effectiveness of projects are key aspects of the three PPFs approaches describedabove.Forexample,inthecaseofUSICEF,relevanceisindicatedintheinitialstatementthatthereisaneedforsupporttoachieveIndia’sambitiousenergygoals,whichwasthemotivationtocreatethePPF.Thesecondfactor,efficiency,isemphasizedconstantlyandmainlythroughprojectprioritizationandselection.However,facilitiescannotavoidacertainproportionofprojectsfailing,whichneces-sarilygivesrisetoinefficiencies.Co-benefits,whichhavebeenlabeledasthethirdfactor,canbecre-atedthroughcapacitybuilding.Itisnotonlyessentialforprojectimplementationbutprovideslocalandregionalgovernmentswiththeknowhowandexpertisetorealizefurtherprojectsinthefuture.Anothersourceofco-benefitsisthesynergiesthatarisefromcollaborationofthePPFswithitsleadorganizations, cities, private partnerships, finance institutions, and academia. For instance, as canobviously beobserved, the fact thatCDIA andESCI are eachhostedby a developmentbank givesthemabetteraccesstoprojectfinanceandalsoabetterunderstandingofafinanceinstitution’sper-spective.Thefourthandthefifthsuccessfactors,thatis,financialviabilityofprojectsandsustainabil-ity,respectively,arecentralissuesinthePPFs’methodologiesandusedtools.Iftheseoutcomesarecomparedtothemainchallengesandrecommendationsintheliteraturethathavebeendiscussedabove,itcanbenotedthattheyareaddressedinmanybutnotallaspects.Therecommendationstobuildnewpartnershipsofactors involvedinprojectdevelopment,toscaleupproject preparation, and to increase funding for project preparation (seeDanso& Samuels, 2017;G20DevelopmentWorkingGroup,2014)arelargelytakenintoaccountbytheprofiledPPFs.Itisevi-dent that the increase in thenumberofPPFs in recentyears isa response to these recommenda-tions.Other identified challenges, however, still remain to be solved. As shown in the literature review,project risk is perceived as quite high in developing and emerging countries (Danso & Samuels,

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2017).Itneedstobereducediftherequiredinternalrateofreturnistobedecreased.Therefore,theuseof riskmitigation instruments isageneral recommendation resulting fromvarious studiesandanalyticalreports.Likewise,citiesaregenerallyfoundtohavelimitedaccesstofinancing.Thisiswhyinstruments likemunicipal bonds or local development funds are suggested by literature (see e.g.CCFLA,2017b).Yet,asthethreecasestudiesinthisreportshow,theuseoffinanceinstrumentsforriskmitigationandotherfinancialproductsotherthanloansisquitelimited.Another remaining issue tobedebated is the lackofanenablingenvironment. It isa system-levelchallengeandthusdifficulttobeaddressedbyindividualPPFs.However,theycontributebyofferingcapacity building for local governments. This collaboration with the cities creates an importantknowledge transfer. Inessence, it is thepresenceofPPFsat the localand regional level itself thatcontributes to a better environmentbecause cities havebetter access to project preparation sup-port.Finally, it is recommended in the literature review that countries fund project preparation them-selves insteadofreceivinggrants(seeG20,2014).This isonlypartiallyaccomplished.ESCIrequirescities topay for thePPFsupport,which theyusuallyclaimback fromsourcesat thenational level.However,thisisnotthecaseforCDIAandUSICEF.Asmentionedseveraltimes,themainobjectiveofPPFsistolinkprojectstofinance.Giventheresult-ingdescriptionofthePPFs,itremainstoaskiftheyareabletoremoveallobstaclesthatpreventpro-jects fromachievingbankability.Theproblemof insufficientprojectdevelopment is tackledby thefacilitiesastheyhavedevelopedcomprehensiveprojectpreparationmethodologies.Sincefundingofthepreparationprocessisensured,riskintheearly-stagedevelopmentphasecanbeclearlyreduced.Bothinclusionofstakeholderandprojectprioritizationcontributetothiseffect.Asecondreasonfornotachievingbankability,theinsufficientlinktoprojectfinance,isaccountedforsincethefacilitiesareabletoestablishthelinktofinancinginstitutionseventhoughtheyaremostlydevelopmentinsti-tutions.

5.3 RemainingChallengesUpforDiscussionHowever, several key issues require continuing discussion. They concern the remaining challengescomingoutofthequestionnairesthatcanbesummarizedasfollows:

• Lock-inofprivateinvestorsinlow-returninfrastructuresectorsislimited,mostprojectsarefinancedbydevelopmentinstitutions;

• Triggerofadditionalprivatefinancethroughguaranteesandblendedfinanceislimited;• Manychallengesatthecitylevelaresystemicandcannotbetackledbyanindividualproject.

Thesepointscanbeexaminedthroughasetoffollow-upquestions.Ontheonehand,theydealwiththe issueofhowthechallengescanbeaddressed.Ontheotherhand,theyalsoaimtorevealnewideasandinsightsthatmayfurtherimprovePPFactivitiesinthefuture.

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• Whatdoesinsufficientinvolvementprivatesectorfinanceimplythatinfrastructurereturnsareinsufficient?

• WhatdoesthefactthatalargeshareofprojectsisfinancedbyMDBsorotherdonorstellus?• WhatapproachesshouldPPFsusetobetterlockinprivatesectorfinance?• Whatdoespreventamorefrequentuseofriskmitigationmeasures?• Howcancitiesgainadditionalfinancefromtheprivatesector,ifcreditworthinesscannotbe

improvedandloanscannotbepaidback?• Cansocialinfrastructureeverprovidesufficientreturnsforprivatefinancetostepin?• Whatcanbedonetoachieveamoreenablingpoliticalenvironmentforinfrastructurepro-

jectimplementation?OrhowdoPPFsneedtobedesignedtoaddressthese?• Howtodealwithinsufficientinstitutionalcapacitiesindevelopingandemergingcountries?• Howhasprojectpreparationchangedwithinthelastfiveyears?Aretheresignificanttrends?• HowcansuccessinPPFsbebestidentifiedandhowcanitbeshared?

Todebatethesequestions,variousexpertswhoareorwereinvolvedinPPFs,indevelopmentbanksor as independent advisors have been consulted. This chapter summarizes their statements andhighlightsthekeypoints.EventhoughtheprofiledPPFshavedevelopedsophisticatedtoolsandex-pertise,there isasetofrecommendationsthatcanbemadetofurtheroptimizesuccessfulprojectpreparation.

5.3.1 ParticipationinProjectFinance

PPFsaresuccessfulinlinkingmanyprojectstofinancebutthevarietyoffinancinginstitutionsisquitesmall.This leadsbacktothebaselineof thewholetopicthatwas introducedatthebeginning:be-tweentheglobalinfrastructureinvestmentneedsandactualcurrentinfrastructureinvestment,thereisagapofmorethanUSD1trillionperyear,theexactnumberdependingonrespectiveestimates.There is general agreement amongmost experts that public and development financewill not besufficienttoprovidetheinfrastructurerequiredfortheachievementoftheSDGs.Sowhileitisclearwhatisrequiredfrominvestmentsupply,theresultsoftheprofiledPPFsalsotellussomethingaboutthedemandsideofinvestment,thatis,theinfrastructureprojects.Theyallneedfinancebutdepend-ingonthesector,notallprojectsareappropriateforthesametypeoffinance.Asanexpertofade-velopmentbanksays,

„Whileprivatesectorinvolvementworkswellinseveralinfrastructuresectors,itneedseffi-cientregulationfromthepublicsector.Additionally,theprivatesectorisbydefinitionmoreinterestedinincomegeneratinginfrastructureprojects(liketollroadsorprivatehospitals4forthewell-earning).Hence,thepublicsectorneedstodefinehowbestinfrastructurecanbe

4Whilehospitalsbelongtothesectorofsocialinfrastructureasdefinedatthebeginningofthereport,return-generatingprivatehospitalsgenerallydonotsincetheydonotprovidehealthasabasicgoodbutratheracommercialservice.

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providedtothepoorerpopulations.Insomecases,thismightbetheprivatesectorincentiv-izedwithsubsidies,inothercasesthismightbethepublicsectoritself.Bothwaysaresup-portedbyInternationalDevelopmentBanks.“

So,loworinsufficientreturns,whichhavebeenidentifiedasamajorobstacleforprojectstoachievebankability,stillremainsachallenge.Theissueappliesoftenappliestoprojects,whichareessentialforclimatechangemitigationandadaptationortoprovidesocietywithbasicgoodsbutdonotyieldsufficientreturnsfortheprivatesectortostepin.Theobviousquestionthatfollowsishowsuchpro-jects canget financed.Thereare severalapproaches to structure financeofprojects inaway thattheyattractinvestors.TheblueprintoftheADB’sGreenFinanceCatalyzingFacility(GFCF,ADB,2017)aswellasthecatalyticfinancefacilityenvisagedbyUSICEFwill,ifrealized,helpreducedefaultrisk.Saferinvestmentreduc-estherequiredrateofreturnandthusreducespressuretogeneratehighreturns.ThesameistrueforUSAID’sDCAandPIDG’sGuarantCo,whichprovideguaranteesforprivatesectorfinance.Howev-er,PPFshavetobeawareofadditionalaspectswhenworkingwithriskmitigationinstruments.First,guaranteesusuallycomeatacostfortheprojectdeveloper.TheDCAchargesmunicipalitieswithanoriginationfee(one-timepayment)andautilizationfee(semi-annualfeebasedonthevalueoftheloancoveredbytheguarantee)(DCA,2017a,2017b).Second,lowerrisk,whetherenabledbyblend-edfinanceorguarantees,reducesthecostatwhichcitiescanachieveloansorissuebondstosomedegree.Yet, itdoesnot increase the incomeflowsgeneratedby theproject.Hence, itmaystillbedifficultforaprojectwithlowreturnstosatisfyannualfinancecosts.Forinstance,aprojectwithhighsocial or climate relevance but zero returns will not attract private sector finance even if risk isstronglyreduced.Thespaceforincreasingprojectrevenuestoaddressthisissueisoftenlimited.Asraisedbyseveralexpertsandidentifiedasaveryfundamentalissue,increasingreturnswouldrequiremakingtheservicesofaprojectmorecostly. Inthecaseofawastewatersystemraisingtariffsforhouseholdsmay do this. However, the servicemight become unaffordable due to low householdbudgets.ThethirdpointisquiteafundamentaloneandisexpressedbyaprojectdeveloperengagedinAfrica:

“Sufficientinstruments,whicharegenerallywellfunded,alreadyexistinthemarkettoad-dresssomeofthemajorrisksassociatedwithinfrastructureinvestmentsinAfrica.However,theseinstruments,suchasguarantees,arenotavailabletomitigatethegeneralabsenceofcreditworthinessofsovereignoff-takers,whichremainstheprincipalchallengelimitingthegrowthofprivatesectorparticipationininfrastructure.“

Thisstatementcomesdowntotheargumentthattheuseofguaranteesisconditionaluponamini-mumcreditworthiness. Ifcreditworthinessofacityisextremelylow,theguarantorexpectsthede-fault riskof thecityand therefore theprobabilityofclaiming theguarantee tobehigh.Obviously,guaranteesdonotjustreducetheoverallriskofaproject,theyalsotransfertheriskfromtheguar-

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anteetotheguarantor.Forthelattertobewillingtotakethisrisk,itmustnotexceedalevelconsid-eredasaffordable.EventhoughthisstatementissetagainstthebackgroundofactivitiesinAfrica,itis generally confirmed by all consulted experts that creditworthiness of cities in developing andemergingcountriesisgenerallyverylow.AswasstatedbyESCIforLatinAmericaandtheCaribbean,publicinstitutionsatthenationallevelareoftenreluctanttostepintoprovideguaranteesfortheircities–justforthisreason.Thefactthatriskmitigationinstrumentsencounterseveralchallengesdoesnotinvalidatetheiruse.However,theymayneedtobecombinedwitheffectiveprojectstructuringandpossiblywithsubsi-dies.Forexample,projectsmaybedividedincomponents.Privatesectorinvestmentthenmayflowtothecomponentswithsufficientincomegenerationwhilethepublicsectorordevelopmentinstitu-tionsengagewith the remaining components. In this case, on theonehand,a LocalGovernmentmaylosesomecontroloverprojectrevenuesbutontheotherhand,itsrequiredcontributionislow-er.Alternatively,thepublicsectororotherpublicdonorsmightsubsidizeaproject inordertopro-videprivatesectorfinancewithareturn.Again,thisinvolvesatransferfromthepublicsectortopri-vateinvestors.Butthiscomesinexchangeforfinanceprovision.Inadditiontothemechanismsofriskmitigation instrumentsthatmaybeusedtocrowd inprivatesector finance, further economic and institutional challenges shouldbe taken into account aswellwhen structuring project finance. The use of financing instruments like green bonds,municipalitybondsordevelopment funds to accessnew sourcesof finance, is a path tobedeveloped further.Howeverinthecaseofgreenbonds:

“Greenbondsarenotreallymuchcheaperthanordinarybonds.Inaddition,theyinvolvehighertransactioncoststhan“boringloans”,whilethelattermaycontributejustasmuchtogreenfinanceinthattheycanfinancegreeninfrastructure.Traditionalloansandpooledloaninstrumentsmaybemoreappropriateforsmallerlocalgovernmentswithlesscapacity.”

Thisexpertstatementpointstothefunding,financingandinstitutionalconstraintsofprojectdevel-opers.Highertransactioncostsofbondsandfunds,beingcausedbytheneedforatrustee,maypo-tentially weigh heavily in terms of financial performance as well as required preparation efforts.PooledgreenbondsmaybeexploredfurtherasanotheroptionforsecondarycitiesandsmallerLocalGovernments.Similarly,municipalitiesoftenhaveinsufficientcapacitiestodealwithPPPs.

“PPPsneedverygoodadvisors,thecostofwhichisrelativelyhigh.WhetherPPPsareappro-priatedependsonthesizeoftheproject,thedepthofthecapitalmarket,thecapacityofthelocalgovernmentandthecapacityoftheirassistance.IffacilitiesaretoprepareprojectsasPPPs,theyneedaconsiderablebudget.”

This experience of an advisor coincideswellwith the experience of the profiled PPFs. It does notnecessarilymeanthatPPPsshouldnotbedone,buttheyarenotthemostefficientprojectstructure

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inallcases.SecuritizedprojectfinanceandPPPsarethusconditionalontheinstitutionalcapacityofacityinthisregard.Newfinancinginstrumentsmaycrowdinmorefinanceandlocalownership.Yet,theirapplicationshouldbetailormadetoeachprojectandcitycharacteristics.Moreover,itisoftenfoundthatduetothelackofcapacitymunicipalitiesarenotabletoachievefairagreementswiththeprivatesectorpartners.

5.3.2 FundingofProjectPreparation

A secondaspectwhereprivate sector finance is an issue is the fundingof theprojectpreparationprocessitself.IntheprojectswheretheprofiledPPFsareinvolved,citiesreceivegrantstofundpro-jectpreparation.Funding isprovidedeitherdirectlybythe facilitiesorbynational financial institu-tions.Thiscoincidesperfectlywellwiththestatementofanexpert:

„Duringthedevelopmentphaseofaproject,itisabsolutelynecessarytoaccessgrantsandpatientcapital.“

Accordingtothisproposition,privatesectorparticipationattheearlystageofprojectdevelopmentisquiteunlikelyduetohighriskanduncertainty in the firstphase.Grantsandpatientcapital (whichdoesnotexcludeprivatesectormoneyapriori)arerequiredtoreduceearly-stagerisk.This issuc-cessfullydonebythePPFs.Yet,grantsare limitedandtospreadsuccessfulprojectpreparationap-proaches,waystoscaleupprojectpreparationfundingareneeded.Oneofthesolutionsinthisre-gardisgivenbyanapproachthatavoidsfundingprojectpreparationservicesbygrants:costsofpro-jectpreparationmaybeintegratedintotheprojectloanamount.Inthisway,costsbecomepartofthewholeprojectandhavetoberepaidovertheprojectlifecycle.ClimateInvestorOne(2015)pro-vides a model of such a funding and finance structure. Funding sources for project preparationtherebybecomelessconstrained,whichmakesiteasiertoshareandspreadsuccessfulapproachesofPPFs.InthelightofthethreeprofiledPPFs,thequestionariseswhytheideaofintegratingprepa-rationcostsintoprojectfinanceisnotappliedbythem.ESCIhasoutsourcedthisquestioninawaysinceitisuptocitiestofundthepreparationsupport.USICEFmaybeattooearlyastagetodothisbutmaypossiblyenvisage it for the future.ForCDIA, thereasonfornotdoing it isan institutionalone.EventhoughithasacloseconnectiontotheADBasitsleadorganizationnow,itwasoriginallycreatedas“financingagnostic”,thatis,moreindependentofthebankthanitisnow.Anagreementinthisregardthusismissing.Second,thereisanotherobstaclehamperingtheintegrationofprepa-rationcostsintoprojectloans.Inmostprojects,CDIA’ssupportisfocusedonpre-feasibilitystudies.Further support like feasibility studiesor technical assistance isoftenprovidedby theADB for fullgrants.Somakingpre-feasibilityplanningby thePPFpartofa loanwhileproviding technicalassis-tanceforfreewouldbeinconsistent.Ingeneral,itcanbeseenthatthewayaPPFissetupandtiedornottiedtoafinancinginstitutionaffectsthestructurenotonlyofitsactivitiesbutalsoofitsfund-ing.

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5.3.3 OrganizationalOptimizationofPPFs

Besidesthefinancingquestions,therearenumerousotherfactorsthataffectthequalityofprojectpreparation ofwhich the general, enabling or non-enabling, environment is one. Expertsmentionseveral aspects thatPPFsmay consider tooptimize the “artofprojectpreparation” that can itselfhaveaneffecton thegeneralenvironmentata systemic level.The firstaspectconcernsagain theobservationthatprojectpreparationismostlyfundedbygrants:

„PPFsshouldseriouslythinkaboutdevelopingmorecommercialbusinessmodelsinordertodeveloptheprojectpreparationelementsthataremorelinkedtosuccess."

Accordingtothisstatement,successfulprojectpreparationcanonlybespreadiftherearepromisingcommercialmodels insteadof grant funding. Thismeans thatnotonlyprojectsneed sufficient re-turnstoattractprivatesectorinvestmentbutalsoprojectdevelopmentshouldbeorganizedaccord-ing to thisprinciple inorder toscale itup.Makingpreparationcostspartofproject financeasde-scribedabovemaybeonepossibilityinthisregard.Anexpertalsopointsoutthatsuccessrequiresamoresophisticatedexpertise,whichcannotbeachievedbyatoobroad-basedPPF.Thus,

„PPFsmaywanttohaveasectoralfocus,allowingthemtoidentifyreplicablemodelsinawaythatabroader-focusedPPFmaynot,sincethelattersimplywillnothavethesamelevelofsectoralexposure.”

ThisactuallyappliestooneoftheprofiledPPFs,that is,USICEF,whichisexclusivelyfocusedonre-newableenergy.WhileitseemstobeanaturalwayoforganizationformostPPFstofocusongeo-graphicregions,sectoralfocusisamuchlessprioritizedprinciple.Bothnarrowandbroadfocihavetheiradvantagesanddisadvantages.Theformerallowsformoreexpertisewhilethelattermaymakemoreuseofsynergiesbetweendifferentsectorsatthecitylevel.Inadditiontothegeographicandthesectoraldimensions,PPFsmayalsospecializeongovernment levels,that is,beingactiveatthesubnational,nationaloreven international level. In somesense,everycity isa specificecosystem.Hence,narrowing the focusmayevendistinguishbetween citiesofdifferent types. This is alreadydonebyseveralfacilities:whileCDIAandESCItargetmedium-sizedcountries,CFFemphasizesmegacities like, for instance,MexicoCity.Eachchoiceonthematrixbetweendifferentdimensionsgivesrisetoatrade-offanyPPFhastobeawareof.Projectsintendingtomitigateandadapttoclimatechangemaybeincontrasttothecallforsectoralfocus.Asoneexpertnotes,greenprojects–iftheyaretobeindeedgreen–mostofteninvolvemorethanonesectorevenifonlyonesectoristargetedintheprojectdesign.Asaprojectexample,abuswayistoberealizedforclimateadaptationinacity.Itinvolvesrelocation,thedrainagesystemandenergyprovisionanddistributionifthebusesaretobeelectric.Hence,aPPFneedsa intersectoralexpertisethatcannotbeguaranteedbytoonarrowafocus.Advisorsmentionotherprojectswhereinsufficientattentionwaspaidtothemultidimensionalityofclimaterelatedissues.Theyturnedout

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nottobesustainableatallandhadtobemodifiedina largeefforttoenablesmall improvements.This coincides well with the experience mentioned, for example, by ESCI that there is still littleawarenessofclimatechangechallengesincityandprojectdevelopment.Finally,collaborationwithcitiesisessentialforanysubnationalPPF.Localconsultantsarethereforeassignedakeyrole.Asoneexpertputsit,

“TheuseoflocalseniorconsultantsrespectedbylocalgovernmentasafocalpointforthePPFandasdesignconsultantsisveryeffective,butthereisadangerthattheyareveryawarethatfutureworkmaycomefromsuchgovernmentandcaremustbetakenthattheyarenotcaptured.”

Hence, hiring consultantswhoare knowledgeableof the local environmentbutwhoare still suffi-cientlyindependentisadifficulttask.Ifpossible,PPFsshouldhiresuchalocalexpert(notaninterna-tional)ineachcitywhereitisactive,whoactsasthelinkbetweenthePPFandthelocalgovernment.Thismaynotbefeasibleinsmallercitiesbutwouldbeinlargecitiesforeitherbigprojectsorprojectsinvolvingcontinuouswork.ThechoiceofPPFbusinessmodels,theselectionofaPPF’sgeographic,sectoralandinstitutionallev-el focusaswell as thecollaborationwith citiesproducesnewexpertiseandbuilds capacity,whichitselfimpactslegislativeandregulativeframeworksaswellcitygovernanceandmanagement.Micro-levelimprovementsthuscanhaveanimpactonthegeneralenvironmentandmakeitmoreenablingfor infrastructureproject implementation.SubnationalPPFsmayusetheirexperienceto foster theverticalpolicydialogues.

6 RecommendationsThe subnational PPFs presented as case studies in this report reveal that adequate functional ap-proachesandtoolsforprojectpreparationexist.Profilingthembymeansofselectedqualitativesuc-cessfactorshasshownthattheyaremostlydealingwithsimilarchallengesandbottlenecksandthatthey have developed suitable responses.Not all issues are resolved.Namely, questions of projectfinance,projectpreparationfundingandthegeneralenvironmenthavebeendiscussedwithselectedexperts.Thisreporthasfocusedonsuccessfactorsforprojectpreparationandhaspresentedtools,identifiedapproachesandevaluatedexperiencesofexperts.Throughthewholeanalysis,thereporthasadopt-ed theperspectiveof thePPF.ForPPFs, systemic-levelcircumstanceshave tobe takenasgivenatleasttosomedegreeandactivitieshavetoadapttotheenvironmentinthebestway.Forthisrea-son,thisreportsrestrictsitselftorecommendationsthateffectivelycomeoutoftheconductedanal-ysisandexpertinterviewsandthatcanbeenvisagedandpossiblyadoptedbyPPFs.Thus,byformu-latingtheconclusionsofthediscussionasasetofrecommendations,thisreportmayhopefullygivesomeinspirationtoPPFsforoptimizingtheirwork:

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1. PPFsshouldmaketheapplicationofriskmitigationinstrumentsconditionaluponindividualprojectcharacteristicsandmatchthemwithprojectstructuring.Whethersuchinstrumentsareeffectivedependsonaproject’sreturn,thedegreeofriskreduction,thecity’sinstitu-tionalcapacityandcreditworthiness.

2. PPFsshouldmatchthestructureofprojectfinanceandpossiblePPPswithprojectcharacter-isticsandcities’institutionalcapacity.Financeinstrumentsotherthanloansandfairandrisk-balancedPPPmodelsrequiresufficientinstitutionalcapacity,projectpreparationfundingandthussufficientprojectrevenues.Hence,formanyprojectsandcities,conventionalloansmaybethemosteffectiveapproach.

3. PPFsmayworkonmakingprojectpreparationamorecommercialbusinessinordertoscaleupsuccessfulapproachesandexpertiseinthemarket.Creatingabusinesscaseofprojectpreparationwouldboostthesupplyofprojectpreparationservicesandthusallowforrealiz-ingmoreprojects.

4. PPFsshouldcarefullychoosetheportfoliooftheiractivitiesaccordingtogeographic,sectoralandinstitutionalleveldimensions.Eachchoiceoffocusinvolvesatrade-offbetweengainingdeepspecificexpertiseandbenefitingfrommulti-dimensionalexperience.

5. PPFsshoulddevelopexpertiseinclimateresilienceprojectsandtheirmultidimensionalandmulti-sectoralimplications.Projectsforclimatechangemitigationandadaptationareamongthemostpressingonesandtheirimplicationsforprojectpreparationareoftennotsuffi-cientlyunderstood.

6. PPFsshouldputeffortintocollaborationwithexperiencedandindependentlocalconsult-ants,whoactasalinkbetweenPPFsandcities.Theselocalconsultantshelpcreateaneffec-tivelong-termlinkwithcitiesandcanalsoinformthePPFaboutthechallengesinaspecificlocalcontext.

7. PPFsshouldsharetheirsuccessstoriesandsuccessfulapproaches.ThismaytakeplaceintheformofexperthubsoreventsliketheCCFLAProjectPreparationPractitionersForum.Suc-cessmaybehiddeninthesmalldetailsofdailybusinessofPPFs.Thiscallsforregularinfor-mationexchangeforthatsuccesscanbeshared.

8. PPFsmayexchangeinformationbeyondthePPFcommunityandalsocreateknowledge-sharingspaceswiththefinancialsector(banks,developmentfinance,insurance)andprojectdevelopers.WhilethelegalframeworkisgivenforPPFsintheircountriesofactivity,capacitybuildingcontributesto“pushingthelimits”towardsabetterenvironment.

9. Inthelongrun,PPFsmaycontributetoimprovedcreditworthinessofcitiesbyprovidingevi-denceofatrackrecordofsuccessfulprojects.Citiesmayeitherbeeffectivelyratedasnotcreditworthyorexhibitsomecreditworthinessthatgoesunnoticedduetomissingrating.Atrackrecordofsuccessfulprojectsmayinforminvestorsoflocalinvestmentopportunities.

Taking these recommendations–built on the case studies and the interviews in this report– andcombining themwith thehigher-level andbroader-focused recommendationsand solutionsof the

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PPF literatureyieldsacompiledrepresentationofthemost important issuesthatneedtobetakenintoaccountbyPPFsinordertoscaleupsuccessstories.Table4providesanoverview.Buildingupontheserecommendations,theseedswereplantedaCOP23duringtheProjectPrepara-tionPractitioners’ForuminBonnco-organizedbyCCFLA,FMDVandGIZwiththesupportofmem-bersoftheProjectPreparationWorkingGroupofCCFLA(ICLEI,C40,GIB,UNEnvironment...),tode-velop an initiative consisting of a subnational PP Platform to foster subnational climate fi-nance.SuchaspacewouldenabletoexchangeontherenewaloftheinvestmentmodelsonProjectPreparation.

Table4 Mainbottlenecks,solutionsandrecommendationsinprojectpreparation

Bottleneck Relevantlevel Solution Relevantscope Recommendation

Fundingcon-straintsforpro-jectpreparation

Local,nationalandregionallevel

Scalingupfundingsources

Enablingna-tionalpolicies

• Nationalgovernmentsshouldcon-tributetoPPfunding;

• FinancialincentivescouldencourageprivatesectorinvestmentsinPP.

Projectlevel ScalingupPPFca-pacity

PPF:approach-esandbusinessmodels

• Projectpreparationcostscanbemadepartofprojectloans;

• PPFsmaydevelopmorecommercialbusinessmodelswhenappropriate(RE/EEsectors).

Politicalbuy-in Localandre-gionallevel

Makingneedofclimate-resilientinfrastructuretransparent

City:commit-menttoclimatefinance

PPF:accesstolocalauthorities

• Climaterisksshouldbecomeinte-gratedpartofcities’developmentplansanddecisionprocesses;

• Localexpertsmayfacilitatecollabo-rationwithcities;

• Strongdomesticfinancialinstitutionsmayensurethelinkagebetweenalllevels

Projectlevel Inclusionoflocalauthoritiesandstakeholders(in-cludinglocalfinan-cialinstitutionsandcivilsociety)inPP

PPF:inclusiveapproaches

PPFsshouldincludecitiesandstake-holders((includinglocalfinancialinsti-tutionsandcivilsocietyorganizations)fromthebeginningofPP

Lackofprivatesectorparticipa-tion

Projectlevel DevelopmentofPPPmodels

PPF:projectstructuring

• Solidlocalfinancialintermediariesshouldbesupported;

• Cities’andPPFs’capacityforprivatesectorcollaborationshouldbestrengthenedsincetheearlystageofPP;

• PPFsshoulddemonstratetogov-ernmentsthatqualitytechnicalas-sistanceinprojectpreparationre-ducesinherentrisksandimproveschancestoattracttheprivatesectorandachievefinancialclosure

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Table4 continued

Financialrisks,lowcreditwor-thinessofmu-nicipalities

Locallevel,projectlevel

Applicationofrisk-mitigationinstru-ments,reductionofearly-stagerisksbyprojectpreparation

PPF:riskmitiga-tionthroughproject

• PPFsshouldmakeuseofriskmitiga-tioninstrumentsincollaborationwithdevelopmentfinanceandpri-vatesectorfinance;

• PPFsshouldsharesuccessstoriesandlessonslearntwithriskmitiga-tioninstruments.

• PPFsmaycreateandsharetrackrecordofsuccessfulprojectstoraisecreditworthinessofcities

Insufficientpro-jectorganization

Projectlevel Improvingcapacityofprojectdevelop-ers


• PPFsshouldbeengagedthroughoutthewholeprojectpreparationstage;

• PPFsshouldcarefullyselectsectors,regionsandscopeofactivitiestode-velopsufficientexpertise;

• Localexpertsshouldbehired.


Improvingcapacityofprojectdevelop-ers


• Nationalhubsofexpertisecouldprovidetherighttechnicaladviceandensurethelinkagewiththeade-quatesourceoffunding;

• Identifysimilarprojectinitiativesathigherlevelstoavoidduplicationofworkandfragmentedplanning

Legalobstacles Nationallevel Legislativereforms Legalframe-work

Nationallegalframeworksshouldbeimprovedtoraiseallocationofclimatefinanceatthecitylevel.

Lackofinstitu-tionalcapacityatlocalandregionallevel


Improvingcapacityoflocalandregionalgovernments

PPF:capacitydevelopment

• PPFsmaycombinepreparationwithcapacitybuildingforlocalandre-gionalgovernments.

• Coordinationbetweendifferentlev-elsofgovernment

Economicandpoliticalrisks


Providingfinancethroughdevelop-mentinstitutions

Generalenvi-ronment

PPFsanddevelopmentfinanceshouldlowerthehigheroverallriskbyprojectpreparationandfinanceandcrowdinadditionalfinance.


Coordinationbe-tweendifferentlevelsofgovern-mentacrosstime

PPF:accesstolocalauthori-ties;Generalenvironment

PPFsshouldpromotecontinuityandcoherenceofprojectsamidstcontinu-ouspoliticalandinstitutionaltransi-tions

Sustainability Projectlevel

MakingESGas-sessmentspartofPPFapproaches

PPF:ESGduediligencewithinprocurementrules

PPFsshouldmakesupportconditionaluponsustainabilityrequirements

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AnnexExperts

ThefollowingrepresentativesoftheprofiledPPFsprovidedtheinformationinthequestionnaires:

• BrianCapati,MunicipalInfrastructureEngineer,CDIA• BarbaraK.Buchner,Ph.D.,ExecutiveDirectorClimateFinance,ClimatePolicyInitiative• AndreasWohlhüter,Consultant,IDB

Thefollowingexpertshavebeeninterviewed.Inafewcasestheinterviewwasbywayofemailcor-respondence.TheconversationshavestimulatedthedevelopmentoftherecommendationsforPPFsinChapter6.

• ShigefumiKuroki,GeneralDirector,DevelopmentBankofJapan• StephenHammer,ManagerofClimatePolicy,WorldBankGroup• GadCohen,CEO,Eleqtra• Dr.KlausLiebig,Director,KfWOfficeNairobi• DariusNassiry,SeniorResearchAssociate,OverseasDevelopmentInstitute• MichaelLindfield,Director,UrbanInfrastructureServices• JorisVanEtten,ADBProgramManager,CDIA• DhrubaPurkayasta,Director,USICEF,ClimatePolicyInitiative

PPFToolsandApproaches

PPF Approach Information

CDIA CityInfrastructureInvestmentProgramming&PrioritizationToolkit

http://cdia.asia/resources/tools/

USICEF Network of private serviceproviders

https://www.usicef.org/service-providers-2/

ESCI ESCIMethodology http://www.iadb.org/en/topics/emerging-and-sustainablecities/implementing-the-emerging-and-sustainable-cities-program-approach,7641.html

Summary of Good Practice of Successful Project Preparation ... · This report analyses project preparation tools, approaches, main bottlenecks, and solutions, by pre-senting three

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