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The risks of green municipal debt: Green bonds and the globalization of “sustainable” finance

Authors: Hanna Hilbrandt*, HafenCity University
Topics: Urban Geography, Economic Geography, Cultural and Political Ecology
Keywords: Municipal Finance, Risk, Sustainability, Urban Development
Session Type: Paper
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Although financial actors have long considered cities in poor and middle-income countries too risky for investment, urgent demands for sustainable growth are currently moving these cities into the spotlight of capital flows. In the context of efforts to expand financialized “climate urbanism” (Long & Rice 2019), in particular in/to so-called emerging markets, this paper examines Mexico City’s adoption of Green Municipal Bonds (GMBs), debt instruments that allow cities to raise capital for sustainable projects. A document analysis as well as interviews with city officials, financial actors and development agencies speak directly to the entanglements of financial and environmental risk:
First, climate standards enforced with the issuance of green bonds hardly alter the city’s climate risk, but capture the energy of environmental and political actors in the building of “green” market infrastructures that reduce financial risk. Second, rather than inflicting further financial risk on cities in the global South, the globalization of green finance shifts the distribution of such risk. While AAA rated municipalities, such as Mexico City, profit from investment in their infrastructure, the financialization of green projects moves a range of municipalities that have typically been targets of development policies ‘off the map’ of global efforts to combat climate change, thereby possibly heightening their climate risk.
To theorize these arguments this paper joins up literatures that document the financialization of nature (Christophers et al. 2018, 2019) and development (Sullivan 2017; Bracking 2012) with a largely separate debate on the financialization of municipal budgets (Lauermann 2018; Pike et al. 2019).

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