Back in the Bronze Age, when I was a graduate student, the American Economics Association invited me to present a paper at their annual meeting. At the time, being a nonconformist, I was struggling over whether or not to appear in a suit and tie. My Ph.D. adviser provided some excellent guidance. “I’m not going to tell you whether to wear a suit or not, but consider whether you want the audience to remember what you say or what you wear.” It was a helpful reminder that if one has a message to deliver, it is best to package it in a way that improves the chances that it will be received and understood. In the end, I wore the suit and tie, and I recorded a useful lesson in the sometimes subtle, sometimes not-so-subtle interplay of form and content.

From time to time, think tanks like the Lincoln Institute need to consider whether they are packaging content in a way that draws people to read and use it. Over the last year, we have taken a careful look at how we present and disseminate our research and policy analysis. We started in January 2015 with a newly reimagined Land Lines, designed to make the magazine more compelling to a broader audience. Our first redesigned issue featured a dramatic aerial photograph of the Colorado River Delta, where a “pulse flow” released from upstream dams in 2014 allowed water to flow down its dry old path to the Sea of Cortez for the first time in decades, stimulating efforts to restore the native ecosystem that had existed under different land use patterns in the river’s watershed. We also started hiring journalists to write compelling narratives that connected our research and policy analysis to the people whose lives would be improved by better land use practices.

The redesign of Land Lines and our Policy Focus Reports are a small part of a larger effort the Lincoln Institute is making to disseminate our formidable arsenal of research and ideas more widely. An ongoing public outreach effort, clear and crisp, will facilitate the impact we want our work to have on policy and on people. In August, we launched a multiyear campaign to promote municipal fiscal health as the foundation from which local governments can deliver the goods and services that define a high quality of life for residents. Our researchers, staff, and partners are working across disciplines to elevate this important issue, while building new, cross-cutting efforts to address climate change and resilience; developing state-of-the-art scenario planning tools; and probing the nexus of land policy and water, or of land use and transportation.

This month, we are taking another step to disseminate our ideas more effectively by introducing a new Lincoln Institute logo, tagline, and mission statement:

Finding answers in land: helping to solve global economic, social, and environmental challenges to improve the quality of life through creative approaches to the use, taxation, and stewardship of land.

The logo retains the Lincoln “L” within a symbolic outline of a land section, with a more modern, open design that invites new audiences to discover our work. The tagline and mission statement make explicit what has always been true: that good land policy can help address some of the most vexing global challenges, such as climate change or poverty and financial stress in the world’s cities.

We are not reinventing the Lincoln Institute, but aiming to introduce our work to broader audiences and to clarify the threads that connect seemingly disparate topics, such as the link between land conservation and climate change mitigation. Our “refresh” will culminate later this year, when we launch our redesigned website, with a format that allows us to convey new narratives about how land policy can shape a better future for billions of people.

This issue previews two important new books that upgrade our presentation of subjects we have been probing for decades. In A Good Tax, Joan Youngman makes a clear, strong case for the property tax—the most important and least understood source of revenue for local governments. This magisterial treatment of a difficult topic is rendered in lucid prose by the Lincoln Institute’s chair of Valuation and Taxation. The chapter on school finance, featured in this issue, defends the tax that people love to hate in service of a public good that defines the fortunes of future generations.

Nature and Cities—edited by George F. Thompson, Frederick R. Steiner, and Armando Carbonell, the Lincoln Institute’s chair of Planning and Urban Form—explores the economic, environmental, and public health benefits of ecological urban design and planning. With essays by New York City’s High Line designer James Corner and other leading landscape architects, planners, and architects around the world, Nature and Cities offers an erudite and visually captivating treatment of a topic that is urgent in the face of climate change and urban population growth.

As you will see, we will continue to serve our long-time partners and friends with rigorously researched and well-written content. But we also will expand the network of researchers, policy makers, and practitioners who will apply our research findings in ways that we can only imagine. Because in the end, our collective endeavor is to improve the lives of all who call this planet home. And we know that it all starts on land.

This feature is adapted from the introduction to Nature and Cities: The Ecological Imperative in Urban Design and Planning, a compilation of essays and images by leading international landscape architects, architects, and planners, some of whose work is showcased here. The book is scheduled for publication in November 2016 by the Lincoln Institute of Land Policy, in association with the School of Architecture, The University of Texas at Austin, and George F. Thompson Publishing.

Everything seems so clear from the air, where details do not get in the way. At an elevation of 33,000 feet (10,058 meters), we see the handiwork of our actions all over the ground below, as if the landscape were our reflecting mirror. As we know, landscapes do not lie; they are the embodiment of all that we do on Earth.

Some roads parallel rivers and valleys—no ingenuity there. Other roads converge into settlements like cattle paths leading to a water tank, or they may follow deer paths and other animal trails or topographic contours and soon resemble the organic majesty of a spider’s web. Picture El Greco’s (1541–1614) home town, Toledo, Spain, from the air: a kind of perfection in organic urban form.

Old North American prairie, largely untouched until two centuries ago, now bears rectangular grids of large-scale farms with no room for any vegetation besides the crops and a thin line of trees alongside riverine and creekside banks, looking like a token tithe to nature and wildlife. And 40-acre (16.1-hectare) center-pivot circles of  corn, soybeans, or alfalfa (the trifecta of corporate agriculture) look as if someone had tossed, in perfect symmetry, large half-dollars on the land. Resembling pavements of crops stretching as far as the eye can see, even from one state to another, all this handiwork is the result of a federal farm policy insanely out of balance with nature. No wonder the butterflies and countless other creatures and plants are struggling so mightily against such unnatural odds.

New sites of natural gas extraction have popped up so suddenly and pervasively that they now permeate much of the Great Plains and interior West of North America, as if enormous prairie dogs on steroids had  burrowed through these large swaths of land. It is Gulliver’s travels all over again. Meanwhile, open-pit mines generate impressive depressions in the ground, as if meteors had crashed from outer space. The pits’ glorious russet and red and golden and sand-colored hues contrast hard against surrounding terrain, as if the mines, too, were inscribed works of art, poor attempts at recreating a subterranean Roman coliseum or a mini-Grand Canyon. Meanwhile, the new and starkly white wind-powered turbines—some spanning 413 feet (126 meters) and towering 312 feet (85–95 meters) in the sky—appear as if a giant surgeon had administered stitches of varying lengths and shapes on the land and in the sea, even as untold numbers of birds die upon impact.

Towns and cities along the coasts cram hard against the adjacent sea, with few buffers to protect communities against a rising tide that likely will be at least three feet (.9 meter) higher a century from now. And the same condition holds true for those towns and cities that reside along rivers, large and small, that naturally want to ebb and flow like the tide, overrunning banks and streets alike from time to time. Even world-class cities such as Chicago, Sydney, Tokyo, and Toronto look like LEGO sets from above and bar graphs at eye-level, in which cars and trucks move about like busy ants, and trains slide like snakes along the concrete.

Deserts, long the forlorn outposts of biblical wilderness, are now bespeckled oases of new towns, cities, and resorts, each with homes nestled against aquamarine-blue swimming pools, as if pools are required for entrance into a neighborhood. Shimmering lakes are impounded by large-scale dams, the water evaporating into the dry, cloudless sky. A jigsaw puzzle of improbably green lawns is highlighted by extensive, even more preposterously verdant golf courses. One might believe that a new school of art called Landscape Cubism had gone awry on the land.

Yet there are the exceptional expanses of undeveloped land as well. Trails such as the Appalachian, Continental, Ice Age, Grande Randonnée, Greater Patagonian, Natchez, Pacific Crest, Te Araroa, and Tokai saunter along for great distances deep into the heart and soul of their respective countries. Forests stretch for thousands and thousands of square miles and kilometers, relieving a planet in dire need of new lungs in order to process the increasing levels of carbon dioxide (CO₂). Still-intact watersheds and wetlands retain their natural place between land and water, providing incalculable value as a water supply for towns and cities downstream and as habitat for fisheries, insects, birds, and other wildlife. Contour farming thrives in harmony with the terrain and the life-giving principles of the Soil Conservation Act of 27 April 1935. And more cities boast integrated systems of parks, open spaces, and greenways, providing evidence that nature can return to the urban scene and enhance communities in biological and socioeconomic ways.[1]

The land tells us so much. And it is the role of landscape architecture, urban planning and design, and architecture to continue their pioneering ways, offering an ecological approach to the design, planning, and management of our varied landscapes—urban, suburban, rural, regional, social, and wild. It all begins on the ground, in nature and our communities, in the multiple ecologies and economies and cultures that encapsulate our home turf, wherever that may be. 

But, as we know, much of that ground is already urban, and that pervasive and expansive pattern of settlement by every account has no end in sight. So how can we do better? That scene and question are the focus of Nature and Cities: The Ecological Imperative in Urban Design and Planning. 

Even as land use may seem relatively clear and simple from the air, on the ground the picture grows more complicated, because of the unavoidable details. All aspects of life—human and natural intertwined, to varying degrees of success—appear before our very eyes, are heard by our ears, are felt by our skin and clothes by way of dew point, humidity, dry air, sunlight, evening breezes, and cool or warm temperatures. That is a lot of ground to comprehend, even within the limited scope of our senses.

Perhaps this view encompasses your backyard or city street; the one well from which you and your community draw water; a favorite gathering place; a beloved vacation spot; a scene ravaged by drought, flood, or fire; a place recovering from earthquake, cave-in, crime, or war. The imagination can transport us to any place we wish, but there is a bottom line to such inquiry. As you imagine or walk or ride or drive through that landscape around you, take it all in: every blade of grass that adorns your lawn or survives in the seam of a sidewalk; every field, common, or pasture that may be part of your everyday life; every hovel, condo, or mansion that gives you shelter; every tree, greenway, or park that embellishes your space; every economic entity and activity before you; every smell emanating from a bakery or foundry; every breath you take that, inevitably, is a respiratory cocktail of Earth’s natural elements (sand, pollen, and dust) and of all the human-induced chemicals too numerous to name.

Now that you have seen, heard, and felt that landscape, imagine that you are suddenly in charge of the scene. Your family, neighborhood, village, city,  region, and country are depending on you. First, to explain every aspect of what you perceive and to make some sense of it all—whether in a public setting or classroom or even corporate boardroom. And second, to envision, communicate, plan, and design improvements to what you see. Where would you begin? What would you do? Under what circumstances would or could you implement change? And how? Bottom-up or top-down? Diplomatically, democratically, or dictatorially? How will your vision, and its associated array of actions, be maintained, nurtured, and, perhaps, changed over time? And by whom and under what circumstances or authority?

This is the terrain that the landscape architect, architect, and planner inherit. So return to your “vision” of what your place wants to be, and consider a process by which change is sought and made through attention to three primary and overarching themes: the human need for clean water, ample and safe food, and humane shelter; the human need for economic well-being; and the natural need to take care of and heal the land, nature itself. How does one work with structure, purpose, and meaning to provide fulfillment, value, and public good? How does one add value to place, communities, cities, and regions by way of designs and plans that offer reprieve from single-purpose thinking and direct us to a sense of stewardship in its many manifestations? Importantly, how do we citizens, as part of increasingly large urban populations, reconnect with the natural world on which we are still dependent and become engaged in the benefits of ecology to biological and socioeconomic life?

Although nature is at the core of our being and every other life-form, plant, tree, soil, water, and rock on Earth, too often our human connections to nature take a backseat to all-too-prevalent interests of every kind that compete for social good and economic gain without the benefit of a land ethic, as espoused by Aldo Leopold.[2] When we look at the varied landscapes on the ground, questions arise as to how well we are actually doing as human beings in our care of this bountiful planet. 

If one travels far enough, long enough, one can still find longstanding human communities and cultures living intimately with the natural systems that surround them. Homes in the Amazon are still built on stilts to allow for the annual and seasonal fluctuations of the world’s second-longest river and world’s largest river basin. Homes in the American South have traditionally used the front and wraparound porch to offer shade and some relief from the noteworthy heat and humidity of the summer season, even as it allows for socialization from one neighbor’s house to another, as can be seen any day of the week in Vicksburg, Mississippi, where streets are lined by shotgun houses with shady front porches animated by conversation. Many Scandinavians still artfully use wood and the fine-art craft of notching to create some of the most energy-efficient cabin-homes anywhere, even as Nordic winters are among the most challenging on Earth. And, increasingly, LEED (Leadership in Energy & Environmental Design) initiatives are helping transform the world’s new architecture into energy-efficient structures, from the geothermal-powered Aldo Leopold Center in Baraboo, Wisconsin, winner of a LEED Platinum Award, to the Shanghai Expo UBPA redevelopment, the first project outside North America to receive a LEED Neighborhood Development Platinum Award. 

Beyond LEED, landscape architects, planners, ecologists, and others designed the Sustainable Sites Initiative (SITES). Now administered by Green Building Certification Inc., SITES was envisioned as LEED for the outdoors. SITES was developed through pilot projects, including those undertaken by Andropogon, OLIN, and James Corner Field Operations. Pilot projects that received certifications include Andropogon’s Shoemaker Green on the University of Pennsylvania campus and the Phipps’ Center for Sustainable Landscapes in Pittsburgh, Pennsylvania, OLIN’s Washington Canal Park in the District of Columbia, and James Corner Field Operations’ Woodland Discovery Playground at Shelby Farms in Memphis, Tennessee.

Yet with every passing generation that becomes ever more urban, the direct connections to nature and its bounties are reduced in spades. In too many cities around the world, nature is an afterthought. The following story is all too common:

Not very long ago, perhaps it was ten years or so, I read a piece in the newspaper that caught my attention: A boy from Harlem in New York City was being interviewed about his views on nature. He was quoted as saying that the blade of grass at his feet, the blade of grass that was emerging from a seam in the concrete sidewalk, was, to him, the embodiment of nature. It was all he needed from the natural world. Here was a sign of wildness along his city street, his home place. The blade of green grass, somehow managing to survive a half-mile away from Central Park to the south, provided that elementary presence of nature in the urban world that was his comfort zone.[3] 

Even in cities graced by larger representations of nature, these green spaces too often feel like isolated pockets for daily use or the occasional visitor, like small museums or zoos. This need not be the case; this need not be an unintended aspiration or consequence of ignorance of the multiple benefits that nature bestows when it is more fully integrated into the urban fabric of any town or city, whether in Jerusalem or Medellín or Stuttgart, Arkansas. We know how to do better. Landscape architects, architects, and planners have often led the way.

So how is it possible that towns, cities, and counties continue to ignore floodplains and sea level and willingly allow homeowners, developers, and resorts to build and rebuild in areas that contend regularly with chronic flooding and storm surges? How is it possible that a utility company can disobey the basics of common-sense planning and be permitted to construct a 564-mile (908-kilometers) natural gas pipeline on a route that will not only penetrate and divide critical habitat for rare and endangered species within existing national forests, but also overlay an area known for its extreme karst landscape and major sinkholes—thereby endangering the aquifer that lies beneath that path, a font of the greatest significance for the supply of fresh water for cities, towns, and farms throughout that region? How is it possible that mining companies are not required to close the loop and provide for the ecological restoration and reclamation of project areas as part of the economic deal? How is it possible that Rio de Janeiro was awarded the Games of the XXXI (Summer 2016) Olympiad with full knowledge that water events will be conducted in Guanabara Bay, in conditions at times equated with raw sewage? Obviously, those landscape players do not include the principles and practices of ecological design and planning as part of their respective worldview, and behold the consequences of their chosen ignorance and greed. 

The promise of ecological design and planning as it pertains to the health and welfare of our communities and cities everywhere is there for the taking, there for action, there for implementation, there for ongoing care. But too often we dismiss the obvious in how we citizens conceive of urban design and planning: we humans, by our very presence in nearly every sphere on Earth, are the essential players not only in the eternal dance with nature that is part of life and the human condition, but also the overall health and welfare of our home ground.

The essayists in Nature and Cities reveal that monumental work has been done and is ongoing in the ecological design and planning of our cities and communities at large. Because landscape architects, architects, and planners have done so repeatedly and throughout the world, we, as a society, can say with certainty that we know how to work collaboratively with all players to provide safe water, food, and shelter; reduce runoff into city streets; accommodate areas prone to flooding and storm surges; safely locate a utility corridor and design it in such a way that it becomes more than a single-purpose pathway for natural gas obtained by the unruly practice of fracking; design parking lots in commercial developments; provide citizens of the world’s cities with more than a sliver of grass in the seam of a sidewalk; restore and heal worn and contaminated sites; and provide joy and economic vitality through green design and infrastructure.

But even more progress needs to be achieved, no matter where we live, because the world is becoming more urban, and the consequences of climate change and of poverty, disease, conflict, and war are real. Once again, landscape architects, architects, and planners have been engaged historically in the process of understanding the natural world before us and its multiple manifestations on the ground, where details and interconnections matter. And, by way of their designs and plans, some of them centuries old, we have examples of finished work that has made this a better world. Landscape architects, architects, and planners have historically offered alternative visions to the failed practice of serendipity and single-purpose thinking that have, for too long, dominated the public and private view.

The contributing authors in Nature and Cities share real-life experiences and perspectives about where we can go in the future. They discuss and reveal their respective perspectives on the historical and contemporary practice of ecological design and planning in their own work and in the work of others. In many cases, this work involves award-winning and path-breaking designs and plans known throughout the world. And so reading their essays is an eye-opening experience, as we share and explore their thoughts about nature and cities, even as they offer reflective worldviews for design and planning. Collectively, the essays convey the great hope and promise of an ecological imperative in planning and urban design, of a tried-and-true approach by which nature and culture, science and art, come together in a united but creative and fluid way to make life better for all.

As is often the case, big projects, designs, and plans tend to dominate the professional view and the ability of design and planning to contribute toward this greater good. Historically, this has included a wide range of undertakings, as large as the design and construction of national parks and new cities, and as small as the private garden and urban mall. But, to most people, ecological design and planning remains an idea and approach not yet in the vernacular. That is where additional work needs to be done. And so here is another story of how far we can travel in but one generation, if landscape architects, architects, and planners are willing to seek work in new ways:

A woman from South Africa, a naturalized American citizen, was inspired by the healing powers of nature. She was well known and highly respected in the community where she lived. She was a quiet but steadfast leader in peeling back the built environment and integrating nature more fully into areas of everyday city life. Even after she was diagnosed with terminal cancer, she served the community and fellow cancer patients as if there would always be a tomorrow. When she died, she was remembered by a new serenity garden, adjacent to an existing park along a popular river. When the city organized a public dedication of the new park in her memory, an overflowing crowd of hundreds showed up on a hot, summer day.

The city manager was among the first to speak. Soon after welcoming everyone and conveying the purpose for the gathering, he began to share this message:

There is something called a “sense of place.” It is a term often hard to describe, but we certainly know a special place when we see it, be it a memorial garden such as this, an historic neighborhood or building or landscape, a community at large, or even a region. As public officials, we strive to cultivate a sense of place in many ways: by providing obvious services and an infrastructure intended to serve all, but also by making connections to the natural world. Even as we may live near one of the most popular and most visited national parks, we need nature to return to the city so that it becomes a daily experience, fully integrated into our fabric of being. Just as Anne-Marie would have wanted.[4]

We dare say that, 30 years ago, the phrase “sense of place” seemed like a pipe dream or even an illusion that had no place in our everyday lives, much less public policy. Yet today, as expressed by this 30-something city manager, the term has been fully realized and embraced. We even hear of teachers at every institutional level, proclaiming the need for and success of “place-based” education—place, of course, referring to the natural and human processes intertwined.

As the world becomes more urban, and even for those who remain tied to rural land, there is the need for “ecological design and planning” to be integrated into our collective being, into our everyday lives, in fundamental ways—just as a “sense of place” has so quickly taken hold during the preceding generation. Even as landscape architecture, urban planning and design, and architecture can continue to advance a “green” vision of a better world through specific projects, both great and small, public and private, it will require a move toward the vernacular, toward the common person, toward the common place, for that vision to be expressed, appreciated, accepted, and embraced more fully: to the point where ecological design and planning becomes an afterthought and, thus, an essential player in providing a healthy and healthful life for human beings and our compatriot life-forms. To heal Earth, our home ground, is to heal ourselves.

In many professional fields and human endeavors, a green vision for an ecological infrastructure has already been achieved. In places where this vision has been allowed to take hold, we see how an ecological approach fosters the necessary interplay between the biotic and abiotic. Establishing a watershed, for instance, as a primary unit of analysis, conservation, and concern has led to instructive work relating to combined sewer overflows (CSOs) within a hydrological system, offering citizens a safe and secure source of water. And it is easy to be impressed by the advances of rain gardens and reduced runoff and other creative solutions that mimic natural processes in biotic enrichment. The further integration of ecological, socioeconomic, and political capacities within specific communities and urban environments at large provides a tried-and-true pathway for landscape architects, architects, and planners to envision improvements at every scale and to implement them through community-based interaction and design.

Each author in Nature and Cities offers a sense of direction, purpose, and model for how landscape architecture, architecture, and planning can continue to move forward and be taken more seriously, to be engaged in community life at every scale and in every city and town in the world. This may well mean that a new generation of practitioners will need to explore pathways other than the traditional design and planning office and become instruments of enlightenment and change in occupations still very much in need of such care: notably, engineering, transportation, utilities, agriculture, resource industries, and commercial development—which, with too few exceptions, remain behind the times.

Imagine engineers embracing the tenets of ecological design and planning as they create roads, parking lots, interstates, impoundments, and other basic infrastructure. Imagine those engaged with municipal management as well as agricultural, industrial, transportation, and utility sectors abandoning single-purpose thinking and embracing something grander and more impactful in providing benefits than does a single endeavor. Imagine a young adult being able to swim in clean waters in Rio’s Guanabara Bay, a utility company finding a safe and not just the shortest path for the transfer of power and natural gas, a corporation building parking lots that percolate and repurpose runoff, a citizenry knowing that all human life begins and ends with nature, the source of all life. Imagine that.

George F. Thompson is the founder of George F. Thompson Publishing and the author and editor of seven books, including Ecological Design and Planning, with Frederick R. Steiner (John Wiley, 1997; 2007), and Landscape in America (Texas, 1995). Frederick R. Steiner is dean of the School of Architecture at the University of Texas at Austin and holds the Henry M. Rockwell Chair in Architecture. Armando Carbonell is chair of the department of Planning and Urban Form and a senior fellow at the Lincoln Institute of Land Policy.

Photograph by Iwan Baan, courtesy of James Corner Field Operations​

Nature and Cities Contributors

José M. Almiñana, Andropogon Associates, Philadelphia

Timothy Beatley, University of Virginia

James Corner, James Corner Field Operations, New York City, and the University of Pennsylvania

Susannah Drake, dland studio, Brooklyn

Carol Franklin, Andropogon Associates, Philadelphia

Kristina Hill, University of California-Berkeley

Nina-Marie Lister, Ryerson University

Elizabeth K. Meyer, University of Virginia

Forster Ndubisi, Texas A & M University

Laurie Olin, Olin, Philadelphia, Los Angeles, and the University of Pennsylvania

Kate Orff, SCAPE, New York City

Danilo Palazzo, University of Cincinnati (formerly Milan Polytechnic University)

Chris Reed, Stoss Landscape Urbanism, Boston, and Harvard University

Anne W. Spirn, Massachusetts Institute of Technology

Charles Waldheim, Harvard University

Richard Weller, University of Pennsylvania

Kongjian Yu, Peking University and Turenscape, Beijing

References

[1] To which Yi-Fu Tuan, the world-renowned geographer responded, “Is it Andy Warhol who said that he is biased in favor of the city? Why? Well, one can find nature in the city, but one cannot find the city—not even a small token of it—in the midst of nature.” Personal email to George F. Thompson. October 23, 2015.

[2] Leopold, Aldo. 1949. A Sand County Almanac. New York, NY: Oxford University Press.

[3] Thompson, George F. 2010. “Our Place in the World: From Butte to Your Neck of the Woods.” Vernacular Architecture Forum. No. 123 (Spring 2010): 1 and 3–6; quoted 1.

[4] Thompson, George F. 2014. Notes at the official dedication of the Serenity Garden, Waynesboro, Virginia. June 2014. 

Across the globe, implementing the Paris climate agreement is expected to cost more than US$12 trillion over 25 years.

So it’s not surprising that much of the conversation since the agreement was finalized in December has been about climate finance. And one of the big topics in climate finance—particularly among city leaders—is “green bonds.”

But what exactly are green bonds, and why should local authorities care about them? Here’s a brief explanation of the major issues.

What Is a Green Bond?

A green bond is a type of debt instrument much like any other bond—except that the proceeds must be earmarked for projects that produce a positive environmental impact.

The first bonds marketed this way were issued by the European Investment Bank in 2007 and World Bank in 2008. Since then, other development banks, corporations, and governments have joined the trend. According to the Climate Bonds Initiative, a research group that tracks the market, total green-bond issuances shot up from US$3 billion in 2012 to about US$42 billion in 2015.

Local authorities represent a growing slice of this market. They see green bonds as one tool that could help pay for renewable energy, transit systems, and water infrastructure, among other things.

The U.S. state of Massachusetts sold the first municipal green bond in June of 2013, followed a few months later by the city of Gothenburg, Sweden. Other recent issuers include the city of Johannesburg; the transit authorities of New York City, Seattle, and London; and the water authority of Washington, DC.

Are Green Bonds Any Different Than Other Municipal Bonds?

Not really. The mechanics work the same as any other municipal bond issuance. The main difference is the environmental aims of whatever the city is using the bond proceeds to pay for.

In addition, green-bond issuers face some additional paperwork—essentially to prove to investors that their money is actually being used to benefit the environment.

To some degree, green bonds are a marketing tool. Labeling a bond that will pay for subway repairs as “green” makes it more appealing to investors. “The reality is a lot of cities are issuing green bonds, they’re just not calling them that,” says Jeremy Gorelick, who teaches municipal finance at Johns Hopkins University in the U.S. city of Baltimore.

That may be true in advanced economies such as the United States, where a mature municipal-bond market has been functioning for more than a century. In the developing world, most cities are unable to issue bonds at all, and for a variety of reasons. In many countries, cities need to obtain legal authority from their national governments to issue a bond in the first place. They also have a lot of work to do in terms of establishing creditworthiness.

Gorelick, who is advising the city of Dakar, Senegal, on its efforts to issue its first municipal bond, recommends that cities in this situation not aim for the bond market right away. He says they can first try borrowing from central governments or their related municipal development funds before approaching development finance institutions for concessionary loans or commercial banks for market-rate debt. The idea is to build creditworthiness and the sort of transparent accounting that bond investors active in debt capital markets will demand.

Why Are Cities So Interested in Green Bonds?

There are many reasons. The key one is that investors really want green bonds in their portfolios right now. As a result, municipal issuers have seen sales of green bonds “oversubscribed”—a good problem for a city to have.

When Gothenburg issued its first green bonds in 2013, “we didn’t know if there would be any interest from investors,” says Magnus Borelius, Gothenburg’s head of treasury. Within 25 minutes, investors had placed €1.25 billion worth of orders—many times more than expected—and Gothenburg had to begin turning them away. “We were overwhelmed,” Borelius says.

Cities benefit from strong investor demand in a number of ways. Most important, it means they can attract new kinds of investors, diversifying the pool of people and institutions with an interest in their city. “It’s good to have a lot of investors know you have access to capital,” Borelius says. Since issuing green bonds, he adds,  “we’ve had increased contact with investors—they’re more interested in the city, and they’re coming to visit us.”

Strong investor demand “puts the issuer in an advantageous position,” says Lourdes Germán, a municipal finance expert with the Lincoln Institute of Land Policy. Local authorities can use their leverage to increase the size of their offering, demand a longer payback period, or seek better pricing. While some cities have reported getting more favorable pricing on green bonds, Germán says issuers shouldn’t count on it. “It remains murky whether calling it ‘green’ gets better pricing,” she says.

What’s in It for Investors?

A growing number of investors want to see their money going toward environmentally sustainable projects. Some are motivated by the fight against climate change; others are simply hedging climate risks in their portfolios.

The result is that more pension funds and private-asset managers these days have some kind of mandate to think green. For example, last month, the Swedish public pension fund AP2 said it was allocating 1 percent of its €32 billion portfolio to green bonds. When you’re talking about huge institutional investors, commitments like this add up quickly.

On top of that, municipal bonds, at least in established markets like the U.S., are generally viewed as safe investments. So green bonds issued by cities are particularly desirable. “Institutional investors have a fiduciary duty and won’t invest in a product that won’t deliver a return,” says Justine Leigh-Bell, a senior manager at the Climate Bonds Initiative. “We have here an investment-grade product by blue-chip issuers where the risk is low.”

How Do You Know If a Bond Is “Green”?

There are no hard rules around that—which is a concern for both investors and environmentalists. However, the market for green bonds is evolving quickly, and some voluntary standards are emerging for issuers.

One, developed largely by large banks through the International Capital Market Association, is called the Green Bond Principles. Another was developed through the Climate Bonds Initiative and is known as the Climate Bonds Standard. The People’s Bank of China also recently released its own guidelines on green bonds.

Nobody has to use these standards, but there’s a strong push in the direction of doing so. “If I called my fire truck ‘green,’ investors might raise an eyebrow,” Germán says. “But it’s a two-sided market, so there’s some check and balance. An issuer will raise that money only if an investor believes it’s really for a green purpose.”

A growing number of municipal issuers are seeking out third-party opinions to validate their bonds’ “greenness.” That’s what Gothenburg does. The Swedish city also has created a “green bond framework” to be transparent with investors about what the city considers “green” and how it selects projects.

“It’s still early days in this market,” says Skye d’Almeida, who manages the sustainable infrastructure finance network for the C40 Cities Climate Leadership Group. “So it’s very important to avoid any ‘greenwashing’ scandals where cities say they issued a green bond and investors find out down the track that it wasn’t green. That would erode confidence in the market. So having some independent party verify and being very transparent about the use of the proceeds is something cities should be prepared to do.”

Does It Create a Lot of Extra Work or Cost for the City to Issue a Green Bond?

Some. Leigh-Bell puts the cost of an independent review at between US$10,000 andUS$50,000, depending on who is doing the review and other factors. That’s a rounding error on deals that are often valued in the hundreds of millions of dollars.

Issuing green bonds can create extra work for city staff. Ahead of an issuance, there’s the need to scour the city’s capital investment plans for projects that qualify as green. Afterward, there’s work involved in tracking the use of proceeds and reporting that information to investors. According to d’Almeida, these jobs have the positive side effect of forcing people to work across their silos—finance staff must collaborate with transportation or environmental staff, for instance.

Borelius says that has been the case in Gothenburg. “The first question people ask me about green bonds is, ‘How much extra work is it?’” he says. “If you don’t put treasury people and sustainability people at the same table, it will be a lot of extra work. But if you’re issuing a green bond, you should have that in place.”

Johannesburg Mayor Mpho Parks Tau agrees that mobilizing around green bonds has paid organizational dividends. Asked recently if labeling bonds “green” is mostly about marketing, the mayor responded that the exercise has been useful for aligning local government as an institution around his environmental agenda. “We are able to say to the institution, actually, the bulk of our capital program is going to be about sustainability.”

Christopher Swope is managing editor of Citiscope.

Image credit: Dennis Tarnay, Jr. / Alamy

This article originally appeared at Citiscope.org. Citiscope is a nonprofit news outlet that covers innovations in cities around the world. More at Citiscope.org.