Project Preparation Glossary

Table of Contents

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About

This glossary defines terms commonly used by Project Preparation Facilities or to describe project preparation activities. The definitions were developed through consultations with the Alliance’s Project Preparation Action Group and referencing related resources such as the ICLEI Climate Finance Glossary, the CPI Global Landscape of Climate Finance Methodology, the APMG PPP Certification Guide Glossary, and the Investopedia Financial Terms Dictionary. The glossary provides a common definition for terms as used by Alliance members in a project preparation context. It does not attempt to be comprehensive or reflect how terms are used in other contexts.

For general resources on project preparation, see the Project Preparation Action Group’s resources page. See the Green City Finance Directory for a list of Project Preparation Facilities and resources for cities climate-related infrastructure projects.

Glossary

General Terms

Adaptation Measures: Activities aimed at reducing the vulnerability of human or natural systems to the impacts of climate change and climate-related risks, by maintaining or increasing adaptive capacity and resilience. Climate resilience and adaptation are terms often used interchangeably.

Bankable: To be bankable, a project must be able to secure financing through equity or debt from public or private sources. A first pre-condition to bankability is a suitable project preparation. A financier will consider a project bankable when it has a high probability of success and is expected to generate sufficient cash flows to cover its costs and recover the investment or if the project is going to be implemented by a creditworthy public entity. The risk-return profile of a project is the key to bankability. Though the assessment of whether a project is bankable will may differ between specific financiers, they will all need confidence that the project is financially viable and that regulatory, environmental, social, and economic factors are unlikely to prevent the projects from being successfully completed. Also phrased as investment-ready or finance-ready.

Budget: A detailed plan for expenditures needed to implement a project.
CO2-equivalent: A metric measure used to compare the emissions from various greenhouse gases based on their global warming potential, by converting amounts of other gases to the equivalent amount of carbon dioxide with the same global warming potential (CO2-eq).

Capacity Development: Activities that strengthen the capacities of key actors involved in project preparation at the municipal level, including project promoters, municipal administrations, national development banks, and other key actors—at the personal/organizational/institutional/societal level—for topics related to the preparation, financing, and implementation of sustainable urban infrastructure projects, including capacities for technical and legal assessments, assessing project viability and risks, financial structuring, stakeholder consultation, and climate change considerations (see Enabling Environment Development).

Capital Assets: Capital assets include land and land improvements; infrastructures such as roads, bridges, water, and sewer lines; easements; buildings and building improvements; vehicles, machinery, and equipment.
Capital Expenses (CAPEX): Expenditures on tangible capital assets, not easily converted into cash that have an initial useful life extending beyond a single financial reporting period, as well as debt capital repayment.
Climate Action Plan: Local governments design and utilize climate action plans as customized roadmaps for making informed decisions and understanding where and how to achieve the largest and most cost-effective emissions reductions that are in alignment with other municipal goals. Climate action plans, at a minimum, include an inventory of existing emissions, reduction goals or targets, and analyzed and prioritized reduction actions. Ideally, a climate action plan also includes an implementation strategy that identifies required resources and funding mechanisms. Climate action plans also may include adaptation action in addition to mitigation actions.

Climate Action: Activities that contribute to either mitigating climate change (i.e. reducing and/or sequestering greenhouse gas emissions) or to activities that contribute to adapting to the impacts of climate change (see Mitigation; Adaptation Measures).

Climate Change: The long-term change to the earth’s climate driven by increases in human emissions of greenhouse gasses, primarily from the burning of fossil fuels. While climate change will lead to an overall warming of the earth’s climate, the localized impacts will be diverse, including larger weather extremes, disrupted seasonal patterns, changes in precipitation rates and distribution, and sea-level rise.
Climate Finance: Finance that aims to reduce emissions and enhance sinks of greenhouse gases and aims to reduce the vulnerability of, and maintain and increase the resilience of, human and ecological systems to negative climate change impacts.

City: Despite its centrality, there is no globally accepted definition of a city. A city can refer to a geographical subnational jurisdiction (“territory”) such as a community, a town, or a city that is governed by a local authority as the legal entity of public administration. A city can also refer to a built-up area with a single integrated economy regardless of the administrative boundaries or governance structure. In this case, a city’s boundaries are typically identified using population density and built-up area.

Climate Risk and Vulnerability Assessment (CRVA): A comprehensive assessment of a project’s vulnerability to climate change impacts, and the risk of those impacts occurring. Methodologies used for CRVA vary depending on the implementer and the type of project. Assessments will be sector and location-specific and are undertaken at a preliminary stage to inform the design and improve the resiliency of the final project.

Co-benefits/Benefits: Defined as the benefits for the local society and environment because of climate action activities that go beyond tackling climate change. For example, creating compact and walkable cities can reduce the number of cars on the roads, which reduces GHG emissions and improves air quality leading to significant public health benefits. Job creation is a major co-benefit, both directly by the project as well as through improved urban conditions.

Concept Note: A short document outlining the project’s concept, including the identification of a problem, envisaged solutions, timeframe, project developer, targeted beneficiaries, expected outcomes, and expected capital and operating expenditures. The concept note is used to communicate with project preparation funders and/or other interested parties.
Cost-Benefit Analysis: A decision-making tool that allows a comparison of options based on the level of benefit derived and the cost to achieve the
benefit from different alternatives.
Economic Impact: Feasibility of a project that accrues to all members of society in aggregate, whether in the form of financial flows or otherwise, such as reductions in environmental damage.

Eligibility (of projects for support): Set of pre-defined criteria that outlines whether a project can be considered for support or not. Each Project Preparation Facility (PPF) has criteria used to select projects that it will support. The eligibility of a project will differ for each PPF, and cities seeking support for project preparation should as a first step always verify the eligibility criteria of a PPF it may require support from.

Eligible Costs: For grants, funds may only be used for eligible costs which will be specified in the financing documents. For loans by International Financial Institutions (IFIs), only some parts of a project might be eligible for lending (e.g., new e-buses) while others are not (e.g. buying land for bus depots). For tenders, please view eligibility criteria for cost in the respective tender documents.

Environmental and Social Impact Assessment (ESIA): ESIAs are conducted to assess and identify potential adverse social and environmental impacts from a project. The scope and level of detail required will vary depending on the nature of the project and the requirements of the project’s financiers and the relevant governments.
Equity (finance): Investments that give the investor an ownership stake in the project or project company. Equity stakes entitle the investor to revenue from the project and can be sold to another owner. Equity represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debts were paid off. Equity is “junior” to debt (loans and bonds), meaning that if funding to repay financing falls short, debt will be repaid first, making equity higher risk.
Equity (social): Distinct from the financial meaning of equity, in a social context, equity is the inclusion of all in society so they can participate, prosper, and reach their full potential. Due to social, financial, and physical marginalization, equity may require different levels of support for different groups.
Financial Feasibility: Financial feasibility is the ability of a project to repay the financing needed to implement the project from sources such as user fees, subsidies, and grants. A financial feasibility study will identify what financing costs and structures make the project feasible and whether those match what can be expected from financial markets.

Financing: Financing refers to the short, medium, or long-term provision of the funds required to undertake the project (for example, to cover construction costs). Finance for infrastructure projects may be provided by the private sector or by the government, through cash surpluses or borrowings. In some cases, projects are also financed by multilateral or bilateral agencies, International Financial Institutions, and Development Finance Institutions. Instruments used to finance infrastructure projects include grants, loans, concessional loans, and guarantees.

Funding: Funding refers to how the project will ultimately be paid for in the long term. Projects are typically funded through either taxes that fund the project through a subsidy, or user charges creating revenue linked to the service the project provides. In some cases, projects are also partly funded by international development aid through grants.
Grant: Grants are non-repayable funds disbursed by a grantor, or donor, who provides funds to the grantee, or recipient. Grants usually have strict limits on what the funds can be spent on, also referred to as earmarked or conditional grants. Grants do not charge interest and not being repayable unless specific milestones are achieved, reducing the risk for project developers in case of project failure.

Green Jobs: Jobs that directly contribute to climate adaptation or mitigation (e.g. renewable energy construction workers) or other environmental benefits (e.g. ecosystem restoration, improving biodiversity) while providing the workers with decent wages and working conditions.

Greenhouse Gases (GHGs): Natural and industrial gases that trap heat from the Earth and warm the surface. The Kyoto Protocol restricts emissions of six greenhouse gases: natural (carbon dioxide, nitrous oxide, and methane) and industrial (perfluorocarbons, hydrofluorocarbons, and sulfur hexafluoride).
Green Recovery: The COVID-19 pandemic led to a global socioeconomic crisis in addition to the health crisis. Recovery funding can promote an economic recovery that drives progress towards climate goals by concentrating stimulus investments on climate-friendly and sustainable infrastructure while creating co-benefits for employment, well-being, and environmental health. Precise definitions of a green recovery vary between institutions and governments.
International Financial Institution (IFI): An institution set up and capitalized by one or more countries. Prominent IFI’s include multilateral development banks (MDBs) which are funded by multiple countries or international institutions or bilateral institutions established by a single country. IFI’s typically provide investment, in the form of grants, loans, and concessional loans, to cities and local authorities through national governments, though some work directly with cities.
Loan: A debt instrument where a financier provides capital up-front in return for scheduled payments of the loan amount, or principal, plus interest at a pre-negotiated rate. Loans with a lower interest rate than the typical market rate, called concessional loans, can be provided by development finance institutions (DFIs). A loan may also be an open-ended line of credit up to a specified limit or ceiling amount.
Mitigation: Activities aiming at reducing or preventing emissions of greenhouse gases including gases regulated by the Montreal Protocol. Mitigation can mean using new technologies and renewable energies, making older equipment more energy efficient, or changing management practices or consumer behavior.
Monitoring and Evaluation: Monitoring is the ongoing and regular collection of information about project activities. Evaluation is the assessment of whether a project has achieved its goals and identifies causes of failure if it has not.
National Development Banks: National Development Banks, often referred to as National Development Finance Institutions (NDFIs), public banks, policy banks, or promotional banks, are ‘any type of financial institution that a national government fully or partially owns or controls and has been given an explicit legal mandate to reach socioeconomic goals in a region, sector, or market segment’.
Nationally Determined Contribution (NDC): Under the 2015 Paris Agreement, each signatory country prepares, communicates, and maintains successive nationally determined contributions towards the Agreement’s climate change reduction goals that it intends to achieve. The NDCs provide the framework for each country’s GHG emissions reduction efforts that the efforts of national and local governments can be judged against.
Operating Expenses (OPEX): Ongoing expenses for the life of an infrastructure asset, such as staff, purchase of goods and services (e.g. energy, fuels), financial charges, and insurance.
Project Implementation Unit (PIU) / Project Preparation Unit (PPU): A Project Implementation Unit is the team responsible for following up on the implementation of a project. This can be either a specific municipal department, a cross-departmental team of professionals within one municipality, or even an inter-municipal team responsible for and/or the planning, development, implementation, and maintenance of municipal/regional infrastructure projects. To respond to the interdisciplinary nature of (urban low-carbon) infrastructure projects, the PIU is composed of a cross-sectoral team.

Project Application for PPF Support: Most PPFs require a project application or expression of interest to be considered for support. Project applications generally include a concept note describing the identified issues to be addressed by the project, details of the applicant or beneficiary, envisaged activities, any studies that have been previously completed, and a description of the type of support requested.

Project Preparation: The process of defining a project concept, studying and refining that concept to develop it to the point that it can raise financing from public or private sources, becoming bankable (see bankable).

Project Preparation Facilities (PPFs): Organizations, projects, or institutions that support cities in developing bankable, investment-ready projects, typically from the project concept/design/scoping stage up to the financial close. A PPF may provide both technical and/or financial supports to project owners or concessionaires. PPFs can provide a wide range of support depending on a project’s stage and sector. See the Green City Finance Directory for a listing of city and climate-focused PPFs.

Project Structuring: Structuring is the design of the contract and tendering process. The project structure will define the responsibilities of the parties and the mechanisms for financing and risk. The contract is an enforceable document that codifies the project structure. The tendering process is the process the government will use to find a suitable partner for the project.
Procurement: The purchase by a government authority of goods or services. The process for an infrastructure project typically involves the hiring of private firms for the technical design and construction of the project that will be publicly owned. Procurement processes often include tenders and other competitive bidding processes.
Public-Private Partnership (PPP): An arrangement between a public authority and a private partner designed to deliver a public infrastructure project and service under a long-term contract. Under this contract, the private partner bears significant risks and management responsibilities. The public authority makes performance-based payments to the private partner for the provision of the service (e.g. for the availability of a road) or grants the private partner a right to generate revenues from the provision of the service (e.g. tolls from users of a bridge).

Replicability: The potential of a project to be recreated or applied in a new context such as a new location or sector. For example, a financing mechanism that could be used in other cities or countries would be replicable. Replicability is related to scalability (see Scalability) but refers to the ability to implement new projects based on the template of the original rather than scale up the initial project.

Resilience: The capacity of a human or natural system to withstand the impacts of exogenous shocks, and to cope with and/or recover from them while retaining the essential functions of the original system. Resilient infrastructure refers to assets such as roads, bridges, mobile phone towers, and power lines that can withstand multiple external shocks, as defined by the developer or procurer, typically including climate-related hazards. Strengthening the capacity of a system to withstand climate-related shocks or stressors (defined as climate resilience) is where adaptation and resilience intersect.

Scalability: The ability of a project to accommodate additions to its capacity or capabilities and expands its scope of operation. It also deals with its ability to increase in size, volume, quantity, or scope to accommodate unforeseen additional components or features of the project. Scalability is related to replicability (see Replicability) but refers to the ability to scale up the initial project rather than implement new projects based on the template of the original.

Scope of the Project: All activities to be carried out as part of the project. Activities or projects can consist of a standalone project, multiple standalone projects under a larger program, a component of a standalone project, or a program financed through a financial intermediary.
Strategic Environmental Assessment (SEA): A range of analytical and participatory approaches that can help cities integrate environmental considerations into policies, plans, and infrastructure programs and evaluate the interlinkages with economic and social considerations. Strategic Environmental Assessments (SEAs) complement Environmental and Social Impact Assessment (ESIAs) since they are applied at the early planning and decision-making stages, rather than the project level.
Technical Assistance (TA): Non-financial assistance provided by local or international specialists to address specific “technical” project issues. It can take the form of improving or developing project documentation (e.g. studies, plans), sharing information and expertise, instruction, capacity development, the transmission of working knowledge, and consulting services and may also involve the transfer of technical data.
Transaction Preparation: Preparing legal arrangements for financial close, when the full financing needed to build the project is secured.

Sectors

Adaptation and Resilience: Projects that help cities adapt to the adverse effects and impacts of climate change and other shocks (see Adaptation; Resilience) such as heatwaves, flooding, storms, but also pandemics, earthquakes, etc.

Energy Efficiency: Measures that reduce energy use, loss, or intensity with substantial demonstrated GHG emissions reductions compared with a technically and economically viable alternative. These can be implemented by projects to improve existing facilities or replace them with new, more efficient facilities. Examples include improving building insulation, installing more LED light fixtures, and utilizing highly efficient architectural designs or building techniques that enable reduced energy consumption for heating and air conditioning, exceeding available standards, and complying with high energy efficiency certification or rating schemes. Efficiency improvements to fossil fuel-fired power plants are not included in this sector.
Land-Use and Nature-Based Solutions: Solutions that are inspired and supported by nature, which are cost-effective, simultaneously provide environmental, social, and economic benefits and help build resilience. Such solutions bring more, and more diverse, nature and natural features and processes into cities, landscapes, and seascapes, through locally adapted, resource-efficient, and systemic interventions.
Low Carbon Technology (ITC/Open Data): Projects producing components, equipment, or infrastructure dedicated to the renewable and energy efficiency sectors. This sector also includes projects to collect data used to support mitigation and adaptation projects in other sectors and to build the information technology infrastructure needed to support low-carbon economies and infrastructure.
Public and Green Spaces: Public spaces comprise the shared, outdoor spaces such as squares, pedestrian streets, and markets. Urban green spaces include parks, street trees. Projects which improve public spaces and access to urban green space may stand alone or overlap with housing, mobility, and nature-based solutions.
Renewable Energy: Projects that generate electricity or heat through renewable and low emissions technology, such as solar photovoltaic (PV), concentrated solar, solar heating, wind, geothermal, and other technologies such as biofuels and ocean renewable energies. Biomass, Biogas, and hydropower are considered renewable if a project’s GHG emissions reductions are demonstrated compared with technically and economically viable alternatives.
Transport and Mobility: The transport sector is composed of systems that move people and goods. Mobility is the ability to move, regardless of which transportation system is used. Climate-friendly transport includes projects where a modal shift away from road and air is deemed to result in demonstrated GHG emissions reductions compared with a technically and economically viable alternative. Within urban areas, these include a modal shift to non-motorized modes such as bicycles and walking or public transport. Regional and inter-urban projects can include rail improvements resulting in a modal shift for freight and/or passengers, waterways transport resulting in a modal shift for freight and/or passengers, and vehicle electrification and energy-efficiency improvements.
Water, Sanitation, and Waste: The provision of clean drinking water, safe removal, and treatment of wastewater, stormwater management, and the management of solid waste. Mitigation-relevant projects with demonstrated GHG emissions reductions include waste management that reduces methane emissions (e.g., shifting from open dumps and lagoons to municipal/industrial waste (water) treatment, including switching to composting, waste incineration, landfill gas capture, and flaring/power production, etc.), and waste recycling measures with a demonstrated net mitigation benefit. This sector also includes demand-side management activities reducing water consumption or increasing water use efficiency and supply-side management activities enabling, e.g., the expansion of supplies, reducing water losses, or improving cooperation on shared water resources.

Project Stages

Urban Planning/Climate Strategy Preparation: Activities to identify needs, opportunities, and goals to prioritize projects to meet cities’ goals. Adequate planning is essential in identifying and implementing projects that contribute to cities’ long-term goals (see Climate Action Plan).

Enabling Environment Development: Support for non-project-specific capacity and policy development that helps future city projects become bankable through greater municipal capacity and a more supportive enabling and regulatory environment. This can include establishing the legal framework for financing mechanisms as well as process or managerial steps that are more aligned to overcome obstacles during the preparation and implementation of projects. It will also address multiple stakeholders which are involved in the project development process, for example, the private sector, financiers, intermediary bodies, and city administrations. Due to the importance of national governments in creating an enabling environment for cities, support at this stage may be focused on the national government.

Concept/Design/Scoping: The initial phase of preparing a project where the scope of what the project will include is defined and the concept is developed. These can include activities such as identifying the highest priority projects from a climate action plan or identifying the corridor to be served by a public transport project.

Pre-feasibility: An assessment, usually shorter than a feasibility study, that provides early technical considerations on the project’s interventions, justifies why the project’s interventions were chosen instead of other options, and provides a clear overview of the benefits and co-benefits. The pre-feasibility study should give confidence that the project should be assessed in more detail because there seems to be a credible business case and potential for implementation.
Feasibility: A study showing the technical details of the project interventions and proving that these can be implemented from an engineering/technical and economic standpoint. Required levels of detail may vary depending on the funder, the project nature, and the project size.
Structuring and Transactions: The project stage where the prepared project executes the legal steps to secure financing and to procure construction and operation services. This stage includes the commercial and financial close.
Post-implementation: After a project is in operation, post-implementation monitoring and evaluation are used to evaluate if the project is meeting its objects. Post-implementation can also include renegotiation or refinancing depending on the type of financing used.

Supported Activities

Creation of partnerships: Assisting cities in creating partnerships with other organizations that will assist them in designing, implementing, and promoting their projects, or connecting cities to networks for knowledge exchange and peer to peer learning.

Development of Business Case: The business case for the project will describe the problem that the project addresses, how the project would address that problem, the benefits of a project, the anticipated costs, and how the project will recover those costs through either a subsidy or revenue.

Highlighting Project to Private Investors: To secure private financing, cities need to be able to structure and present projects in a way that is of interest to private investors and often need support in making connections with such investors. This is done through project factsheets, conferences, roadshows, online platforms, or project preparation facilities’ networks of contacts.

Investment Finance: Support for cities in accessing finance for their projects, which includes developing a financial options analysis in assessing possibilities and models of financing. This can include the private sector and public sector as well as financing of integral parts of the projects or co-financing, for example, Multilateral Development Banks (MDBs) (see International Financial Institutions), or private investors.

Project Structuring: Structuring is the design of the contract and tendering process. The project structure will define the responsibilities of the parties and the mechanisms for financing and risk. The contract is an enforceable document that codifies the project structure. The tendering process is the process the government will use to find a suitable partner for the project.

Technical Assistance to Support Project Definition: See Technical Assistance (TA) definition.