Project Preparation Glossary
Table of Contents
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.
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.
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).
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.
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.
benefit from different alternatives.
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.
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.
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.
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.
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.
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.
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.
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.
Technical Assistance to Support Project Definition: See Technical Assistance (TA) definition.