Standards and SSOs in the contested widening and deepening of financial markets: The arrival of Green Municipal Bonds in Mexico City

Abstract

Particularly since the financial crisis of 2008, much has been written about the growing influence of finance in the development of cities in the global North. Today, financial markets also appear to be expanding southwards. A small but growing number of existing studies on the financialization of Southern cities helpfully explore how international investment changes urban development locally. Yet, they say less about the actors, procedures, and hurdles through which global market expansion is forged and expanded in the first place. In this paper, we examine the role of standards and standards-setting organizations in fostering market expansion and financial deepening. In particular, we highlight the efforts of standards-setting organizations in implementing a novel financial tool, green municipal bonds. Green municipal bonds are debt instruments that allow cities to raise capital through the issuance of bonds exclusively for investment in projects certified as sustainable. First employed by European, Canadian, and US cities, the paper traces the processes that led up to the issuance of these bonds in Mexico City, one of the first municipalities in the so-called ‘emerging markets’ to issue green municipal bonds. Our findings indicate that standards barely impacted project implementation; nevertheless, with the political efforts of standards-setting organizations, standards worked as vehicles through which infrastructures of markets, knowledge, and political support were built, legitimized, and secured. While these processes widened and deepened financialization, they also encountered challenges in terms of the long-term stabilization of these infrastructures and the upkeep of political support.

Climate finance governance: Fit for purpose?

“…The integrity, verification and authority of standards and the efficacy of reporting and disclosure are often context specific, and require evaluation in specific case studies. Hilbrandt and Grubbauer, for example, explore the role of standards and standards‐setting organizations in fostering market expansion and financial deepening in Mexico City, and show that while standards barely impacted project implementation, they did work “as vehicles through which infrastructures of markets, knowledge, and political support were built, legitimized, and secured…[which] widened and deepened financialization” (Hilbrandt & Grubbauer, 2020, 1). Reporting and disclosure, aside from their impact on specific project quality, are technologies of neoliberal, market‐based climate change governance.…”

Treating ecological deficit with debt: The practical and political concerns with green bonds

“…Geographers have shown that methods of evaluating 'green-ness' and creditworthiness are central to the production of risk and surplus value for green bonds (Bigger, 2017;Christophers, 2018b). They have also considered the project level impact of voluntary product standards (Hilbrandt & Grubbauer, 2020) and the relationship between certification and the realisation of financial and environmental value (Bracking, 2015). In the latter case, the question of additionality is drawn into an analysis of value that raises political concerns about fairness and deserts.…”

“…This concern is best demonstrated in the work of Bracking (2015) and Hilbrandt and Grubbauer's (2020) study of standard setting organisations (SSOs). Standards are considered a pivotal piece of market infrastructure even if they cannot fully make things the same (Timmermans & Epstein, 2010).…”

“Everyone wants this market to grow”: The affective post-politics of municipal green bonds

“…Many "regular" bonds, furthermore, have been and continue to be used to fund environmental projects, in the case of cities to create, fund and maintain parks and playgrounds, for land conservation or flooding infrastructure. With the ability to fund projects through regular bond issuances, why are increasing numbers of municipalities in particular across the Global North and increasingly the Global South (Bigger and Millington, 2020;Hilbrandt and Grubbauer, 2020) issuing green bonds? Why create this new financial product, which generates additional reporting and portfolio management work?…”