Global investment in infrastructure falls short by more than US$1 trillion every year. The investment gap is especially acute in cities of the global south, where both populations and economies are growing rapidly. With a few exceptions such as China, neither government budgets nor international aid are sufficient to meet this shortfall. Private investors have been largely unwilling to fill the financing gap due to the high risks, low returns and imperfect information associated with many infrastructure investments. It is even harder to raise the incremental investment associated with lower carbon or more climate resilient options, let alone overcome the non-economic barriers to financing climate-compatible cities.
In light of this growing issue, and the growing acknowledgement of the importance of cities on taking action on climate change, one of the key aims at the Cities IPCC - Cities and Climate Change Science Conference was to identify major evidence gaps that constrain investment in lower carbon, more climate resilient urban developments (A background paper to the conference on Financing Low-Carbon, Climate-Resilient Cities, can be found here).
Given this targeted outcome, the Coalition for Urban Transitions organised a panel session at the Conference on Raising and Steering Finance for Climate Action in Cities with the objective of identifying priority areas for future research in order to address critical evidence gaps; and facilitating collaboration among researchers, practitioners and financiers to improve the relevance of research and uptake of evidence.
The main outcomes of the panel discussion were:
- Cities are finding that lower-carbon and more climate-resilient options typically have higher upfront costs than conventional systems, which is leading to a substantial infrastructure deficit (>$1 trillion) that must be filled to reduce their vulnerability to the effects of climate change.
- Public resources- particularly in the global south, are currently insufficient to fill the infrastructure gap. Therefore, to ensure the infrasture deficit is met, public resources must be used in new ways, such as: leveraging private finance by improving the risk-return profiles of different projects or improving the bankability of projects and creditworthiness of investment entities to reduce the costs of capital.
- Central and city governments have a range of different financing and funding instruments available to them, which can be used in different combinations to ensure fiscal sustainability. But governments scope to deploy these varies substantially, so there is a need to improve their urban finance readiness over time through concerted efforts to improve public financial management, build project preparation skills and provide policy certainty.
- National governments must empower cities to deploy a wider range of financing instruments; create an enabling environment for private investment; and establish policies and regulations that steer finance towards low-carbon, climate-resilient options.
Sarah Colenbrander - Coalition for Urban Transitions and the International Institute for Environment and Development (Session Chair)
Aniruddha Dasgupta - WRI Ross Centre for Sustainable Cities (Keynote)
Andrew Sudmant - University of Leeds
Manisha Gulati - C40 Cities Finance Facility
Günter Meinert - Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ)
David Jackson - UNCDF
You can find further information on what happened at the Cities IPCC Conference here