Financing a post COVID-19 economy that’s green and inclusive

Cities are bearing the brunt of the combined effects of global warming and COVID-19. And far too many are contending with everything from limited health care systems to inadequate water sanitation services and transport systems to having enough space for public recreation and social distancing. 

“These challenges are magnified in poorer communities where the pandemic has exposed deeply rooted inequalities. And women and those employed in informal sectors are shouldering the heaviest burden,” observed Michelle Gyles-McDonnough, Director of the Sustainable Development Unit with the Executive Office of the UN Secretary General, during this week’s plenary on Driving Green Recovery at Daring Cities 2020.

She added that cities need to get past just talking about building back better and actively pursue the financing needed to transform their economies from grey to green, leading to change “that is inclusive and gender equal.” 

To give an idea of just how enormous the world’s sustainable transition will be, Gerry Muscat, head of the European Investment Bank’s Urban Development division said they’ve set a goal of raising 100 million Euros for gap funding – just for cities in developing and emerging countries. And those funds are intended to pay exclusively for the technical support and advice cities need in the early stages of their projects. “So it’s for expertise and not (actual) project funds,” he emphasized. 

The fund – called the City Climate Gap Fund – is meant to attract the money needed to fund these city projects. Their mandate is to “turn resilient low-carbon ideas into strategies and finance ready projects.” Should they reach their target of raising 100 million Euros, these funds will be used to leverage an estimated 4 billion Euros in investment for urban climate action. 

To qualify for this early stage support, Muscat said the gap fund advisors “want to see evidence that the city is backing and committed to the project.” While acknowledging there may often be spin-off social benefits to getting these projects off the ground, he said the number one criteria of the fund is to “support projects that have a climate impact,” tied to such goals as urban greening, improving urban mobility, creating more affordable housing, water and sewage system enhancements and supporting climate adaptation projects.

Peter Kurtz, Mayor of the City of Mannheim, Germany said that initiatives such as the European Green Deal should not only be viewed as an environmental or economic project, but a cultural one as well. “Efficiency is not enough,” he said, offering that moving forward we need to push for “the reorientation of the economy towards the common good… putting the health and quality of life of current and future generations at the center,” of what comes next. 

Kurtz, whose city in partnership with ICLEI recently hosted the 9th European Conference on Sustainable Cities and Towns, said there’s still a lack of awareness surrounding the decisive role cities need to play “particularly at the national level” with respect to sustainability initiatives.

Another institution involved in closing the investment gap for urban subnational climate projects and infrastructure around the world, is the Climate Finance Leadership Alliance. Barbara Buchner, Executive Director for Climate Policy Initiatives, represented the alliance in the session. She joked that the Alliance organization is a “closely guarded secret”, one with over 60 contributing members that includes not only the European Investment Bank, but also such noteworthy organizations as Bloomberg Philanthropies, C40 Cities, the Global Covenant of Mayors and ICLEI. 

Not unlike the European Investment Bank, Buchner said the Alliance is focussed on having an outsized impact with the funds and expertise they make available for promising city projects. “We need to make sure we use the funds most effectively to catalyze and leverage private investment.” An added challenge Buchner said, is “we need to make the private sector part of this conversation… and at the moment we’re not there.” 

As a way to incentivize more private financial institutions to get on board, and demonstrate that the public sector is also able to bring funds to the table, she said “we need to come up with innovative new financial sources and business models that can unlock and attract investment funds from the private sector,” alluding to such options as crowd sourced funding and the issuing of green bonds. 

The Alliance’s overarching goal Buchner said, is to “develop pipelines of bankable projects” that empower cities to achieve their climate action goals, while at the same time “create jobs and really help (contribute to) a sustainable recovery.”

For cities around the world, many challenges still lie ahead, including finding the additional financing needed to better cope with the dual challenges of COVID-19 and climate change. However on a more encouraging note, session chair Yunus Arikan, ICLEI’s Director of Global Advocacy said that after years of concerted effort… the voices of cities are finally being heard. 

In the 90’s when the UN’s Framework Convention on Climate Change was initiated, “there was no reference to local government,” Arikan recalled. Fast forward to the UN’s 2007 Climate Change Conference “and we started with three goals for local government to recognize, engage and empower.” Building on those goals at the 2015 Paris Agreement, he said for the first time local government representatives were actively engaged in coming up with measures and targets to limit greenhouse gas emissions.  

“And now (cities) have completed the cycle of empowerment through capacity building and financing… so in this era of next year’s implementation with next year’s COP-26… we can be confident that we will be running faster.” 

And for many cities, no doubt find a way to recover from the current challenges sooner.