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Leading the Transition: delivering cities for a low-carbon world

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Office blocks lit up at night in Hong Kong, China

By Kookie Habtegaber

As world leaders and their negotiators make the final push for agreement at the Paris summit, any outcome will need to be implemented through the lens of urban living. Cities are already home to 50% of the world’s population, generate around 80% of global economic output and account for 70% of greenhouses gases. Moreover, this trend is set to continue.

How we finance the transition to sustainable cities will therefore play a leading – if unsung – part of mitigating the impacts of climate change. With this in mind, WWF commissioned a study entitled: Financing the Transition: Sustainable Infrastructure in Cities (read the summary here).

While post-Paris reaction will focus on the multi-billion dollar equity flows between rich and poor economies to help finance such a transition, the striking finding of our study was that a lack of investible projects is already threatening sustainable investment at scale. So while making the necessary funds available is a necessary condition, it’s not sufficient in itself to deliver climate proof infrastructure and building resilient future.

Large investors will only commit a greater share of their resources to infrastructure if they trust and have confidence in the project providers’ ability to contract and manage their finances responsibly. Such responsibilities include, ascertaining funding streams and understanding private sector financing.

The study makes clear that meeting the criteria of investors to fund sustainable infrastructure requires a shift in approach on the part of governments (national and regional) and city municipalities themselves. In particular, a ‘product and marketing’ approach is needed to help cities focus on project preparation and financing structure as such that infrastructure needs meet investors’ risk-return requirements.

In parallel, cities should also aim to strengthen investor confidence by improving the transparency, accountability and sustainability of public finances as well as the efficiency of planning and procurement processes and procedures.

Central governments need to support cities in realising the above while multilateral and national development banks can share expertise in designing and structuring infrastructure projects across and within sectors. For their part, cities should increase and improve collaboration between departments in charge of sustainability, environmental services and energy and those in charge of planning, finances and procurement to help find gaps.

The good news is there are financing instruments today that could be used to fund sustainable infrastructure provided the institutional setup and project development are right. While some instruments are better suited than others, they nonetheless provide solid backdrop to deliver immediate action in investment. Our research identified four immediate areas that can help in scaling up financing for sustainable infrastructure (see figure below).

Fig 1

Figure 1 What Next for Sustainable Infrastructure

Above all, decisions about sort of infrastructure we build will have an immediate and both lasting impact on humanity’s ability to tackle and adapt to climate change. And as Douglass North, Economist, put it succinctly: “To predict the future we would have to know today what we will learn tomorrow which will shape our future actions”.

Find the Full Report here and the summary here.

Kookie Habtegaber is Global Lead Green Economy for WWF International.

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