Cities play a critical role in driving society’s transition toward a low-carbon, climate-resilient, just, and inclusive future. More than half of the world’s population lives in urban areas. Cities consume 78% of the world’s energy and produce more than 60% of its greenhouse gas emissions.
The Role of Finance for Net-Zero Cities
Finance is a key enabler of net-zero transitions of cities, and the challenge to be met is colossal: The C40 cities alone will require annual investments of about USD 50 billion up to 2030 and beyond. If these massive investment flows are to drive structural change in urban areas (and their surrounding regions), their stewards must be enabled to design and deploy financial capital in a way that generates systemic effects.
This is particularly true of municipal governments (particularly the legislative and executive branches) because the financial mechanisms they control have the power to exert great leverage over the stocks and flows of money in cities. But it is also true of a rising number of non-governmental actors dedicated to urban climate finance, such as multi-stakeholder alliances, impact-driven private sector investors, innovation partnerships, and multilateral financial institutions.
Existing Support Offerings Are Stuck in Ineffective Finance Practices
A great many support offerings exist to help these actors get savvier on climate finance, including peer-to-peer learning platforms, technical assistance facilities, training courses, policy support offerings, and concessional finance. Yet, as our research shows, most of these offerings focus on a narrow set of issues and are steeped in traditional mindsets and practices.
For instance, many see the greatest challenges for cities in mobilizing capital, training civil servants, and strengthening project pipelines. While these are important issues to address, they are not, on their own, sufficient to lead to more systemic ways of capital allocation. That’s because they neglect the complexity of city systems and the myriad ways in which a slew of factors inhibits more systemic approaches to climate finance, including culture, decision-making frameworks, approaches to visioning and futuring, institutional structures and governance, ways of collaboration, and modes of citizen participation.
Systemic Investing in Cities
We believe that there is tremendous potential in a more systemic approach to investment programming, deployment, and management in cities. What, exactly, this could look like and how it could be delivered in ways that are both empowering for city stakeholders and complementary to existing offerings is the key question at the heart of our partnership with the Centre for Public Impact and Climate-KIC.
The long-term ambition of this partnership is to establish a centre of competence for systemic investing in cities. The purpose of such a centre would be to support municipal governments and other urban stakeholders in stewarding financial flows to catalyse the net-zero transitions of city-regions. We are currently in an exploratory process to deepen our knowledge of the specific challenges cities face, sharpen our value proposition, and design a first set of service offerings to be piloted by such a centre starting in early 2023.