Takeaways Author: Will Bugler Comments

The fast-paced growth of climate-vulnerable cities around the world, and especially in Asia, has huge implications for the lives of large numbers of people. This realisation is beginning to lead to an increase in climate finance flows to urban areas in low and middle income countries. But how much public money is out there? Which countries are benefiting? And how can these funds have the biggest impact?

These are some of the questions that a recent report by the Overseas Development Institute (ODI) sought to address. The explosion in urban populations, the report notes, presents many challenges from a climate perspective, with demand for resources increasing and more people and property concentrating in climate vulnerable areas.

However the speed of development in many Asian cities also offers opportunities to build climate resilience. If policy-makers have the foresight, then climate resilience can be integrated into planning and development decisions at an early stage.

The scale of the investment opportunity in urban areas is staggering. The ODI report cites a McKinsey Global Institute study[1], that projects that US$ 57 trillion in infrastructure investment will be needed between 2013 and 2030, just to keep pace with expected GDP growth. A significant portion of this colossal pie will be directed to cities.

Despite the vast sums involved, many cities in Asia face considerable barriers to steering investments towards projects that increase climate resilience. This, according to the ODI paper, is where public climate finance can have maximum impact. The authors argue that multilateral climate funds, being only a tiny fraction of total financial flows, should be carefully targeted at helping regional and national governments to overcome the barriers to ensuring climate compatible urban development.

To understand what these barriers are, and where multilateral climate funds can have the most impact, report author Sam Barnard analysed US$ 842 million in approved climate finance directed at cities from 2010-2014.

A shortage of funds

Barnard found that there was a considerable and growing stream of multilateral climate finance for urban areas. In fact one in every ten dollars spent on climate finance was spent in cities. This was primarily driven by increased interest from major funds like the GEF, which has begun to target more funds for urban projects. Similarly, another major funding source, the Green Climate Fund (GCF), has explicitly recognised the many benefits of supporting resilient cities.

However, despite the growing interest in cities, finance for climate resilience and adaptation remains limited. The lion’s share of multilateral climate funds are still channelled to mitigation efforts, helping cities reduce their carbon output. In fact, since 2010, only five projects have been approved through multilateral funds that target urban climate resilience.

Funding for urban areas lags well behind other areas of climate adaptation funding too. The ODI study found that only 5% of the US1.83 billion that was approved for climate adaptation projects was directed to cities. This sliver of funding was mostly directed at just three projects, all funded by the Pilot Programme on Climate Resilience (PPCR).

The fact is that at present the multilateral funds have largely ignored investing in urban climate resilience measures. The lion’s share of the funding has come through other channels, notably from the Rockefeller Foundation, which has supported urban resilience through its 100 Resilient Cities programme, and in Asia through the Asian Cities Climate Change Resilience Network (ACCCRN).

Patterns of public funding for urban resilience

Identifying patterns in urban climate resilience spending through multilateral funds is made difficult due to the small numbers of projects involved. 47 of the 700 projects approved for funding target cities, and 91% of this funding targets climate mitigation.[2]

It is interesting to see, however, that 89% of urban-focussed climate finance was targeted at middle income countries.[3] In part this reflects the fact that more of the climate funds are directed to mitigation, and therefore they have more impact when spent in middle income countries rather than  low income countries. It also shows that at present multilateral climate finance is failing to provide adequate support to the poorest and most vulnerable countries.

Not only were less than 10% of funds channelled to low income countries (LICs) but this sum was dominated by a single US$ 40 million project for coastal infrastructure in Bangladesh (funded through the PPCR).

“There were only two urban mitigation projects approved for LICs. Conversely, there was extremely restricted funding for urban adaptation projects outside of the low-income grouping, although the very small number of urban adaptation projects approved in total means that we cannot not attach this pattern with too much significance.notes the ODI report.

According to Barnard, the lack of funding for urban climate resilience in low income countries may have its routs in the fact that very few urban projects made their way into country submission to the UNFCCC under the National Adaptation Plans of Action (NAPAs). The ones that did, were not given high priority. However, with the increased focus on urban climate change adaptation today one would expect the priorities of climate funds to change and channel more funding into urban resilience in the coming years.

Approaches for impact

The ODI report shows that urban adaptation projects tend to target national governments and comprise a mix of technical assistance and capacity building to compliment hard investments, usually in new infrastructure. Multilateral funding is also tending to attach itself to other established funding flows. For instance the SCCF has provided US $4.6 million to the Government of Vietnam to help municipal planners integrate climate change resilience into their decision-making, topping up US $120 million of finance provided by the Asian Development Bank (ADB).

Given that urban climate resilience funding through multilateral funds is likely to grow considerably in the coming years considering its current low-base, the question presents itself: where should it be spent for the maximum impact?

Barnard’s view is that given that multilateral funding sources will only represent a small proportion of total finance for climate resilience, with vastly more coming from private funding, they should focus on enabling other funding sources, and on areas that are unlikely to get funding.

Specifically Barnard recommends funding to be put towards four areas:

1.     Catalysing action by others

Where possible public climate finance should create the conditions to enable other larger funding sources to scale up. In practice this will often mean public funding being used for early-stage and higher risk projects. The report notes that “this might mean crowding-in further finance for specific infrastructure investments, allowing local intermediaries to employ their own resources to greater effect, or improving the capacities of institutions at different levels to create policy, regulatory and technical environments that steer wider investment towards sustainable urban development.

Barnard goes on to say that often the enabling role of public funds is not realised in practice, and that they should offer incentives to take some of the risk out of climate resilience projects by, for example, providing guarantees.

2.     Developing appropriate access arrangements for reaching the most vulnerable people

Public funding should work to deliver funding to the poorest and most vulnerable. Barnard highlights that there are an increasing number of institutions that which are in a position to channel finance from climate funds. This will offer opportunities to ensure that climate funding can be delivered to those who need it the most, so long as appropriate oversight can be maintained.

3.     Mainstreaming resilience into local governance

The ODI report recommends that the current focus of climate funding on providing support to governments to help them to integrate climate resilience into their existing decision-making process should be continued. However the report also warns that, “such frameworks are only effective to the extent in which they actually influence urban development in practice. Investment strategies must consider political and economic factors at play in any given context and seek to support those actors that can best deliver results on the ground.

4.     Support urban project preparation

The ODI analysis suggests that investment in infrastructure is not being held back by a shortage of liquid capital. Instead it seems that currently private finance does not see enough ‘bankable’ projects to invest in. Multilateral climate funds could help to oil the wheels in these instances by helping to develop business cases for climate-relevant investment projects. Barnard argues that this would have a bigger impact than direct investment in infrastructure.

It is clear that there public climate funding will play a growing role in shaping urban climate resilience and the ODI study highlights some useful areas where multilateral funds can have real impact, even at relatively low levels of funding. In terms of mobilising private finance flows, more work needs to be done to develop investable opportunities in urban climate resilience, as they are far less obvious than for mitigation.


A copy of the report can be accessed through this link

[1] Mckinsey Global Institute (2013). Infrastructure productivity: How to save $1 trillion a year.

[2] Barnard, S. (2015) Climate finance for cities: How can international climate funds best support low-carbon and climate resilient urban development? ODI Working Paper.

[3] Barnard, S. (2015) Climate finance for cities: How can international climate funds best support low-carbon and climate resilient urban development? ODI Working Paper.


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