Creating a Common Narrative for Financing a Sustainable Urban Future
This blog post is co-authored by Mark Watts, executive director of C40, and Brandee McHale, president of Citi Foundation and director of corporate citizenship.
Good ideas that get cities results are worth replicating. Sounds simple enough. But when it comes to scaling up and investing in sustainable urban solutions, it’s complicated.
With more than 400 cities making commitments to climate action through the Compact of Mayors, the world made significant progress at the UN Climate Change Conference (COP21) last year in Paris. Now that the negotiations are over and the commitments have been made, we face the challenge of financing and implementing sustainable urban projects that will improve the quality of life for residents and turn this collective vision into a reality.
WRI Ross Center for Sustainable Cities, C40 and the Citi Foundation are partnering together to help cities around the world accelerate the implementation of low-carbon urban solutions. By drawing on WRI’s on-the-ground knowledge, C40’s unique network of global city leaders and the Citi Foundation’s agenda for urban economic progress, the Financing Sustainable Cities Initiative is developing new approaches to overcoming what is commonly, but mistakenly, seen as simply a financing gap.
Recent economic research estimates a $4.1 to 4.3 trillion annual investment gap between the urban infrastructure we have and the amount we need. According to the traditional narrative, there is simply insufficient supply and financial appetite for sustainable urban projects. However, the situation is much more complex. Demand for sustainable solutions is growing, and investor appetite for new markets and non-traditional assets is increasing as well. So why is funding for sustainable urban projects often stuck at an impasse?
What really seems to be happening here is that these two sides are talking past each other. On the one hand, cities claim there is a lack of available financing for their projects. On the other hand, capital providers say that there isn’t a robust enough pipeline of viable, bankable projects. Without a common language and a forum for cities, service providers and capital providers to engage with one another in productive dialogue, potential projects become stalled during the idea phase, reinforcing the belief that there is a lack of financing or bankable urban projects.
Fortunately, we know that there are already a number of successful projects around the world that are delivering, funding and financing leading sustainable solutions in innovative ways. From on-demand rickshaws in Bangalore to energy efficient public lighting in Rio de Janeiro, this kind of innovation is the result of service providers, capital providers and cities talking with one another about technical and financial options that are available. Often, key players in the sector simply don't know how public-private partnerships can help or how new financial products can provide alternative sources of investment. A process that is collaborative from the beginning is more likely to find innovative solutions to complex local challenges.
Bogotá's TransMilenio bus rapid transit (BRT) system, for example, shows how capital providers and city planners were able to finance and implement a low-carbon project at an unprecedented scale. Since 2000, TransMilenio has grown from 14 kilometers (km) to 112 km (8.7 miles to 70 miles) of dedicated bus lanes that now carry 2 million passengers per day. By successfully aligning all stakeholders early, TransMilenio adopted a business model that drew investment from local sources and established a public-private partnership to manage operations. With integrated, collaborative planning and all sectors taking part in financing and implementing the BRT project, Bogotá has become healthier and more sustainable in the long term. The Colombian capital is proof that potentially game-changing solutions exist. However, cities need the mechanisms to explore flexible business models that take into account their unique needs.
Creating a global environment that is conducive to investment in sustainable urban projects will require close collaboration and open dialogue between cities, technology providers and capital providers. The Financing Sustainable Cities Initiative—which consists of a learning community, technical assistance and a web-based engagement platform—is designed to help city decision-makers, financiers and technical experts better understand their choices and work with one another strategically. By facilitating knowledge sharing and best practice, and creating a space for innovation, the partnership between WRI, C40 and the Citi Foundation is helping to foster a conversation today for the thriving, sustainable cities of tomorrow.