This year’s finance plenary was optimistic. All panelists agreed that we are finally living the true naissance of resilience and adaptation funding. But we are still not making adequate haste – especially considering that much of our collective available financial resources is sitting idle.
Session name: Financing the Resilient City: Progress Toward Bottom-Up Finance Approaches. Strategy Panel.
There is a matchmaking gap and a silo problem. Different stakeholders aren’t communicating effectively and the divide between public and private is still overly demarcated. Integrated planning and multi-stakeholder processes are in dire demand, which is not yet fully grasped throughout society and among decision makers. Simultaneously however, financial institutions, private investors and reinsurers have definitely begun to realize not only the necessity of resilience and adaptation funding, but also the opportunities and risk reduction encompassed. It is thus clear that the global community has come a long way since, for example, Resilient Cities three years ago, when:
“Everyone in the finance plenary panel were trying to be able to say something about it.”
These themes and words were uttered by facilitator Jeb Brugmann (Managing Partner, The Next Practice; Founder of ICLEI) already in the beginning of the plenary, and would turn out to prophetically summarize all that was to follow.
In terms of instruments, bonds were the focal point of the session. Upon David Jackson’s (Director Local Development Finance Practice, United Nations Capital Development Fund (UNCDF)) warning against the common practice of looking at green bonds as a panacea (they have limits and in some cases un-earmarked grants from national governments to their local counterparts are better), Sean Kidney (CEO, Climate Bonds Initiative, London) agreed but gave the proposed solution of bundling, since “the bond market is no good for small bonds – scale is required”. He also noted how we are currently seeing explosive growth in such bonds, twenty-folding in the last two years:
“The world is awash in capital! This is the age of bonds. Interest rates are at historical lows. Now is the time to for local governments to issue them. In five or six years the rates will have risen much again.”
To enhance matchmaking, Monali Ranade (Senior Environmental Specialist, World Bank, Washington D.C) calls for new mechanisms aimed at increasing the creditworthiness of local governments, ensuring investors that money will go were advertised – and also be repaid. She also told of how the World Bank is slowly but steadily mainstreaming climate change considerations into all of its programs. Matchmaking efforts are also championed by the Rockefeller Foundation’s 100 Resilient Cities” project, Bryna Lipper (Vice President, 100 Resilient Cities, New York) enthused:
“The big idea behind the project is: How do we organize the financial market to respond to the needs of the cities? And vice versa, because external financing is not viable unless you have the right legislative and policy environment.”
These matchmaking issues were also touched upon in the audience-induced discussions, which focused mainly on the reinsurance industry and concluded that reinsurers not only are important actors in their own right but also important asset managers (investors) and, which is often overlooked, professional research institutions producing data valuable to us all.
Lipper also advertised the project’s own financing quests, for example providing initial funding for cities to hire Resiliency Officers reporting directly to mayors. This initiative went well in line with what David Dodman (Senior Researcher, International Institute for Environment and Development (IIED), London) passionately recommended:
“We need to remember that we need to finance not only resilient infrastructure but also resilient agents and resilient institutions.”
In conjunction to this, Dodman elaborated on how decentralized funds for local adaptation work especially well in low-income urban areas if they consist of small weekly payments by residents and additional support from international funding. And perhaps the issue of the small scale of such initiatives can be addressed through their increasingly strong record. As Daniel Wiener (CEO, ecos, Chairman, Global Infrastructure Basel (GIB)) said:
“Sustainability de-risks projects”
Furthermore, local governments giving resilience funding more attention can help them also with their mitigation efforts, of course since there is overlap but mainly, then, because of branding issues: the public often responds better to resilience planning than to mitigation efforts with their seemingly much further-off benefits. Deploying such a strategy is a must, Weiner implored, because it is very problematic that cities tend to need a Hurrican Sandy in order to get off their feet.
All in all, opportunities seem to abound as much as challenges do. Throughout the session, ICLEI Secretary General Gino van Begin urged panelists and audience not to underestimate the latter category.
“Low-carbon solutions are still not equally costly as or, better yet, less costly than traditional infrastructure investment options.”
van Begin stressed that the interlinkages and tipping-point criteria needed to be fulfilled are very complex and that it is clear that resilience and adaptation funding is still in its very infancy. He was however very optimistic on the leader roles now being taken on by the big development banks and the multilateral financial institutions.
Speaking of leaders, there are cities that already are setting very positive examples even on how to sourcing resilience and adaptation finance from ther own financing mechanisms and revenue streams – cities such as Surrey, British Columbia, Canada, represented in the panel by Mayor Dianne Watts, show that it is possible.
Student, Lund University