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In the Housing and Urban Development Division of the IDB, we have organized the webinar series “Cities in Latin America and the Caribbean as Catalysts for Climate Action Post-COP28” to support municipalities in the region in understanding the opportunities and challenges of climate change management in the urban agenda, delving into aspects of governance, gender and equity, and financing.
The first webinar highlighted the importance of multi-level coordination to drive climate action in cities; the second meeting delved into the need for mainstreaming climate equity in the urban agenda; and the third and final meeting, held on April 3rd, addressed the importance of mobilizing resources and promoting climate financing at the subnational level for the construction of resilient urban environments and for the advancement of national and global climate goals. We share here its recording:
Challenges and opportunities for accessing subnational climate financing
The financing gap is one of the main challenges to undertake climate actions in cities. Globally, cities received less than 8% of the climate finance they require each year during the period 2017 and 2018 [1].
Some of the main barriers to accessing subnational climate finance are institutional weakness, limited municipal technical capacities, the complexity of integrating climate plans with other development and land use plans, the lack of urban-scale climate studies to guide the development of climate plans and investments, the difficulties in designing bankable projects and budgeting investments, as well as ensuring alignment with national policies.
To address the financial challenges of climate change at the local level, it is necessary to align local climate plans with urban development, integrating Nationally Determined Contributions (NDCs) and national policies. It is essential to establish a roadmap with priority interventions, strengthen the institutional capacity of cities, and improve the collection of climate data. Additionally, it is crucial to develop attractive projects for investors, seek external financing (such as climate funds), and explore innovative financial instruments, such as municipal green bonds, to ensure long-term sustainability.
The good news is that global and regional organizations, as well as financing entities (MDBs, green funds, etc.), have developed initiatives and actions to strengthen the capacities of subnational governments, create conditions that incentivize private investment, and support the preparation of projects that can be financed by banks and multilateral organizations, being particularly attractive those with high potential for financial return. These are some of the resources and initiatives mentioned during the webinar:
- Financial Instruments Toolkit
- Project Preparation Resource Directory
- Financial Aggregation Blueprints for Urban Climate Infrastructure
- CityWorks: Localising Global Agendas
- FAST-Infra Label
- NetZeroCities resources
- APEX: An Investment Planning App for Cities
Climate action in citiesBottom of Form
City of Mendoza, Argentina. Mendoza has incorporated the climate perspective across its municipal budget. The municipality stands out for its vision of being a sustainable city, with social inclusion and environmental care, as well as collaborative work between the Environment and Finance secretariats to mainstream climate action in municipal projects. The municipality allocated 51% of its 2023 budget to climate financing, enabling its application to a United Nations fund, along with national grants and support from the Global Environment Facility (GEF). Additionally, they are working on structuring a green bond to finance research for a solar park project. A green fund has also been created to finance research projects for climate management in the city.
State of Baja California, Mexico. To address water supply backlog in the State of Baja California, Mexico, the State Government recently approved the issuance of a 3 billion Mexican pesos green bond. With water storage levels below 30%, the State Government of Baja California sought to ensure supply using a sustainable approach. The green bond was backed by US federal, Mexican federal, and private funds, totaling 9 billion Mexican pesos for treatment, desalination, and more projects. The associated benefits have been significant enough to overcome the challenges associated with its structuring. Better rates, grace periods, and warranty conditions have been achieved, tripling the investment made. The State has also implemented an interesting management model by creating a technical financing committee, a repayment model for water operators with commercial, financial, and governance performance indicators, and a revolving investment model that promotes permanent investment. With a green approach, Baja California is moving towards sustainable water management, guided by performance indicators and environmental monitoring.
To promote access to subnational climate financing, it is essential to strengthen capacities for the generation of solid projects, as well as to promote multi-level coordination and private sector participation in the search for innovative financing mechanisms to drive climate action at the local level.
[1] https://www.climatepolicyinitiative.org/wp-content/uploads/2023/11/Executive-Summary_Accelerating-Urban-Climate-Finance-in-Low-and-Middle-Income-Economies.pdf
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