Sustainable cities: It's (not) the finance, stupid

Published on Friday, 23 February 2018

Published by Renard Teipelke on Friday, 23 February 2018

Singapore is a rare example of an Asian city that can handle a lot of urban investment.
Singapore is a rare example of an Asian city that can handle a lot of urban investment.

Last week, the most important global conference on sustainable urban development and human settlements the World Urban Forum, concluded in Kuala Lumpur, Malaysia.

With about 22,000 members of the public and private sector as well as civil society from 165 countries participating in several hundred events, it’s difficult to single out just one conclusion on which direction the global community is moving in the implementation of the New Urban Agenda, which was agreed at the 2016 Habitat III Conference in Quito, Ecuador.

But I managed to extract two takeaways: there is enough money available to fund well-prepared projects, and we need to swiftly move from discussing global agendas to actually implementing them through urban development actions.

First, it’s (not) the finance, stupid.

For many years, there has been a chicken-or-egg conundrum about the lack of finance for bankable urban infrastructure projects. A consensus is building that the answer points toward the chicken, not the egg. This means that there is actually no lack of finance (eggs).

Instead, there is an abundance of capital looking for (risk-mitigated) assets to invest in, while specialized climate and green funds underperform due to a lack of actual disbursement to sustainable infrastructure projects. Although various aspects around project finance are complex and there are huge investment needs linked for instance to the Sustainable Development Goals (SDGs), the focus more and more shifts to project owners’ (chickens’) capacities as the key issue to address.

  Enough money available to fund bankable urban development projects

We clearly need to support governments—particularly provincial and municipal administrations—to improve their systems and processes for budgeting, taxation, as well as their strategic and investment planning. Support by the Cities Development Initiative for Asia (CDIA) or the GIZ C40 Cities Finance Facility is addressing these bottlenecks, but there is still not enough funding available for this very un-commercial technical assistance.

India and other developing countries have tested direct development loans and guarantees to sub-national governments, development funds, and municipal companies. But extending the availability of and access to such sub-national, sub-sovereign financing instruments for local infrastructure projects will go nowhere unless provincial and local governments and their agencies on the demand side are ready to properly apply for and utilize such instruments.

Besides a few countries and large urban centers, the vast majority of small and medium-sized cities in Asia and the Pacific still have a long way to go before they can properly handle even single-sector infrastructure project loans on-lent from central governments. Being able to manage these “traditional” projects better would give local governments the track record and systems necessary to gradually develop their creditworthiness in order to access more sophisticated finance instruments and sources.

It would also enable them to better handle integrated interventions that are key to implement the multi-sector objectives of the New Urban Agenda and the SDGs.

A second theme I noticed at the World Urban Forum was speakers’ recurring reference to “try-storm instead of brain-storm”.

Of course, proper strategizing in urban planning should not be replaced by shortsighted actions. But city mayors and government representatives underscored that the myriad of global agendas, agreements, and frameworks require one thing in particular: to start implementing them.

  Want resilient cities? ’Try-storm’ instead of brain-storming

Some practitioners felt that the discussion about indicators to monitor the whole New Urban Agenda or the SDGs distracts attention from the far more challenging and urgent tasks of improving urban lives in the various action areas. These include equitable access to basic urban services or improved community resilience against climate change and natural disasters, among others.

One way to implement competitive collaboration is through expert pools or similar retainer systems where qualified firms, organizations, and individuals are selected for a cross-sectoral program or initiative. A platform/network facilitates regular knowledge exchange, while capacity development and technical work are solicited pro-bono or via individual contract bids. This approach has been used by the EU’s climate innovation initiative Climate-KIC, the Rockefeller Foundation’s 100 Resilient Cities network, and similarly by ADB with its indefinite delivery contracts involving retention without commitment.

The notion of “try-storming” acknowledges the complexity of localizing and implementing global agendas.

Many events at the conference repeated a common mistake of focusing too much on success stories. Fortunately, some event moderators chose more intimate formats so participants could share their stories about failed attempts and lessons learned before they eventually arrived at the stories that are typically marketed in brochures.

This brings us back to my first takeaway about finance availability versus project bankability. It helps to hear from city mayors about their problems in strategically prioritizing investments, checking their feasibility, and mastering implementation-ready project preparation.

This is the focus area where more support is needed, favoring “try-storming” to get things implemented, and using creative minds in competitive collaboration to match local governments with the best partners.