Cities unlimited: climate finance for a just and green transition
Cities require the most investment and face the biggest risks in the climate emergency. But how can we make sure that they are at the centre of the growing conversation around finance for climate action? The House Live sat down ahead of COP27 with a panel of experts from C40 Cities and WSP to hear what a major new report tells us about unlocking the finance potential of cities to play a greater role in meeting the climate change challenge.
Across the world, cities are places where most people live and work.
The World Bank estimates that 4.4 billion people, some 56% of the world’s population, currently live in cities. This number is forecast to grow, with the urban population set to double in size by 2050.
The sheer scale of urban populations makes cities enormously important as drivers of economic growth, accounting for over 80% of global GDP. However, that economic growth comes with a significant environmental price tag attached. Cities are currently responsible for 70% of global energy-related carbon emissions.
With cities set to grow so substantially in the coming decades, policymakers face a considerable challenge. How can we direct finance to cities so that they reach net zero and adapt to climate risks, including for the Global South?
Some of the answers to this critical question have now been set out in an important new report.
The global climate coalition of mayors, C40 Cities, has released the Banking on a just and green recovery: Lessons from 9 cities report, commissioned by the C40 Cities Finance Facility (whose work is funded in part by the UK Government) and produced by global professional services consultancy WSP. It focuses on nine cities around the world that are finding innovative ways to unlock climate investment—from their own revenue, development banks, private partnerships and beyond.
Mehrnaz Ghojeh, Head of the C40 Cities Finance Facility, believes that the report is an invaluable and timely resource for policymakers. She told The House that urgent action is required, warning that governments cannot afford to ignore the challenge that confronts cities.
“This is not a problem for the future, - it is a problem for today,” she explains. “At a time when there is a significant cost of living crisis, increasing inequality, and severe environmental degradation, governments should take lessons from places that are tackling those agendas simultaneously.”
Whilst the focus of the research is global, the expert team behind the report believes it also has important implications for political leaders in the UK as the nation looks to transition to a net zero economy.
One of the report authors, Peter Hayakawa, Senior Consultant in WSP UK’s Net Zero Cities team, is positive about the role that the UK is already playing on this agenda.
“Despite being constrained, a lot of councils in the UK are actually leading the way,” he explains. Hayakawa cites examples of Islington in North London and Warrington in the North-West, unlocking new city-led climate finance like Community Municipal Investments, where ordinary citizens can invest in net zero projects for as little as £5.
Hayakawa is pleased to see UK Parliamentarians learning from international best practice to help shape domestic policy responses. He agrees with analysis that the wider lessons of the report are important for cities in the UK, particularly when it comes to innovative ways of funding infrastructure. For Hayakawa, this is essential if they are to address the mismatch between the resources cities require and the investment they can currently access.
“Globally, cities need $4.5 trillion a year in investment to create the infrastructure they need to meet the climate emergency, according to the Cities Climate Finance Leadership Alliance” he explains. “Cities get less than 10% of what they need at the moment.”
Closing that gap presents a significant challenge to governments around the world, particularly with growing pressure on public spending. However, Aris Moro from C40 Cities believes that in addition to new resources, more can be done to align current investment streams in a way that places climate at the heart of all investment decisions.
“Net zero requires a systemic change in the way that things are done,” Moro tells us. “It requires strong short- and medium-term plans. That in turn requires cities across the world to have a clear sense of what they will look like in 2050 and how they will operate. No one is exempt. UK cities will have to do the same.”
WSP’s Peter Hayakawa shares Moro’s analysis that attaching a ‘climate’ label to specific strands of investment is often unhelpful. It ignores the fact that all infrastructure investment needs to actively address the environmental challenges that the planet faces.
“All finance needs to be climate finance,” he says simply. “Every decision that cities make and all of the funding that cities get from central government must have net zero and preparation for adaptation risk in mind.”
And although this is often seen as a ‘cost’, Hayakawa is convinced that we are getting better at understanding the wider benefits and investment opportunities that flow from this investment, - for example, savings to health services delivered by cleaner air that result from new transport solutions.
“We are on the cusp of being able to monetise and market the benefits of reducing emissions and protecting infrastructure and livelihoods,” he says. “We need to change how success is measured.”
Mehrnaz Ghojeh is confident that a more holistic understanding of the costs and benefits of investments in climate action can deliver economic as well as social and environmental goals.
“Increasingly there is a wider socio-economic argument to investing in climate action,” she tells us. “New jobs, reduced health spend. The evidence is clear. Every time you take action that invests in climate-linked infrastructure, you are setting yourself up for the economy that is coming.”
As UK cities plan for tomorrow’s economy, they require new financial approaches that can help them resource the net zero transition. But, if they get this right, then communities, cities, the nation, and the planet could turn out to be the real winners.
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