Sustainable urbanization comes with a high price tag. Fortunately for urban leaders, there is a wide spectrum of financing on offer. They just have to learn how to tap into it.
In a World Economic Forum article, three urban financing experts – Robert Muggah, Okan Geray and Kari Aina Eik, all members of the Global Council on SDG 11 – make a compelling case for innovative urban financing.
“Much like the evolving climate-finance architecture, it is time to start thinking about a more coherent urban finance ecosystem,” argue the authors. This is particularly the case for fast-growing cities in the Americas, Africa and Asia, many of which do not have a credit-rating score and have difficulties convincing national authorities to provide collateral.
According to the article, cities can tap into a massive supply of capital to finance their urban projects. These include traditional sources such as pension, sovereign and insurance funds and endowments, as well as new ones like the growing number of impact investors who want to invest in socially and environmentally responsible projects while still generating a respectable return on their investments.
Multinational banks are also getting involved in urban financing, by de-risking investments for private investors, fostering public-private partnerships or providing concessional finance. Closer to home, cities are also turning to domestic sources of financing, such privatising under-used assets and even crowdsourcing.
But cities will also have to become more creative in how they work with the national governments to unlock urban financing. The authors also recommend that city authorities consolidate project pipelines to make them attractive to foreign and domestic investors and develop new mechanisms that match the potential supply of finances with the demand from city-based projects.
Image credit: Andreas Wecker via Flickr