Cities Climate Finance Leadership Alliance lays out how cities and sub-national bodies can finance solutions to climate change

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10th November 2016 – Cities and other sub-national bodies can and should take advantage of upcoming investments in urban development and find climate finance solutions to play a major role in tackling climate change, according to a new report released today.

The report by the Cities Climate Finance Leadership Alliance (CCFLA) and partners looks at subnational and local climate finance activities and pinpoints gaps that require urgent attention to harness subnational and city-level climate responses. http://www.citiesclimatefinance.org/

Cities, as population epicenters, account for three-quarters of the world’s energy use and some 70% of the world’s carbon emissions. These figures are likely to increase if no action is taken, with around 60% of people expected to live in urban areas by 2030, according to the United Nations. Subnational and city actors have shown commitments by submitting pledges to the Non-State Actor Zone for Climate Action (NAZCA) Platform, but they can do much more, the report finds.

Although great efforts are being made to align the financial system with sustainable development, trillions of dollars still need to be mobilized to meet the Sustainable Development Goals (SDGs) and the Paris Agreement, and to overcome the financing barriers at the subnational and city levels.
The scoping report calls for deeper analysis of the projects and financing currently available at a sub-national level. Having a greater understanding of the best practices currently being implemented will help to overcome barriers and further reduce financial risk. The report finds that major advances need to be made in order to create incentives for investment in local resilience. This in turn will then support local and subnational governments in building fiscal autonomy, integrating and further adopting standards, operational frameworks and measurement tools.

The CCFLA also calls for more training and awareness building initiatives and to further explore derisking instruments and dynamics aiming at reducing the perception of risk, aiming to both empower local and subnational governments to understand the environment and players, and responsible investors to adapt to local needs in order to better catalyze climate finance flows.

The report was developed in partnership with Climate-KIC, FMDV, R20 Regions of Climate Action and UN Environment.

Report: Key facts
• Global momentum towards addressing the funding gap for resilient and low carbon investment at local level: about 80 initiatives covering the whole financing chain of local climate actions.

• Investment readiness activities are at the core of CCFLA members’ initiatives: Almost 50% of the initiatives focus on bridging the readiness gap by supporting PPF focusing on pre-feasibility studies; associated with urban infrastructure planning and climate actions plans

• Particularly, early stage project development is a priority in CCFLA members’ delivery, confirming that readiness and upstream phases are crucial to feed the pipeline of projects available for investment, and in particular those of interest to private investors.

• A CCFLA contribution to the acceleration of project preparation support. In 2016, The CCFLA Scoping Report on subnational and local climate finance highlights the valuable work of the Alliance members related to project preparation facilities (PPF) with the aim of contributing, through greater cooperation and awareness raising, to accelerate replication and innovation of such facilities.

• Among the initiatives presented, over 32 % involve at least 3 CCFLA members and 29% involve 2 members demonstrating the relevance of the existing CCFLA partnership.

• Over 30 announcements for COP 22 have been proposed by Members evidencing an important effort to share expertise, experiences and financial solutions addressed to localize climate finance.

• The existing financial engineering supports the development of urban climate strategies into concrete urban investment projects, including climate co-benefits and risk management perspectives.

• A lot remains to be done to support local and subnational governments in building fiscal autonomy, integrating and further adopting standards, operational frameworks and measurement tools. Active support and oversight from central governments, as well as an active coordination and collaboration amongst local stakeholders is still required to integrate a local carbon market or to introduce a new tax aiming at pricing externalities.

• While financial intermediation for urban low-carbon/resilient infrastructure projects remains a core topic to be addressed, few initiatives focus on supporting Regional and Local financial institutions in identifying needs, opportunities and gaps. There is still a lot to be done in order to give financial intermediaries more visibility, and to design incentives for operating in the subnational climate finance market niche.

Download a free copy of the report