An additional 2.5 billion people will be a part of our world by 2050, mostly in low- and middle-income countries (LMICs) across Africa and Asia.[1] As the population increases, rapid urbanisation, without rapid transition to low-carbon pathways, risks causing a continued acceleration in GHG emissions, leading to increasingly severe climate breakdown, rising sea levels and ever-increasing disaster risk, including cyclones, flooding, drought and extreme heat.
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Cities in LMICs are particularly prone to increased effects of climate change because of their existing vulnerable conditions, which affects the city across all key sectors such as infrastructure and the built environment, public health, agriculture, water, and sanitation. A shift towards planning for climate resilient cities requires holistic action towards three interdependent systems [2]:
1. Resilient people and livelihoods, to include actions towards job securitisation, early warning systems, resilient value chains, helping finance reach local communities and social protection which helps achieve climate justice.
2. Resilient business and economies, to include actions that establish an understanding of climate-risk informed future investments with a focus on cities, infrastructure, and services such as energy, transport, and industry. This also includes actions towards sustainable food and agricultural systems, natural ecosystems and water, coastal systems including oceans.
3. Resilient environmental systems, to include action to secure resilient development for human and planetary health where nature including terrestrial and marine ecosystems are protected by establishing measures to protect biodiversity and natural ecosystems and transition to agro ecological and regenerative agriculture.
Research by the IMF estimates that the cost for public adaptation globally will be 0.25 percent of GDP per year in the years to come. While this may seem globally manageable, in the case of many low-income and vulnerable countries, this may exceed 1 percent of GDP and can go even up to 20 percent of GDP for small, and island nations.[3] This makes it hugely challenging, for countries who are already facing tough economic and institutional conditions, to prioritise action on resilience in cities and sub-national regions.
At UrbanEmerge, we support clients to identify practically applicable solutions to plan and finance urban climate adaptation around the world. For example, we are currently providing 2-year, flexible support to GIZ for urban climate adaptation actions and finance strategies, to support their policy advice to The German Development Ministry, Federal Ministry for Economic Cooperation and Development (BMZ). A few high-potential finance approaches for climate resilience are green bonds, catastrophe bonds, concessional loans, and the aggregation of smaller projects to improve economies of scale and reduce transaction costs for a small project.
However, it is important to highlight that less than 20% of the 500 largest cities in LMICs are considered creditworthy by national ratings, and only 4% have access to international markets.[4] A situation which severely constraints the ability of most municipal governments in LMICs to use conventional commercial finance to fund much needed infrastructure and services, particularly in small and intermediary cities. This is often compounded by many other barriers to accessing finance, includingthe ability to define bankable projects, due to a lack of institutional and economic capacity.
In this context, at UrbanEmerge, we are also developing a guide for the Cities Climate Finance Leadership Alliance (CCFLA) Project Preparation Action Group (PPAG) to advocate how donor-funded project preparation facilities (PPFs) can help small and intermediary cities access finance for climate resilient projects, despite a lack of creditworthiness. The guide will be released in 2023 and is focused on cities that range from 10,000 to 200,000 residents and larger, depending on the national context. Our learnings so far show that while improving the enabling environment and creditworthiness is a long-term goal for small and intermediary cities, more urgent climate action can happen by supporting approaches such as blended finance to help de-risk private sector investment, potentially combined with aggregation of smaller projects, sometimes between small cities, to make an investment more feasible.
In the medium to long-term, municipal efforts can benefit from a shift to understand specific climate risks for their national and regional contexts and encourage public investments for emergency response mechanisms to mitigate drastic impacts from climate events.[5] It is also vital for cities to realise inclusive development and resilience. Participatory planning with recognition of, and encouragement for local action where complex or large-scale climate resilient solutions are not the most feasible. One way forward is to recognize the potential of accessible solutions in cities facing challenges to prioritise and implement climate resilient action so no-one is truly left behind.
The role of digital technology is becoming increasingly relevant to help support and enhance urban resilience that is inclusive. For example, in our recent assignment with GSMA, Mobile Big Data for Cities: Urban Climate Resilience Strategies for Low- and Middle- Income Countries (Link) focused on understanding the role of Mobile Big Data (MBD) to enhance urban resilience, we came across some important innovations, particularly in the context of data poor environments. Cities with limited resources and poor data on hazard risks to their populations, can make use of MBD to gather information about the likely impact of climate events such as extreme rainfall or drought, and implement effective disaster mitigation or response efforts. For example, Flowminder[6] used MBD to track post-disaster population flows in Bangladesh following Cyclone Mahasen in 2013. This helped with post disaster population patterns and assessments for high-risk behaviour during emergency settings as well as climate related migration patterns.
It is also possible to harness citizen engagement and encourage participation to leverage MBD for crowdsourcing information, enabling real-time updates from coastal communities that can support appropriate response action by local authorities. This is useful where implementations of large-scale systems are presented with a lot of barriers.
We are also strongly focused on the role of Nature-based Solutions (NbS); natural solutions that complement hard infrastructure to improve living conditions in urban areas while increasing the scope for climate adaptation. NbS is especially beneficial to cities that have low-lying coastal areas or areas that are prone to flooding as they can be useful to protect coastlines by reducing wind erosion, improving urban water supply, managing stormwater, and regulating city temperatures by reducing heat island effects.[7] Some of the co-benefits of an effective NbS system are that they improve food security, reduce GHG emissions and provide better connections through cities and reduce carbon intensive activities in cities.
In terms of financing solutions, implementing NbS can work quite effectively with Land Value Capture (LVC), which uses the increase of land value in an urban area to fund infrastructure improvements within it. This can be in the form of land banking, tax-based land value capture and development-based land value capture. Enhanced green infrastructure such as urban parks, river-side management increased tree cover or urban forests have many co-benefits such as making walking and cycling more attractive, which can reduce GHG emissions from private vehicle use and improve public health.
As an example of LVC in practice, betterment levies are a LVC mechanism that have been used in Columbia since 1921, helping to finance public services and NbS to improve urban development and climate resilience. The value of the levy is calculated according to the cost of the public project and the degree of benefit for the beneficiaries. The instrument has a social element that takes into consideration the socio-economic platform of the people who will engage with the development. In Manizales, a small mountainous Columbian city, urban development projects come with high engineering costs. The city took a strategic approach by issuing a single levy assessed on 80 percent of city property to finance multiple public projects that contributed to making the city resilient to the impacts of climate change.
Payment for Ecosystem (PES) is another climate resilience financing strategy that promotes environmental management. PES encourages participation of land-managers such as farmers or communities by providing financial incentives for maintaining natural resources. Primarily a rural strategy, it can be used in cities to develop ecosystem services by using payments from those using the services. PES can also use digital solutions for crowdfunding ecosystem developments. For example, the recent pilot of Grove: Forestry Smart Ledger (FSD) in India[8] to protect mangroves in coastal areas, shows how crowdfunding, blockchain, payment for ecosystem-services and nature-based solutions can combine into an innovative approach to finance enhanced resilience.
Overall, UrbanEmerge is helping clients understand sustainable solutions for planning and financing urban resilience in LMICs. We are navigating the intersection aspects of urban planning, municipal climate finance options and digital solutions to improve data, planning and financing. Please do reach out to us if we can help you in these areas.
Sources:
[1] UN. (2018) 68% of the world population projected to live in urban areas by 2050, says UN. (Link) [2] UNFCCC. (2019) Climate Action Pathway Climate Resilience Executive Summary. (Link) [3] Georgiva. K, et al. (2022) Poor and Vulnerable Countries Need Support to Adapt to Climate Change. (Link) [4] WB. (2013) Planning and Financing Low-Carbon, Liveable Cities. (Link) [5] Knight, L. and Negreiros, P. (2022) Policy Brief: How to Increase Financing for Urban Climate Adaptation and Resilience. (Link) [6] See Flowminder. (Link) [7] Reid, H. (2020) How Can Nature-Based Solutions Help Build Resilience of the Urban Poor? (Link) [8] See Grove: Forestry Smart Ledger. (Link)