Cities have the potential to reduce 70% of global CO2 emissions, yet many urban mitigation projects are struggling to get off the ground. According to a new CDP White Paper on climate investment for cities under Low Carbon City Lab (LoCaL), the key barriers currently blocking mitigation action include the lack of bankable projects and low creditworthiness among cities.
The establishment of better match-making opportunities for investors and cities is at the core of Low Carbon City Lab (LoCaL), an ambitious Climate-KIC funded programme with South Pole Group as lead partner, that aims to unlock the climate action potential of cities. LoCaL has a specific objective of leveraging € 25 billion worth of climate finance for cities by 2050, providing a basis for platforms and innovative financial instruments to link investors and urban centres. It brings together a growing collaboration of more than 15 organisations dedicated to empowering cities in the fight against climate change.
At present, many local governments do not have the capacity to develop bankable projects and might only have limited access to international public and private climate finance. These are the same governments that have the potential to significantly shape the world's development towards a low-carbon future, as the underlined by the recent white paper titled "Low-Carbon Investment in Cities - How to Harness the Potential?".
South Pole Group's climate finance expert Martin Stadelmann stresses that investors are more than willing to finance green growth. 'However, only a relatively small percentage of international public climate finance – between 10 and 30% – flows through cities. So investments need to be redirected. Now is the time to develop and present both viable projects and the financial tools that can get projects underway by offering investors an adequate risk-return ratio,' he adds.
LoCaL has already worked towards providing cities with a better understanding of available finance instruments through different types information resources: the latest factsheet compiled for local governments, for instance, outlines the essential aspects that cities need to do in order to source investment capital and secure revenue streams. Under the project Closing the Gap through Transformative LoCaL Action, LoCaL has also helped cities to improve the financial viability of transport and waste projects, and is currently pioneering result-based finance and green bonds in urban areas. Furthermore, LoCaL offers workshops and training sessions to share knowledge on urban climate finance.
Transferring knowledge goes hand in hand in the prevention of carbon lock-in and the quest for global sustainability. By bringing together change-makers across sectors and from multiple areas of expertise, LoCaL seeks to contribute to global policy design and to increase the financial flows for climate action in cities.
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