ICLEI Plots New Course For External Financing For Nature-Based Smart City Solutions
The United Nations World Cities Report 2016, Urbanization and Development: Emerging Futures, predicts that by 2030 two-thirds of the world’s population will be living in cities. It further forecasts that the urban populations of developing countries will have doubled and that the area covered by cities could triple. This report also points out that for megacities, the greatest growth will take place in the developing regions, and that medium and small cities (with less than one million inhabitants) are the fastest growing urban centers.
In a rapidly urbanizing world, both city governments and the natural resources that we all depend on, are under pressure to meet increased demand for infrastructure, land, water and other requirements. In addition, rapid urbanization trends will increase resource consumption patterns and greenhouse gas emissions, which will further exacerbate climate change impacts.
Meeting these increasing demands places strain on the financial resources of cities. At the local level, budgets and policies for addressing development and infrastructure challenges, as well as climate adaption and disaster reduction strategies, are determined by a complex mix of growth and development priorities, fiscal systems, legal mandates, institutional factors and political will. Financing for infrastructure development and service delivery in local governments relies largely on intergovernmental transfer payments, grants, subsidies, taxes and other sources that are unsustainable in the long run.
Why do external investments remain low at city level?
It is commonly recognized that while the “money is there”, actual investment into “green”, low carbon, climate resilient projects remains very low and even completely out of reach for most cities. The reasons are complex: In certain parts of the world, the capacity of city governments to secure additional external funds is often hampered by a lack of capacity and limited access to external funding due to poor credit ratings. Another reason is the lack of “bankable” projects. Cities’ appetites for venturing outside of their normal revenue streams and fiscal allocations, with associated budgeting and reporting processes and cycles, remain relatively low. Supported by traditional public service planning frameworks and a “business as usual” outlook, government officials are often not expected nor encouraged or equipped to create attractive, innovative, profitable and sustainable business propositions which would draw new public and private investors to the table. Traditionally, the focus is more on day-to-day basic service delivery and maintenance than to test, transform, disrupt and co-create innovative projects that would redefine our cityscapes and systems. And in some countries, public finance policy and regulatory requirements also contribute to low external investment at city level.
However, this is changing. Today there are thousands of cities that understand the value of creative and integrated development plans that will give them a competitive edge, create sustainable value and increase the quality of life for their communities. One such community is our growing ICLEI network of over 1 500 cities and other subnational governments, large and small, who have all embraced sustainability as part of their futures. And for many of these trailblazers, working with nature is no longer optional. A thriving, and often improved and expanded, natural environment of green corridors, healthy ecosystems, ample and safe green open spaces, food gardens, green and blue infrastructure and accessible, easy, daily community engagement with nature, is deeply embedded in the vision of these cities.
Making room for nature
Fiscal policy lies at the heart of creating an enabling environment for embracing sustainability, and nature-based solutions in particular, as integral to addressing the multiple challenges associated with rapid urbanization. Our cities, especially those fast-growing urban nodes in Asia and Africa, urgently need to rethink the way in which they approach, plan and prioritize budgets. City governments need to work with nature – rather than against it – when planning and building our cities. In order to make this shift towards working with nature and adopting nature-based solutions, the very principles that underpin planning, budgeting and fiscal policy at local level, need to be reviewed or, in many instances, completely turned around.