Financing the Resilient City: A demand driven approach to development, disaster risk reduction and climate adaptation

Financing the Resilient City: A demand driven approach to development, disaster risk reduction and climate adaptation

ICLEI – Local Governments for Sustainability - proposes cities pioneer a demand-driven approach to climate financing. This approach involves ‘inverting’ the typical development financing approach by: i) bottom-up planning for identifying climate vulnerabilities and risks, ii) bottom up development of appropriate resilience strategies, using local capacity and expertise, and then, iii) bottom up procurement of finances to support the strategies. The authors propose that this process would enable and motivate financial service providers to create a market of diversified pools of investment, allowing much larger potential flows of climate finance to cities – without relying on gaining access from the international climate funds.

The report is divided into three sections. The first outlines that this was developed in response to the feedback of key stakeholders at the 2010 Resilient Cities Congress held in Bonn, Germany. It details the history and rationale of ICLEI, and the range of bottom-up approaches to mitigation and adaption the organisation has developed and procured finance for. It argues that the majority future costs of adaptation and mitigation will be borne in the urban sphere, which creates a resilience investment opportunity. The second section contends that waiting for international climate finance poses a risk to cities, because the costs of adaptation are set to far outweigh the available funds. It proposes a the demand-driven approach as an opportunity: by integrating various sectors and mobilising the private sector, it aligns various agendas including adaptation, mitigation, human security and sustainable development, promoting more transformational forms of urban resilience. The third section outlines the requirements for a resilient city approach, which address local environmental factors, infrastructure, buildings, commercial life, social life, institutions, and governance issues comprehensively, in an integrated fashion. The fourth section describes how to create market conditions for financing resilient cities. The final section proposes ways to create more financial flows to resilient-city building through innovations in risk-based financial instruments. The authors conclude that a new ‘alliance for resilient cities’, which would include private sector partners and financial services providers, could pilot some comprehensive, bottom-up resilience projects.

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