From Principles to Practice DIGITAL

22Economic models “Economic models”18 are defined here as specific instru - ments that can fund and operate development projects and help ensure positive long-term value and outcomes in the form of social benefits and a high-quality living envi- ronment. The Alliance seeks to answer the question: what mechanisms will work on the neighbourhood or district level, rather than a regional approach? What mecha - nisms can be identified that would be useful to a range of stakeholders including investors, banks, developers and municipal leaders? Where, within an integrated economic cycle (Figure 1), are the opportunities for the public and private sectors to use economic levers to ensure a Bauku - ltur that delivers affordability and social value? An integrated economic cycle considers each phase of a project’s development – from planning to delivery and operation – and seeks to identify consistent fund- ing sources and mechanisms that will best advance the goals of project stakeholders. It provides a framework for achieving this alignment through a project’s key stages. This approach helps ensure that long-term affordability, sustainability and meaningful social value creation are robustly integrated into urban develop- ment. The economic models outlined here can – and should – be combined as needed and used with other approaches to follow. FIGURE 2 Integrated economic cycleAPPROACH 1 Consider collaborative funding models These models offer innovative ways to pool resources. They can include multiple philanthropic organiza - tions joining forces to create more impactful social programmes, as well as joint ventures, where each member retains their organization but creates a part - nership through which to fund and deliver a project. Collaborative funding models help to distribute risk and can deliver a greater impact on social outcomes and the quality of living environments, if that is one of the model’s objectives. They can also create chal- lenges if the incentives and rewards for each funder are misaligned. One type of collaborative funding model includes blended finance, which pools different kinds of finance and different rates of return to ensure that each funder can achieve the return that it requires. In this model, one entity might fund a project with a grant, while others may seek returns at market or other rates. The differing rates of return required by each funder support the project’s overall viability.The Alliance has identified the following approaches for government, business and civil society leaders to con- sider when seeking to improve a project’s viability and create social value: FIGURE 3 Examples of blended finance models THE RENEW DISTRICT FRAMEWORK Bankers without Boundaries’ (BwB) Net Zero Neigh- bourhood (NZN) model, part of the RENEW District framework, uses blended finance to fund large-scale home retrofits. By combining public grants, private investment and outcome-based financing, it reduces risk and attracts capital for deep energy renovations. Addressing the challenge of scattered homeownership, NZN integrates multiple properties into a single invest - ment structure, enabling economies of scale and cost efficiency. Beyond energy upgrades, funds support community-wide improvements like green infrastruc- ture and mobility enhancements. Long-term revenue streams, such as annuity payments from energy savings, ensure financial sustainability and make the model scal- able and replicable for broader decarbonization efforts. Read more in the Alliance’s RENEW Districts case study . 23Fund-level blended finance This refers to the combination of concessional funding (public or philanthropic funds) with full return private capital for investments in companies' regular equity or bonds.1 Company-level blended finance Public or philanthropic investors provide credit enhancement through guarantees or insurance on below-market terms and subsized concessional loans through below-markets terms.2 Outcome-based blended finance Public or philanthropic investors invest in corporate bonds or loans with commitments to SDG impact, either in use of proceeds or the achievement of material sustainability targets.3 Project-level blended finance Public or philanthropic investors provide partial funding or guarantees for large infrastructure or energy projects that contribute to the SDGs to help attract further commercial funding.44321Getty Images Source: CFO Coalition for the SDGs. (n.d.). Mapping Examples of Corporate Blended Finance. https://www.cfocoalition.org/blueprints/p3-3-3-mapping- examples-of-corporate-blended-finance .2 Delivery1 Visioning3 OperationFunding