Nature Positive Financing the Tranisition in Cities

Multilateral development banks MDBs provide technical and regulatory assistance, concessional and long-term financing, and support for projects with high-risk profiles, and have long supported efforts for urbanization globally. MDBs operate to improve countries’ economic standing, address inequality, promote job creation and develop critical infrastructure. MDBs are a valuable source of supplementary finance for cities and can lend to long-term projects with higher risk profiles. MDBs are also a valuable source of concessional finance and grants for urban development projects. MDBs frequently enable cities to access capital under favourable terms, such as lower interest rates and extended repayment periods. This helps diversify urban development funding sources, reducing reliance on governments for all nature- related investments. MDBs, adoption of novel financing mechanisms at scale can also act to mobilize private finance for nature. To expand investment portfolios in cities, MDBs must be strongly engaged with federal governments, to strengthen creditworthiness and scale national projects. Given the prominence of cities’ development needs, subnational government engagement is becoming a core part of MDBs’ remits. To close funding gaps in urban nature finance and strengthen connections between cities and potential sources of nature funding, it is crucial to clearly assess and communicate the investment opportunities in nature. Currently, there is no universally accepted definition of “nature finance”, which leads to a lack of clarity and consistency across sectors. Large financial institutions, private businesses and governments often do not differentiate their investments between nature-positive finance (aimed at creating positive environmental impacts) and nature mainstreaming (incorporating nature considerations into broader financial decisions).As a result, the way nature finance is assessed within each industry and sector varies significantly, which hinders efforts to accurately identify and address gaps. This variability creates challenges in understanding the true scale of investments directed towards net positive outcomes in nature, as well as in measuring progress. To address these issues, it is critical to establish a more granular view of how the public sector allocates funds specifically towards nature-positive outcomes. This clarity could reveal opportunities where private sector or philanthropic contributions would be most impactful, enabling targeted investments that complement public funding and maximize environmental, social and economic benefits. 2.4 Overcoming funding gaps Nature Positive: Financing the Transition in Cities 15