Nature Positive Financing the Tranisition in Cities

Development finance plays a significant role in advancing a nature-positive transition in cities. By establishing a nature lens in all investment decisions, financial mechanisms can be aligned with goals to support urban development, putting nature protection, restoration and enhancement at the core. Partnerships between local governments and MDBs are vital for catalysing urban transformation, de-risking investments in critical infrastructure and attracting additional external finance.Stepping up to the challenge, MDBs have formulated an innovative set of nature-positive investment principles that are consistent with this vision and can provide inspiration to private sector investors. Initial steps include incorporating nature into investment decision criteria and assessments, and offsetting nature-negative business actions. The principal challenge, however, resides in the effective implementation of these principles, particularly within urban contexts. MDBs possess the financial resources, technical expertise, on-the-ground presence and policy credibility needed to support countries and local governments in integrating and financing both development and environmental goals. In response to increasing economic and environmental crises, and the pace of urbanization globally, MDBs have defined a process to reform their agendas, which centres around six main categories:29 –Efficient use of capital –New forms of capital –Expanded mandates and associated shareholder capital –Impact reporting –Country engagement transformation –Expanded private finance mobilization If fulfilled, the above reforms could lead to up to a 30% increase in MDB lending capacity, compared to commitment levels of 2019 (see Figure 3). The role of MDBs in supporting the pressing demands of urbanization has become central in this comprehensive reform programme, as local government leaders navigate how to overhaul the current financial framework to address their most pressing development challenges. This reform process is following a deductive approach to define which investments are necessary to achieve the SDGs, and climate action and nature preservation are now seen as key enablers and mutually-reinforcing agendas, as well as an investment opportunity to mitigate global and local economic risks. Reflecting this priority, 10 MDBs signed the Joint Statement on Nature, People and Planet at the UN Framework Convention on Climate Change’s (UNFCCC) COP26 in Glasgow, which recognizes that tackling poverty, climate change and the drivers of nature loss are inextricably linked, and affirms their commitment to mainstream nature ever more deeply into their policies, analyses, assessments, advice, investments and operations.30 With this growing awareness of the value of nature and the identification of a significant funding gap, the MDB reform process is an opportunity to capitalize on the pioneering efforts on nature mainstreaming at the urban scale and to increase funding for nature-positive initiatives at a time when MDBs are looking to strengthen subnational engagement.3.1 The relationship between MDBs, urban development and nature 3.2 Carving space for cities and nature in MDB reforms Businesses dependent on wild pollinators, marine fisheries and forest timber could stand to lose $2.7 trillion in global GDP annually if sustainable practices are not introduced. 17 Nature Positive: Financing the Transition in Cities