Nature Positive Financing the Tranisition in Cities

Despite the significant challenges cities face in accessing nature finance, there is a unique opportunity for transformation. Banks are beginning to recognize the importance of nature as infrastructure, and through the development of proof-of-concept projects, can mobilize finance towards infrastructure projects that benefit nature. In regions such as the Asia Pacific, where the demand for infrastructure continues to grow rapidly, a drastic 60% of wildlife populations have been lost and natural ecosystems have been severely degraded, limiting their ability to absorb and withstand climate shocks. Nature-positive infrastructure and increased finance for nature is a cost-effective solution to addressing climate and economic challenges. As cities increasingly recognize the economic, social and environmental value of nature finance, the desire to address challenges in their enabling environments will grow. These shifts promise to bridge financing gaps, drive sustainable development and facilitate greater urban resilience. Despite these challenges, financial institutions are demonstrating a commitment to scale nature finance. The investment opportunity of nature action is considerable, providing a clear incentive to mainstream nature into business-as-usual activities. Championed by the MDB sector reforms, new initiatives aim to strengthen subnational performance and increase the attraction of finance. Creditworthiness reforms and initiatives Creditworthiness is not equal across all cities and regions. Cities in low- and middle-income countries are at particular risk of missing out on finance. The World Bank estimates suggest that fewer than 20% of the largest 500 cities in low- and middle-income countries are deemed creditworthy in their local context. Global financial architecture reforms are working to close this divide by boosting liquidity for investments in renewable energy and sustainable food systems through measures that: –Ensure MDBs adopt a new risk model to attract greater private finance flows to low- and middle- income countries. –Encourage more efficient use of balance sheets by member states. –Expand eligibility criteria for concessional financing to increase availability for vulnerable economies. Additionally, financial institution initiatives, such as the World Bank’s City Creditworthiness Initiative, help city leaders develop an action plan that evaluates the enabling environment. These action plans must consider the financial, capacity and institutional reforms necessary to deliver infrastructure services and provide capability- building and technical support to improve regulatory frameworks within a city’s context.63 Creditworthiness reforms are pivotal in helping cities strengthen their ability to attract more finance by creating investment opportunities that are financially favourable for nature investments and greener infrastructure investments. Creditworthiness programmes are also a valuable way for MDBs to provide cities with technical support and upskill local workforces on highly specialized topics. 4.3 Emerging initiatives and progress Overview: In 2012, the city began to improve its creditworthiness by addressing challenges such as poor revenue collection and management, weak governance and overdependence on government transfers. Solution: The city developed a strategic plan that addressed capacity building, financial management and interaction with external organizations to improve municipal revenues through efficient billing processes, better accounts and records management. Outcome: One year after implementation, revenues increased by 86%, improving revenue from UGX 98.8 billion (Ugandan shillings) to UGX 226.5 billion in three years.CASE STUDY 1 Kampala Fewer than 20% of the largest 500 cities in low- and middle- income countries are deemed creditworthy in their local context. Nature Positive: Financing the Transition in Cities 30