“All in all, it often comes to the money questions like, ‘how do we fund our climate work?’” says Elina Ojala, the environmental director of Lahti, Finland.
“And there we also need private investors, and we need to find out how we can make it all happen and have all the things financed that we have planned.”
Like 32 other cities in the EU Cities Mission, Lahti has now been awarded a ‘Mission Label’ – formal recognition of their plans to reach climate neutrality, detailed in their Climate City Contract and submitted to the European Commission.
But what comes next? The label acknowledges a city’s climate plans and aims to facilitate public and private funding for them, but Elina Ojala’s question, also asked by environmental leaders in every ambitious city, still needs an answer. The funding gap for climate actions across the 112 Mission Cities could be €650bn, requiring hugely innovative financial solutions.
Hub-hub-hooray
Step forward the ‘Climate City Capital Hub’, which launched on 26 June, offering expert advice and assistance to make city climate projects ‘investment ready’. And, crucially, the Capital Hub can help cities take a final critical step, connecting them with investors to move projects from planning to implementation.
As a service for cities in the EU Cities Mission, the Capital Hub is delivered by NetZeroCities, the consortium set up to support cities in the Mission.
“We are seeing a very exciting project pipeline develop as cities plan for the climate transition. But their budgets won’t fund all the investment on their own,” says Allison Lobb, a financial expert from NetZeroCities consortium member Bankers without Boundaries (BwB).
“Cities have developed Investment Plans as part of their Climate City Contracts and this has allowed them to plan for what municipal funding and grants are available and where private capital is going to have to bridge the gap. Our aim is then to help bring those plans into a reality and to find the resources and get the projects off paper and into action.”
Although all Mission Cities have developed sophisticated decarbonisation plans, their needs will vary greatly, including on what stage their projects are at. Some might be ready for investment and need the right partner, while others will need significant development with future investment in mind.
Scripts for every stage
There is direct support at hand for cities at every stage of their journey to find finance and investment for their climate-related work and an introductory meeting is available for all cities with a Mission Label to meet with specialists from BwB, who will contribute expertise through the services of the Capital Hub.
The outcome of this first appraisal will determine where each project stands and, in turn, what assistance is needed. For those at the earliest stages, their financial or technical feasibility can be established through the ‘City Finance Framework’ tool, and evidence from similar projects in Europe can be shared. The possibility of funding from grants can also be considered here.
Later stages of support for projects can include advice on, for example, possible business models, or reviewing feasibility studies, which can be followed by help to refine a proposal for funding.
When ready, innovative financing can be part of the mix of solutions for cities, including sustainability-linked bonds, securitisation, crowdfunding, and energy-performance contracting.
Finally, the Capital Hub team can engage new investors, when external funding is being sought by a city, and help cities through the process.
‘The next big challenge’
Cities with the Mission Label and a climate investment plan are now gathering data for their future climate projects, including the development stages and required investment, ahead of introductory meetings with the Climate City Capital Hub and the European Investment Bank.
Through these sessions, Mission Cities will be keen to make serious progress on what Maider Etxebarria García, Mayor of Vitoria-Gasteiz, says is their “next big challenge”, as these cities seek to capitalize on their ambition: “Next to public finance streams, the services of the Capital Hub – whether through tailored advice on project development or identifying potential investors – will be critical to turning this ambition into reality and making our city healthier and more vibrant for all our citizens.”
Think global, advise local
“A great strength of the EU Cities Mission, and the support provided by NetZeroCities, is the extra capacity and expertise that it provides. When busy city staff are already stretched to the limit, transformative change means complex rapidly changing financial opportunities can tough to capture,” says Rupesh Madlani, CEO at BwB.
“One of the key offers for cities will be City Finance Specialists, who can add that capacity and expertise to access financing in partnership with the Capital Hub to help finance climate goals.”
These City Finance Specialists (CFS), soon to be deployed across Europe to help cities, will be experts in their locale, share the native language of the cities they advise, and understand the local context, including relevant laws and regulations. Working in-house with the municipality, this experience will be used to help develop projects and connect local and national investors, as well as to help bring smaller projects forward to be ‘bundled’ (offering them as a package with other similar projects) to investors to improve their financial viability.
A portal to success
Like the EU Cities Mission as a whole, the Capital Hub offers the advantages of a thriving community, offering opportunities to collaborate on new plans and spread ideas far and wide to distant partners across the network.
Through a dedicated group on the NetZeroCities Portal – a specialist online resource library and social network for cities aiming to become climate neutral – cities benefitting from the services of the Capital Hub can interact and easily register for relevant events and receive updates on new resources.
And there, the city also has resources for scenarios at all phases of a city’s project development, and two newly available tools covering financial guidance and climate investment: the guidance tool helps cities identify specific suitable funding sources, while the City Finance Framework assesses the economic viability and impact of a city’s climate project, improving decision making.
Along with many other resources in the portal, including detailed guides and recorded workshops, these can be used by cities without expert oversight, allowing them to work independently on their early plans, which – like the Capital Hub itself – will be a boon for busy city officials seeking to get ahead with their climate projects.
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