Brussels, Belgium, July 2021 -   As requested by the European Parliament, the European Commission, European Investment Bank and UN-Habitat, supported by the International Growth Centre, are working on a pilot initiative to identify measures to mobilize financing for sustainable urban development in low-income countries. During the virtual InfoPoint conference hosted by the European Commission on 28 June 2021, an interactive web report was launched as one of the outcomes of the initiative.

The report is based on review of empirical literature, case study research, several meetings with experts and practitioners (videos with key messages here), and guidance by an international Advisory Board.

In his opening remarks, Paolo Ciccarelli, Head of the European Commission’s Sustainable Transport and Urban Development, said 95 per cent of urban expansion is expected to take place in the developing world, putting pressure on urban service provision in already constrained and inadequate infrastructure.

In response to the massive financing gap, he explained that the European Commission is scaling up financing instruments through the European Fund for Sustainable Development (EFSD +), focusing on new financing instruments known as “blending and guarantees” which aim to lower the risk for investors in developing countries and use public money to cover part of the development costs.

Such new tools bring in other sources of public and private finance to complement development funding, with a view to achieve access to financing for the Sustainable Development Goals, with investment windows targeted towards cities.

The report recommends that external finance be accompanied by technical assistance that encourages policy reforms. These and other policy issues around improving investment planning, raising local revenues, and enhancing access to external finance were presented by Katharina Rochell, Urban Development Specialist at UN-Habitat.

Prof. Edgar Pieterse, Director of African Centre for Cities, commended the work by UN-Habitat and partners as being an important contribution to an unresolved debate on how to improve urban finance. He welcomed the report`s recommendation to use urgent investment as catalyst for institutional development and to determine the types of infrastructure investment with transformative potential.

He said transformative infrastructure in an African context should be labour intensive, low carbon, digitally enabled or adaptable in future, return value in communities and reverse spatial inequality. 

For Gerry Muscat, Head of Urban Development Division of the European Investment Bank (EIB), climate finance can be a driver to stimulate local finance in African cities. He outlined key examples of EIB`s work in Africa around two recently launched initiatives: the City Climate Gap Fund and the African Sustainable Cities initiative, the latter targeting secondary cities.

He stressed that bankability and local revenue considerations must be part of project preparation and implementation and that leveraging the role of the private sector is equally important, whereas the challenge is to safeguard public interests. Finally, he recommended engaging more with intermediary financing institutions in Africa, which have more capacity to handle investment programmes at subnational level than intermediary cities.

In his closing remarks, Ciccarelli called for a wider continued dialogue and enhanced focus on urban challenges, finding more responses and best practices in financing sustainable urban development, possibly in the form of an Africa-EU forum.