“We need to grab the political moment. Now is the time to push for converging all agendas – international, national, and subnational – as discussion has started about how to reform the international development financial architecture,” enjoined Paris Mayor Anne Hidalgo, Co-Chair of the SDSN Global Commission on Urban SDG Finance, speaking at the Commission’s third meeting held September 18, 2023 on the sidelines of the United Nations’ Climate Week in New York City. Launched in June 2023, the Commission has a mandate to harness the insights of climate and finance experts, mayors, practitioners, and scholars to develop and champion innovative ideas and solutions for increasing climate funding to cities.

More than 50 commissioners and observers assembled in MHR Fund Management offices, hosted by Mark Rosenberg, Chair, Penn IUR Advisory Board, where they heard from the Commission’s co-chairs and Task Force leaders, the U-20 Climate Finance Working Group co-chairs, and the president of Finance in Common (FICS). Commission Co-Chair Eduardo Paes, Mayor, Rio de Janeiro, delivered opening remarks, followed by Horacio Rodriguez Larreta, Mayor, Buenos Aires, who unveiled the U-20 Climate Finance Working Group’s roadmap for enhancing financing subnational climate resilient infrastructure. Mauricio Rodas, Visiting Fellow, Penn Institute for Urban Research and former Mayor, Quito, Ecuador, then called on the Commission’s six Task Forces to offer progress reports.

The Commission’s Task Forces see opportunities to call for increased subnational funding within new and already proposed global reforms aimed at balancing the need to increase development finance funds with maintaining financial stability within nations.

Task Force One: Reforming Multilateral Development Banks (MDBs)

Eric Berglof, Chief Economist, Asian Infrastructure Investment Bank, along with David Jackson, Director, Local Government Finance, UN Capital Development Fund, and Lauren Sorkin, Executive Director, Resilient Cities Network, reinforced Mayor Hidalgo’s message, acknowledging the timeliness of the Commission’s work as the World Bank and IMF lead global discussions on MDB reforms. Several concepts having the potential to benefit subnational borrowing are under consideration. They include harmonizing and focusing the balance sheets of the major MDBs to enhance their impact, securitizing existing fossil fuel loans to free up MDB capital for climate sensitive projects, working with credit ratings agencies to achieve a better understanding of subnational risks, and developing schemes to deploy blended finance and guarantees.

Task Force Two: Augmenting Existing and/or Creating New Funds/Institutions

Jaime Pumajero, Mayor, Barranquilla, Colombia, and Angel Cardenas, Director, Urban Development, Water, and Creative Economics, CAF, emphasized on the importance of changing the risk rhetoric doubting city creditworthiness and developing recommendations for more long-term, low-interest, non-sovereign guaranteed loans for cities. The Task Force is debating the merits of such new institutional arrangements as guarantee funds for direct loans in local currency to cities that present “viable products” and the creation of a green cities development bank, as proposed by C40, Climate Works Foundation, and Baker McKenzie.

Task Force Three: Attracting Private Sector Participation

Felicity Spors, Head, Climate and Sustainable Finance, Gold Standard Foundation, and Alice Charles, Director, Cities, Planning and Design, ARUP, see the work of their Task Force as responding to two key questions: What can we do better with existing instruments? How can we innovate to create more mechanisms to bring funding to cities for climate development finance? While examining the range of financial instruments from PPPs to bonds to equity investments, the Task Force will focus on how private sector financing at the subnational level can be encouraged through de-risking mechanisms such as blended finance, guarantees, securitization, and collateralization.

Task Force Four: Advocacy Strategy Task Force

Carrying the message now and into the future is the work of the Advocacy Task Force, explained Andrea Fernandez, Managing Director, Climate Finance, Knowledge, and Partnerships, C40. The mantra of co-originating, collaborating, and championing is guiding their work. They are developing a roadmap to G-20 Brazil in November 2024 that will align the Commission’s work with a global network of organizations committed to urban SDG financing including 1) City networks (C40, GCoM, ICLEI, RCN, and UCLG); 2) Corporations (ARUP, PwC, UK Sustainable Investment and Finance Association); 3) Financial institutions (AIIB, CAF, UNCDF, and WBG); 4) National governments (Germany/BMZ, EU); 5) Localities represented by the mayors on the commission; 6) Knowledge hubs (CCFLA, Connected Cities Catapult, CPI, Gold Standard, Guangzhou Institute for Urban Innovation, IIHS, OECD, SDSN, UN, UNEP, UN-Habitat, and WRI); 7) Universities (LSE, NYU, Penn, and Tokyo); and 8) Financial institutions (AfDB, AIIB, CAF, UNCDF, and WBG). Their roadmap includes such critical global and regional meetings as Malaga Global Coalition for Municipal Finance Dialogue, WB-IMF Annual Meeting, COP 28, UNEP/UNEA, a Paris convening (July 24, 2024, by invitation of Mayor Anne Hidalgo), and G-20 preparatory meetings.

Task Force Five: Recognizing Geography and Context

Paul Smoke, Professor of Public Finance, New York University outlined Task Force Five’s charge to develop a clear and robust framework that incorporate multi-level government perspectives on urban and subnational finance into policy and action plans. The Task Force is identifying a variety of characteristics of current subnational systems that can affect urban and subnational finance, recommending pragmatic near-term steps to improve a subnational development finance system, and highlighting context-specific options for major system reforms that would further improve subnational government access to efficient and equitable finance. Lastly, the Task Force is making suggestions to remedy the fragmented current operations of international development partners towards subnational and urban financing.

Task Force Six: Balancing Mitigation and Adaptation Finance

Daniella Levine Cava, Mayor Miami-Dade County, and Andy Deacon, Managing Director, Global Covenant of Mayors (GCoM) began their Task Force report by reflecting on the Miami-Dade County example of multi-stakeholder approaches to balancing adaptation and mitigation, highlighting the opportunities and challenges of both. The Co-Chairs discussed mechanisms including creating an innovation authority to add blue and green industries to an area’s economic base, working with the national and subnational governments for technical assistance and funding for non-revenue producing projects, and consulting widely with local stakeholders on specific programs. In addition to identifying lessons from case studies, the Task Force is querying current definitions of adaptation/mitigation (such as how climate resilient development is conceptualized in IPCC’s 2022 Working Group II report), noting that common usage of the terms fail to recognize their synergies and overlapping functions in cities. They are examining how the respective co-benefits of adaptation and mitigation can be integrated into climate action plan programs, including insurance, bonds, land value capture, and monetizing urban nature-based (or nature positive) solutions.

Following these reports, Remy Rioux, President, Agence Francaise Developpment (AFD) and International Development Finance Club and Chair, Finance in Common (FICS), a global coalition of 530 public development banks (PDBs) with $2.3 trillion in annual lending, described the importance of PDBs’ work. He outlined their resources and effectiveness in understanding the contexts in which they operate, their ability to strengthen local capital markets, and their custom of lending in local currencies. He then invited the Commission to partner with FICS to develop and advocate joint messages.

Finally, in addressing the Commission, SDSN President Jeffrey Sachs, Commission Co-Chair, left the attendees with a challenge, reminding them that time is of the essence. Noting the upcoming G-20 meetings in city-sympathetic Brazil and South Africa, he argued, “We should not miss the opportunity for things that need to get done to put them on the agenda now, especially with Rio Mayor [Eduardo] Paes as our co-chair. We should clarify as soon as we can a set of practical objectives for what should be accomplished in the next two G-20 meetings. By December, I hope we have a list of what we want to do and then a game plan. We can give a report but, believe me, a report is not money for cities, if you want actual flows there’s a lot of work to do between December and G20.”