In recent years, the UN Secretary-General has supported a call for action to turn cities into engines of sustainable development and enable investments in critical urban infrastructure like affordable housing, efficient transport, and social services. However, challenges present themselves in galvanizing stakeholders to mobilize the financial resources necessary for meeting these goals.

Cities remain key to the global economy, generating over 80% of global GDP and housing more than half of the world’s population (projected to reach two-thirds by 2050). Yet, urban hotspots face immense risks of disasters and climate change. 70% of cities already experience climate change impacts, and by 2030, the impact of disasters could cost cities three times more than today and push millions of urban residents into poverty. 

With rising urbanization trends equally considered, city authorities are under increasing pressure to enhance investments to realize resilience and sustainability objectives. Yet, investments in disaster risk reduction, climate adaptation, and resilience-building in cities fall billions short.

Access to disaster and climate risk finance is a major challenge hampering risk-informed development efforts, especially for small and medium cities, where budgets barely cover on-going administrative functions and day-to-day services. In response, the United Nations Development Programme (UNDP) works to augment municipal finance for disaster and climate risk-informed development, scaling up investments in cities of Least Developed Countries (LDCs) and Small Island Development States (SIDs). In line with its Urban Risk Management and Resilience Strategy, UNDP focuses on the following viz.

One - Increasing domestic revenue streams: UNDP works with municipal and national governments to help unlock domestic financing streams for risk-informed urban development. This includes conducting cost-benefit analyses known as Public Expenditure and Institutional Reviews (PEIR) to promote innovative financing solutions. Through the improvement of efficiencies in existing revenue generation systems and strengthened collaboration with key sectors and stakeholders, cities can widen their local revenue base. 

Two - Accessing international financial instruments: Cities often face barriers in accessing international funds like the Green Climate Fund, the Climate Investments Funds, or global pension funds. Leveraging its extensive experience and strong technical capacity, UNDP partners with cities’ government stakeholders to prepare and implement innovative investment proposals. This collaboration helps cities bridge the gap in accessing international funding, including those from private pension and wealth funds.

Three - Enhancing National-Local Alignment in Policy, Planning, and Funding for Sustainable Urban Development: National budget priorities often misalign with the local level, limiting resources for long-term, urban development and resilience-building. Addressing this disconnect, UNDP works with local governments to adapt national plans/policies to local contexts, ensuring alignment with national disaster risk reduction and climate adaptation strategies. By fostering active engagement and collaboration between ministries, disaster management agencies, regulatory bodies, and social planning departments on national and local levels, UNDP helps to increase the integration of intersecting risks into all public financial policy. This integration enhances the potential for cities to attract greater national budgetary resources and ensure that resilience-building considerations can be incorporated into both national and local financing strategies within public financial policy. 

Four - Develop investible projects that attract public and private investments: Local governments often lack the capacity to design bankable project proposals, especially for infrastructure. UNDP provides training and technical assistance to city officials, strengthening their capacities to develop qualitative proposals. By promoting innovative sustainable financing mechanisms and facilitating public-private partnerships, UNDP helps local governments attract the interest of public and private investors. 

Five - Enhance effective allocation, absorption, and utilization of resources: UNDP supports local authorities, sectoral and administrative agencies in building and augmenting systems, capacities, and technology applications for improved management of resources. This includes promoting cross-sectoral planning and implementation to optimize resource use by overcoming linear sectoral functioning and harnessing the potential offered by synergistic resource utilization. 

Fostering a holistic approach, UNDP provides integrated policy, programme and technical advice to support cities in increasing municipal finances to advance their resilience and sustainability. Tapping into diverse funding sources on domestic to international levels and addressing the challenges cities face in implementing these funds, UNDP helps promote cities’ ability to attract investible resources and expand their socio-economic base. 

To learn more about how UNDP and others work to augment municipal finance, we invite you to participate in our side event at the World Urban Forum.

For further details, reach out to Ronald.jackson@undp.org and Rajeev.issar@undp.org