Collaboration and knowledge sharing is key to unlocking capital for climate neutrality

In order to reach net zero by 2030, or any of the other climate goals, the issue of finance is critical. The need to accelerate buy-in from investors to finance climate resiliency projects is at the top of cities’ minds as they look at how to reach ambitious targets and make transformations in the time needed. At COP27, we brought together a wide range of experts to explore the role of finance and capital in transforming cities.

“Developing an economic case for transforming cities is vital,” said Julio Lumbreras, Founder and Director of CitiES2030. An economic case means not only highlighting the advantages of investing in climate neutral projects – which currently outweigh the disadvantages – but also presenting a robust framework of how a project works and what the investor is set to gain from it. This helps to minimise risk which, according to Divyata Ashiya from the Long-Term Investment Coalition, is one of the biggest barriers to investors financing in the climate space: “being clear what the programme is and what it hopes to achieve is critical for investors to become partners in your work and minimise concerns over risk”.

The capital needed to fund transformations is, however, no easy feat. Lumbreras noted some research that the number sits at around 10,000 EUR investment per inhabitant so using Madrid as an example, that’s at least 35 billion EUR needed. For those who sit on the government level, this is a huge undertaking. Rodrigo Massi, International Relations Coordinator for Sao Paulo City Hall, noted the importance of having a network of cities to lean on in this process: “being able to speak to other cities going through the same processes allows us to learn and expand our understanding of what is possible in this space”. There was also an acknowledgement by all panelists that getting local investment buy-in was key to not only gaining assurance and confidence when pitching to international investors but also building coalitions at a local level that can spark new and innovative connections.

How can the gap be between knowing what you need to finance and actually finding someone to finance it? Jonas Kamleh, Lead Climate Strategist for the City of Malmo, noted that cities often do not have a full picture of the financial system, so they do not have a good idea of what is ‘bankable’ in terms of investors’ minds and what is not: “there needs to be a process for cross-learning that needs to happen to broaden the knowledge across sectors”. This sentiment was echoed by Thomas Osdoba, Director of NetZeroCities at EIT Climate-KIC, who talked about the need to bring different perspectives to the table: “In order to solve the climate issues at hand – which are systemic and huge – we need to bring different intelligences and expertise to the table. This means creating a space to do this well. It’s extremely easy to say but extremely difficult to do”.

It appears there is a huge appetite for climate experts at city levels and beyond to have a wider understanding of the finance sector but can the same be said of the reverse? Ashiya said that she sees the industries moving in the right direction because those working on the finance side of things understand the gravity of the issues at hand and know that things have to change. However, it is not a straightforward path: “this isn’t just a question of public capital or private capital, it’s a question of the combined and aligned interests. This will help us move in the right direction”.

Watch the recording of the session here.