Investing in cities: how can the Commonwealth act to leverage private finance?

Tackling climate change requires a radical restructuring of cities’ carbon footprint and rapid implementation of adaptation measures. However, there is a huge gap in finance needed to address these challenges.

The Commonwealth Heads of Government Meeting being held in Kigali, Rwanda in June 2022 - with its theme 'Delivering A Common Future: Connecting, Innovating, Transforming' - provides an ideal platform for discussing innovative and collaborative action by the Commonwealth on how to support the mobilisation of private finance for green cities.

Current policy initiatives to improve cities’ access to finance are delivering technical assistance, project preparation facilities and guarantees. To date, such interventions have mobilised very limited private finance for a modest number of city projects. Much more needs to be done if cities’ financing needs are to be met.

This think piece has been prepared as part of the Africa–Europe Mayors’ Dialogue with the Commonwealth Local Government Forum (CLGF).

Key Messages

The following are potential solutions that would benefit from collective action by Commonwealth members:

The Commonwealth could leverage its influence to bolster existing approaches and to scale and refine the most effective initiatives that support cities’ access to private finance. This should include working towards a greater integration of cities into national climate plans, the provision of finance directly to cities and for the extension of guarantees to facilitate this.

Commonwealth members could work together to create a collective fund with a mandate to work across the Commonwealth to accelerate the mobilisation of private finance for cities. The financial intermediary would need to provide project preparation support, early-stage finance and support for financial structuring and access to investor networks. Key would be pooling assets across many cities to allow the fund to provide securities that are attractive to institutional investors and also to allow lower credit-rated and smaller cities and projects to participate. Similar financial intermediaries have already proved successful and could provide models for Commonwealth cooperation.

The Commonwealth could provide support for cities to tap into new ‘city-aligned’ green bonds and carbon credits. Cities require support for green bond certification as well as to access certification schemes for the sale of carbon credits. This focus could be combined with the proposed collective city-focused fund, through a mandate to deliver and share expertise in green bonds standards, impact certification and climate and greenhouse gas certification processes.