Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure

This policy brief by the Climate Policy Initiative examines the barriers and opportunities for National Development Banks (NDBs) to increase financing for climate-smart urban infrastructure. It identifies a significant gap between the potential of NDBs to act as intermediaries and the current reality, where only a small minority finance local governments. The document provides a 'City Maturity Model' consisting of 12 dimensions across strategic, financial, policy, and operational levels to help city officials improve their creditworthiness and project pipelines to better access NDB funding.

• National Development Banks (NDBs) are strategically positioned to scale up green urban infrastructure financing due to their local knowledge, yet very few currently do so; specifically, only 4% of Public Development Banks have a mandate to finance local governments.
• Cities face significant policy, legal, and regulatory barriers to accessing NDB finance, including 'short-termism' driven by 4-year election cycles, debt limits on city budgets (such as Brazil's Fiscal Responsibility Law), and limited authority to collect taxes.
• Institutional and financial barriers for cities include a lack of technical expertise to define project objectives or understand NDB assessment criteria, as well as a tendency for creditworthy cities to prefer Multilateral Development Banks (MDBs) over NDBs due to lower costs of capital.
• The document proposes a City Maturity Model with 12 dimensions to enhance access to finance, categorized into strategic (engagement with policy makers, climate action plans), financial (revenue capture, structuring capacity, fiscal independence), policy/legal (tax authority, debt capacity, borrowing diversity), and operational (project preparation, human resources, management information systems, and international relations units).
• Case studies illustrate different city capacities: Cape Town, South Africa, achieved high creditworthiness through rigorous property tax and water utility revenue capture; Chefchaouen, Morocco, remains highly dependent on national government transfers due to a lack of legal authority to collect local taxes; and Belo Horizonte, Brazil, utilizes a dedicated International Relations division to map over 150 international institutions for funding.
• Global urban infrastructure financing needs are estimated at US$ 4.1-4.3 trillion per year from 2015 to 2030, with an additional US$ 0.4-1.1 trillion per year required to make this infrastructure low-emissions and climate-resilient.

APA

Harb, S., Smallridge, D., Hodson, G., Gough, J., & Yang, K. (2021). Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-City-Officials-Mayors-Chief-Financial-Officers-Climate-and-International-Relations-Directors.pdf

Chicago

Harb, Sara, Diana Smallridge, Glen Hodson, Jonathan Gough, and Kristiina Yang. Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-City-Officials-Mayors-Chief-Financial-Officers-Climate-and-International-Relations-Directors.pdf.

Wikipedia

{{cite report |last1=Harb |first1=Sara |last2=Smallridge |first2=Diana |last3=Hodson |first3=Glen |last4=Gough |first4=Jonathan |last5=Yang |first5=Kristiina |title=Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure |publisher=Climate Policy Initiative |date=March 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-City-Officials-Mayors-Chief-Financial-Officers-Climate-and-International-Relations-Directors.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harb2021leveraging, author = {Harb, Sara and Smallridge, Diana and Hodson, Glen and Gough, Jonathan and Yang, Kristiina}, title = {{Leveraging National Development Banks To Enhance Financing For Climate-Smart Urban Infrastructure}}, institution = {Climate Policy Initiative}, year = {2021}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/03/Policy-Brief-l-Directed-to-City-Officials-Mayors-Chief-Financial-Officers-Climate-and-International-Relations-Directors.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }