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

This policy brief examines the supply and demand side barriers to financing climate-smart urban infrastructure, focusing on the role of National Development Banks (NDBs). It introduces a 12-dimension 'City Maturity Model' to help city officials improve their strategic, financial, and operational capacities to attract green investment. The brief highlights that while NDBs are well-positioned as intermediaries, only 4% of Public Development Banks are specifically mandated to finance local governments. It provides recommendations for city officials to engage national policymakers, strengthen revenue capture, and build technical expertise, supported by case studies from Cape Town, Chefchaouen, and Belo Horizonte.

• National Development Banks (NDBs) are strategically positioned to scale up green urban infrastructure financing due to their local knowledge, yet very few are mandated to support local governments; specifically, only 4% of Public Development Banks have such a mandate.
• Cities face significant policy and regulatory barriers to climate financing, including 'short-termism' driven by four-year election cycles, legal debt limits on city budgets, and complex coordination requirements among ministries.
• Institutional and financial barriers for cities include a lack of technical expertise to define project objectives, insufficient data collection capabilities, and a lack of understanding regarding the assessment criteria used by NDBs and Multilateral Development Banks (MDBs).
• The 'City Maturity Model' identifies 12 dimensions across strategic, financial, policy/legal, and operational levels that determine a city's ability to access NDB finance, such as the existence of long-term City Climate Action Plans and the ability to optimize revenue capture from taxes and utilities.
• Strong revenue capture and creditworthiness are critical for accessing low-cost credit; for example, Cape Town's use of property taxes and water utility tariffs has enabled it to secure financing from bilateral DFIs like KfW and Agence française de développement.
• Some cities are severely limited by a lack of fiscal decentralization, as seen in Chefchaouen, Morocco, where the city cannot collect local taxes and is dependent on the national government and a single subnational development bank (FEC).
• Dedicated international relations units can bridge financing gaps by mapping international institutions and adapting projects to meet global standards, as demonstrated by Belo Horizonte's IR division which monitors over 150 institutions.

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} }