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

This policy brief by the Climate Policy Initiative examines the role of National Development Banks (NDBs) in financing climate-smart urban infrastructure. It identifies significant gaps in current NDB mandates and proposes a 'maturity model' consisting of 12 dimensions across strategic, financial, business, and operational parameters to help NDBs better support municipalities. The document provides recommendations for International Financial Institutions (IFIs) to support NDBs through technical assistance, innovative capital access, and de-risking instruments to bridge the urban climate investment gap.

• There is a significant gap in the mandates of Public Development Banks regarding local government and green infrastructure; only 4% are specifically mandated to finance local governments, and an even smaller number have a green infrastructure-focused mandate.
• Climate change poses a substantial financial risk to urban areas, with up to US$ 4 trillion in assets worldwide at risk. Infrastructure financing needs for cities are estimated at US$ 4.1-4.3 trillion annually 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.
• The research identifies three primary categories of barriers preventing NDBs from financing climate-smart urban infrastructure: policy, legal and regulatory barriers (such as restrictive legal structures and broad mandates); institutional barriers (including lack of sectoral expertise and bankable project pipelines); and financial barriers (such as insufficient capitalization and limited access to innovative capital).
• The document proposes an NDB Maturity Model to standardize the measurement of an NDB's ability to finance green urban infrastructure. This model comprises 12 dimensions across four parameters: Strategic (legal structure, mandate, policy role), Financial (equity size, innovative capital, resource mobilization), Business (project design participation, de-risking instruments, sectoral expertise), and Operational (intermediary status for climate funds, monitoring indicators, strategic partnerships).
• International Financial Institutions (IFIs) are recommended to support NDBs by providing project preparation facilities, technical assistance, and guidance on de-risking instruments to catalyze private investment. IFIs should also help NDBs access innovative capital sources, such as institutional investors and multi-currency funding, to achieve economies of scale.

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-International-Financial-Institutions.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-International-Financial-Institutions.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-International-Financial-Institutions.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-International-Financial-Institutions.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }