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

The policy brief argues that National Development Banks (NDBs) are ideal intermediaries for scaling climate-smart urban infrastructure due to their local knowledge, yet few are currently mandated to finance local governments or green projects. The research introduces an NDB Maturity Model consisting of 12 dimensions across strategic, financial, business, and operational parameters to standardize the assessment of NDB capacity. It identifies key barriers including unspecific mandates, lack of sectoral expertise, and insufficient capitalization. The document recommends that International Financial Institutions (IFIs) support NDBs by providing project preparation facilities, technical assistance, and access to innovative capital and de-risking instruments to catalyze private investment.

• Despite their potential to scale financing for climate-smart urban infrastructure, only 4% of Public Development Banks have a specific mandate to finance local governments, and even fewer have a mandate focused on green infrastructure.
• The document identifies significant financial risks and investment needs for urban climate action, noting that up to US$ 4 trillion in assets are at risk globally, with annual infrastructure financing needs estimated between US$ 4.1-4.3 trillion from 2015 to 2030.
• The research establishes an NDB Maturity Model based on 12 dimensions across four parameters: Strategic (legal structure, mandate, policy role), Financial (equity size, innovative capital, resource mobilization), Business (project design, de-risking, sectoral expertise), and Operational (intermediary status, monitoring indicators, strategic partnerships).
• NDBs face multiple categories of barriers to providing climate-smart financing, including policy/legal constraints (e.g., restrictive legal structures), institutional gaps (e.g., lack of bankable project pipelines and sectoral expertise), and financial limitations (e.g., insufficient capitalization and weak fiscal capacity).
• International Financial Institutions (IFIs) can enhance NDB capacity by providing technical assistance, project preparation facilities, and helping NDBs access innovative capital and de-risking instruments to attract private sector investment.

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} }