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 capacities, proposing a 'maturity model' with twelve dimensions across strategic, financial, business, and operational parameters to help NDBs better support local governments in implementing low-carbon and climate-resilient projects.

• There is a significant gap in the current mandates of Public Development Banks regarding local government and green infrastructure financing, with only 4% specifically mandated to finance local governments and even fewer having 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 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.
• NDBs face three primary categories of barriers when 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 consisting of twelve dimensions across four parameters—Strategic, Financial, Business, and Operational—to standardize the measure of an NDB's ability to finance green urban infrastructure. Maturity is defined by a balance across these parameters rather than strength in a single area.
• To enhance their capacity, NDBs are recommended to seek legal structures that allow for higher risk and longer tenors, align their mandates with the Paris Agreement and Nationally Determined Contributions (NDCs), and utilize de-risking instruments like guarantee programs to catalyze private investment.
• Case studies illustrate successful NDB implementations: Indonesia's PT SMI uses its status as a non-bank financial institution to gain flexibility in risk and tenors, while Mexico's Banobras created the 'Proyectos México' online platform to standardize project profiles and link them with investors, featuring over 700 investment opportunities in 2018.

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-National-Development-Banks.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-National-Development-Banks.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-National-Development-Banks.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-National-Development-Banks.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }