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

This policy brief examines the supply and demand barriers preventing National Development Banks (NDBs) from financing green urban infrastructure. It introduces a 12-dimension 'maturity model' across strategic, financial, business, and operational parameters to help NDBs optimize their capacity. The brief argues that while NDBs are ideally positioned as intermediaries, few have the specific mandates or capitalization required to support local governments, necessitating coordinated action from national governments and development finance institutions.

• National Development Banks (NDBs) are well-positioned to scale up green urban infrastructure financing due to their local knowledge, yet very few are mandated to do so; only 4% of Public Development Banks are specifically mandated to finance local governments.
• The financial risk associated with climate change in cities is substantial, with up to US$ 4 trillion in assets at risk worldwide. Infrastructure financing needs from 2015 to 2030 are estimated at US$ 4.1-4.3 trillion annually, with an additional US$ 0.4-1.1 trillion required to make this infrastructure low-emissions and climate-resilient.
• NDBs face significant barriers across three levels: policy, legal and regulatory (such as restrictive legal structures and broad mandates), institutional (including lack of sectoral expertise and bankable project pipelines), and financial (such as insufficient capitalization and limited access to innovative capital).
• The proposed NDB Maturity Model defines a 'mature' bank through 12 dimensions across four parameters: Strategic (legal structure, mandate, policy role), Financial (equity size, innovative capital, resource mobilization), Business (project design, de-risking instruments, sectoral expertise), and Operational (intermediary status, monitoring indicators, strategic partnerships).
• To enhance financing capacity, NDBs should encourage national governments to provide legal structures that allow for higher risk and longer tenors, and secure mandates that align with the Paris Agreement and Nationally Determined Contributions (NDCs).
• Case studies illustrate successful models: Indonesia's PT SMI uses its status as a non-bank financial institution to gain flexibility in risk and tenors, while Mexico's Proyectos México platform, initiated by Banobras, catalyzes investment by standardizing project profiles for domestic and international investors.

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} }