Enhancing the Role of National Development Banks in Supporting Climate-Smart Urban Infrastructure

The document argues that National Development Banks (NDBs), which hold over USD 5 trillion in assets, are uniquely positioned to close the urban climate investment gap due to their domestic expertise and ability to provide local currency financing. However, their impact is limited by narrow mandates, a lack of bankable project pipelines, and insufficient internal capacity to assess climate risks. To enhance their role, the brief recommends that NDBs strengthen their climate mandates, seek accreditation from multilateral funds like the Green Climate Fund, and deploy risk-mitigation instruments such as guarantees to catalyze private investment. It also emphasizes the need for national governments to improve the financial creditworthiness of cities and integrate NDBs into the planning of Nationally Determined Contributions (NDCs).

• National Development Banks (NDBs) possess significant financial scale and strategic advantages for urban climate action, collectively holding at least USD 5 trillion in assets, which is substantially more than the just under USD 1 trillion held by Multilateral Development Banks (MDBs).
• Cities face severe financial constraints in accessing climate-smart infrastructure; for instance, fewer than 4% of the 500 largest cities in emerging economies are considered creditworthy in international markets, and less than 20% are creditworthy in local markets.
• NDBs have several comparative advantages over other financiers, including deep knowledge of domestic development planning, the ability to provide financing in local currency, and the capacity to lend directly to municipalities that lack commercial financing options.
• A primary barrier to scaling climate-smart urban infrastructure is the lack of bankable project pipelines, with project preparation costs in developing countries estimated at 5-10% of total investment.
• While loans are the dominant instrument for green finance, risk-mitigation tools like guarantees are underutilized by NDBs despite their high catalytic potential; for example, 96% of 2018 member commitments for green finance by the International Development Finance Club (IDFC) were loans, while guarantees were less than 1%.
• Institutional gaps within NDBs, such as the lack of explicit climate mandates and limited capacity to mainstream climate objectives into portfolios, hinder the acceleration of urban climate-smart investments.

APA

Conway, S., Negreiros, P., Tonkonogy, B., & Yang, K. (2020). Enhancing the Role of National Development Banks in Supporting Climate-Smart Urban Infrastructure. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Enhancing-the-Role-of-National-Development-Banks.pdf

Chicago

Conway, Sarah, Priscilla Negreiros, Bella Tonkonogy, and Kristiina Yang. Enhancing the Role of National Development Banks in Supporting Climate-Smart Urban Infrastructure. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Enhancing-the-Role-of-National-Development-Banks.pdf.

Wikipedia

{{cite report |last1=Conway |first1=Sarah |last2=Negreiros |first2=Priscilla |last3=Tonkonogy |first3=Bella |last4=Yang |first4=Kristiina |title=Enhancing the Role of National Development Banks in Supporting Climate-Smart Urban Infrastructure |publisher=Climate Policy Initiative |date=August 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Enhancing-the-Role-of-National-Development-Banks.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{conway2020enhancing, author = {Conway, Sarah and Negreiros, Priscilla and Tonkonogy, Bella and Yang, Kristiina}, title = {{Enhancing the Role of National Development Banks in Supporting Climate-Smart Urban Infrastructure}}, institution = {Climate Policy Initiative}, year = {2020}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Enhancing-the-Role-of-National-Development-Banks.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }