Dar es Salaam is one of the fastest growing cities in Africa. Photo: Andrew Moore/Flickr 

Only 11% of investments by five major multilateral climate funds have been made in urban areas, despite the fact that cities serve as home to more than half of the global population and account for a large proportion of their countries’ greenhouse gas (GHG) emissions. A recent study in the Journal of Sustainable Finance & Investment also shows that 90 % of the funds invested in cities were allocated to mitigation projects rather than adaptation, and that funds mostly invested in upper middle-income countries. This risks locking rapidly growing cities in low-income countries into carbon intensive growth patterns.

Link to publication

At the COP 21 conference in Paris 2015 the role of cities for meeting the global goals for de-carbonization was highlighted. Apart from being big emitters, the rapid growth of cities requires the development of infrastructure to respond to demands for transport, housing, waste management, energy, etc., and in light of climate change it is crucial that these are made sustainable. At the same time, adaptation to climate change is needed as natural disasters caused by climate change affect large amounts of people and result in considerable financial impact.

Rural mitigation prioritised

To see how money contributed by the international development organizations to address these issues was being used, GEDB researcher Amar Causevic and colleague Sujeetha Selvakkumaran at Chalmers University of Technology, Sweden, reviewed the investments made between 1994 and 2014 by five major multilateral climate funds, together responsible for distributing approximately 72% of the total multilateral climate finance in the examined time period. They found that only 11 % was invested in urban areas.

“This is a surprisingly small percentage given the large proportion of global warming that stems from cities”, comments Amar Causevic.

Furthermore, the study showed that mitigation projects, such as introducing biodiesel bus routes or replacing public lighting or heating systems with sustainable alternatives, dominated over adaptation projects, for example renovating a river stream ecosystem to deal with flooding or building water reserves for periods of drought. This was the case both in terms of funding (90% vs 10%) and number of projects supported (87% vs 13%).

“Although mitigation is important to meet the global targets and reduce future GHG emissions, it would be preferable if there was a better balance between mitigation and adaptation”, says Amar Causevic and explains why:

“Climate change is already happening and is already affecting city dwellers around the world. Even if the 1 1.5-2°C degree target from Paris is met, more extreme weather conditions will continue to hit urban areas.”

Richer countries benefits most

The five climate funds distributed together a total of almost US$ 1.8 billion dollars during the 20 years of the study. Of these, as much as 93% was invested in upper middle-income countries such as China, Brazil and Mexico, which raises questions about the equity and efficiency of climate aid.

“The people running these multilateral climate funds seem to have to some extent the mentality of private investors, choosing to invest mainly in countries where it is generally safer to invest”, Amar Causevic reflects and adds:

“But upper middle-income countries have bigger chances of attracting private funding whereas countries in the lower-income realm have a harder time doing so. Moreover the populations in lower-income countries, not least in Sub-Saharan Africa, are booming, and will see the fastest growing cities in the years to come. Money invested there can potentially have huge effects on which path they choose to take.”

Urbanization in low-income countries is characterized by the development of carbon-intensive and fossil fuels dependent infrastructure. Without access to strong multilateral urban climate finance that development will continue, the authors argue. Therefore, it is of great importance for the multilateral climate funds to increase their investments in cities per se and low-income countries in general, they conclude.

Causevic, A. and S. Selvakkumaran. 2018. The role of multilateral climate funds in urban transitions between 1994 and 2014. Journal of Sustainable Finance & Investment 8(3):275-299