For the past few months. John and I have been working with partners at Meister Consultants Group and Ramboll to understand the challenges and opportunities facing cities trying to fund their climate adaptation plans. It’s no secret that finding money is proving to be a big barrier to advancing urban adaptation, as we discussed in Essential Capacities for Urban Climate Adaptation. So it’s no surprise that lots of people–cities, NGOs, government policy makers, financial institutions, insurance companies, and others–are trying to do something about it. We’ve identified more than 30 innovations or revisions of current financial practice that are in the works, almost all of them at experimental scale. Now we’re thinking about what these add up to, how they contribute to the development of a system for urban climate finance. Below we provide a summary list of these various projects, divided into 6 categories based on what the goal is, and then some initial thoughts about what it looks like to shape these blooming flowers into a well tended garden. The categories:

A. Generating Public Revenues

B. Managing Financial Risk

C. Balancing Burdens and Benefits

D. Aligning Public Policies

E. Leveraging/Catalyzing Private Capital

F. Revising Government Jurisdictions

Accelerating and expanding the development of an urban climate-financing system could follow several approaches:

• Enhancing City-Level Transaction Capabilities. Cities need the ability to produce high-quality and equitable adaptation plans and projects with comprehensive, hybrid investment strategies backed by the necessary multi-jurisdictional governance arrangements and community support, and a technical capacity to implement transactions through a variety of financial mechanisms. Few cities have these capabilities in place for climate adaptation.
• Aligning Government Policies. Cities need state and federal governments to initiate comprehensive, aligned policies, regulations, and standards that support increases in public revenue and private capital for climate adaptation, and eliminate barriers for cities and distortions in market behaviors. Only a few states are moving in such a direction, as are some federal agencies such as FEMA, but the efforts are not usually aligned with each other or through engagement of cities and market players.
• Scaling Changes in Financial, Insurance, and Real Estate Markets. Cities need key markets to accurately price climate risk and develop and rapidly deploy risk management solutions for private capital, including revised and new products and services, and put in place standards for risk disclosure and resilience financing. “Making these market mechanisms work effectively requires a widely accepted set of standards and disclosures for buildings that signals the degree of resilience to the various actors and helps them assess risks more accurately,” as the Sustainable Solutions Lab of the University of Massachusetts-Boston reported in April 2018.[1]

[1] “Financing Climate Resilience,” 30.

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• More than a third of the cities–local authorities–have done NO climate planning for either GHG reduction or adaptation–and nearly 9 out of 10 cities have no adaptation plan.
• In nations without any national government mandate to conduct climate planning, it’s mostly the largest, and presumably more affluent, cities that have done climate planning.
• In nations that have no local climate planning mandates, cities that participate in city-based networks, such as the European Union Covenant of Mayors, are more likely to have produced a climate plan.
• Few cities have integrated their GHG-reduction and climate adaptation plans.

It would be no surprise if these patterns are present in the US, where there is no national mandate and few state-government mandates for climate planning. Of the nearly 2,000 municipalities with more than 25,000 people, it’s likely from scattered data that only 10-20 percent, a few hundred of them, have taken steps to develop adaptation plans.

In addition to flagging the frustrating slowness of urban adoption of climate planning–it’s nearly 30 years since the first small set of cities started to tackle their GHG emissions–the European study and its likely US counterpart underscore the challenge of aligning policies across levels of government. The willingness of some cities to drive ambitious climate-change planning has attracted worldwide attention, but an important basis for making sustained, high-impact progress on both mitigation and adaptation is the alignment of policies at the national, state, sub-national region, and local levels. Cities can’t do everything by themselves. Nations can’t just order cities to plan and act.

This new study suggests a huge Policy Alignment Gap in Europe, and it’s no doubt worse in the US.

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That said, it’s so interesting, speaking as a lawyer and urban planner (I only play one on TV), how entrepreneur/founders like Bird’s and Uber’s have little to no regard for rules, and/or no knowledge of how public policy works and why we have rules in the first place (zoning codes, environmental laws, public health codes, each is a species of the police power, intended, at bottom, to ensure some level of public order and safety). Ask for forgiveness, not permission, is the MO. I wonder if these entrepreneurs ever took a basic civics course, let alone a course in land use law and city planning.

On the one hand, I love their approach. Given how tough it is to break through the status quo (incumbent businesses like taxi cabs and the rules and regs that protect them), this approach seems to be the only way to get traction quickly and at some scale. And the PR effect, while it cuts both ways, at least raises people’s awareness and level of consciousness about what’s possible (Bird founder VanderZanden’s dream of scooters outnumbering cars one day) and what’s currently missing (hard to get people to care about something they don’t see or experience).

On the other hand, it’s a slippery slope, unbridled enterprises flaunting rules at will, rules that, while no doubt imperfect, usually have a very sound rationale (and rule making process) behind them. It’s a variation on Hardin’s Tragedy of the Commons. . . Each entrepreneur pursuing her own grand vision and road (pun intended) to profitability at the expense of the whole, the common good. Santa Monica’s sidewalks and streets, as currently configured, can only hold so many moving objects, only so many scooters and bikes and pedestrians and skateboarders, to say nothing of cars. At some point, without new rules and upgraded infrastructure, the “commons,” our public streets and sidewalks, will simply be overwhelmed, if not (tragically) destroyed, as city populations grow and the sheer number of vehicles, whether self driving cars or scooters, grows with them (think Kolkata or Beijing).

Which points to, I think, the really hard innovation challenge, which is a social one, not a technological or commercial one: How, in a messy, pluralistic and open democratic society such as ours, can we make smarter, more forward-thinking social policy decisions more quickly, more nimbly, so as to enable commercial innovation to happen in a way that maximizes its benefits while minimizing its risks (think of the flurry of social media platforms like Facebook that have grown so quickly, largely unregulated, and are now the subject, ex post, of so much scrutiny, if not disdain, for their recklessness vis. user privacy).

I don’t think it’s an either/or. I think we can have great, smart rules (think of Smart Codes and form-based codes for city planning) and great, smart technologies that work hand in hand. I’d prefer the rules to come first, myself. This was the great legal historian Willard Hurst’s thesis: our legal order, our constitution and laws, were the great enabler, or as he put it, “releaser,” of American enterprise, of our creativity and entrepreneurship as a people. Laws, on Hurst’s view, didn’t limit or constrain freedom, they made it possible, especially in the area of economic development.

But I guess this is the rub. Chicken/egg, scooters/smart codes. Which came first? My left brain votes for rules first. My right for creative enterprise. I guess the point is, it’s not really linear or binary, and rule making is a kind of creative enterprise in its own right. Rules  are an ancient technology, a core operating system whose many versions span the centuries.

Social change, even something as simple as scooters on sidewalks, is dynamic and messy, like any creative process, and this includes a role for disruptors and transgressors like VanderZanden. After all, I imagine that if he actually studied all the rules and procedures that make it so hard to change urban mobility systems (think about how hard it was just a decade ago to build a dedicated bike lane in most US cities), he probably wouldn’t have started Bird in the first place.

Hurst and Hardin might not have been pleased, but then again, they never sat in LA traffic at rush hour. .

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It’s a cornucopia of innovation with the city as a lab. And it’s paid for with an equally creative mix of funds, from consent decree-induced storm water rate increases; legal settlements after utility failures; federal and agency grants and incentives; and philanthropic partnerships with nonprofit community organizations.

What will it cost?

As we enter an era of demands on cities sparked by climate change–induced shocks and stresses, ingenuity by cities is in high demand. Various estimates of adaptation/resiliency[1] funding needs exist. For instance, the United Nations Development Program projects that adaptation costs could range from $140 billion to $300 billion by 2030 – and between $280 billion and $500 billion by 2050 (source). In the U.S., the Union of Concerned Scientists, a source for cost estimates to remedy such risks, estimates that sea-level rises of 13-to-20 inches by 2100 would threaten privately insured coastal property valued at $4.7 trillion (source).

In addition, the Risky Business initiative notes that increases in temperature, heat waves and humidity will drive up demand for energy and require the equivalent of 200 new power plants nationwide that could cost up to $12 billion a year by 2100 (source). Plus, we already know how costly it can be to respond to climate change. Hurricane Sandy in 2012 cost New York $32 billion in damage and loss.[2] Earlier, thunderstorms, tornadoes and flooding in the summer of 2008 caused more than $18 billion in damage and 55 deaths nationwide, primarily in the Midwest.

Communities need funds to shore up their critical infrastructure assets, such as transportation infrastructure, wastewater treatment, telecommunications networks and electricity and gas supply. Funds are required for projects where resilience is a primary function to enhance a particular geography (e.g., a new sea wall) and to boost traditional mainstream projects’ resiliency attributes (e.g., elevating an existing bridge). Both primary function and resilience projects can bring big paybacks. Global reinsurer Zurich calculates that for every dollar spent on targeted flood-risk reduction measures, five dollars can be saved by avoiding and reducing losses.

Where will cities find the funding stream to support inventive resilience-related projects that strengthen the capacity of governments, communities, institutions and businesses to survive, adapt, and grow in the face of increased climate-driven shocks and stresses? Based both on my role in the Global Adaptation and Resilience Investment work group and on dozens of conversations with resiliency fund leaders, resilience initiatives, hazard mitigation experts and regional collaborations (primarily in support of the Regional Plan Association’s Regional Resilience project for the Fourth Regional Plan entitled “Establishing a Regional Resilience Trust Fund”), here are three elements to a fresh era of market finance.

Collateral Benefits

In many communities, those most at risk from climate impacts are poor or disenfranchised residents. Their greater risk can reflect such factors as lower insurance penetration, fewer savings, language-barriers, fewer funds to dedicate to maintenance, more unemployment, less access to information and more assets in lower-lying areas. When planners focus on improving infrastructure and social structures in more vulnerable communities, projects reap collateral benefits, known as “resilience dividends.” In these situations, a future disruption doesn’t become a disaster and shorter-term economic and social benefits are realized. The key lies in setting priorities for proposals that decrease economic vulnerability along with climate vulnerability.

For practitioners, three practical ways build these collateral benefits into projects:

• Include government officials, project developers and citizens in project planning to create engagement and literal and figurative buy-in.
• Promote breaking traditional departmental silos to identify funding that can be used collaboratively.
• Emphasize system benefits over project benefits to promote projects that have positive impacts across both the targeted and surrounding communities.

Benefit Cost Analysis

Many city leaders already have a long-term mindset. They plan for their city’s wellbeing 20, 30 and 50 years into the future. But they need to develop it in their financiers by modeling long-term benefits and costs through assessments that go beyond a normal benefit cost analysis and include elements of equity, land use, safety and stability. Typically, basic project BCAs evaluate direct financial benefits (e.g., project revenues or decreased operational costs) and direct byproducts (e.g., labor days, taxes from business transaction revenue, etc.) Resilience-oriented BCAs also calculate impacts that are avoided in the future as well as current benefits, such as outdoor community amenities, job creation for project maintenance, changes in property values, changes in public health, value of land-based amenities and positive and negative impacts on lower income or minority populations.

Several models for long-term benefit cost analysis are emerging:

• The International Financial Stability Board’s Task Force on Climate Related Financial Disclosuresis finalizing a yearlong process to, among other things, create measures of climate risk.
• Standard and Poor’s system for “Evaluating the Environmental Impact of Projects Aimed at Adapting to Climate Change.”
• The National Disaster Resilience Competition, Department of Housing and Urban Development. (While this BCA is considered a good practice because it focuses on finance loss and return in terms of both future risks and future benefits and is a U.S. government source, its discount rate is likely too short for most projects because it doesn’t reflect the useful project life of 50-100 years).

Potential Sources of Finance

Both collaboration and long term BCAs should not only entice the finance community, they should make it more politically feasible to ensure that existing budgets and funds – such as general obligation bonds and rate-payer revenue – can be used for resilience projects. While cities often are wary of increasing their general obligation bonds, credit raters are rational actors and more of them are mindful of resilience. Simply consider Standard &Poor’s recent reports on the impact of climate risk on sovereigns and corporations. In any case, these features should make financing with any mechanism easier.

Here are some other funding mechanisms to consider[3]:

• Community Reinvestment Act (CRA) investments: Banks have shifted away from meeting their CRA goals with their general market share in low-value mortgages in the post-housing bust. The statute is flexible enough to allow investments for resilience that improve communities.
• EPA Supplemental Environmental Projects (SEP): Organizations (more than 600 across the country) such as utilities that are fined for violating various environmental statutes should finance resiliency solutions process across the states and territories.
• EPA Clean Water State Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF): for local and regional infrastructure agencies.

• FEMA Hazard Mitigation Grant Program (HMGP): Funds for projects that mitigate future hazards after a president declares a disaster area can receive such monies.
• FEMA Disaster Deductible Program (DDP):A funding model under consideration by FEMA to promote risk-informed decision-making to build resilience and reduce the costs of future events. (N.B. open for public review until April, 2017)
• Green Banks: With tools such as green bonds and property assessed clean energy (PACE) programs, Green Banks are well placed to pivot to adaptation if their legislated authority enables the change.
• Green Bonds: Already funding resilience, Climate Bond Initiative (CBI) and others are working to introduce adaptation/resiliency components of all Green Bonds, and Standard & Poor’s has established a green bond rating system that includes resilience elements. 

• HUD Section 108 Loan Guarantees: HUD’S existing borrowing authority.
• HUD Community Development Block Grants (CDBG): Relatively flexible funding for community improvement that has a recent history of focus on resilience.
• Patient Capital: Investors with longer-term perspectives, such as pension funds, where the expectation of market return enjoys a longer timeframe.
• Philanthropy including existing funders Kresge Foundation and Rockefeller Foundation, and Climate Resilience Fund (CRF).
• Property Assessed Clean Energy (PACE): With reforms, it could become a Property Assessed Resiliency (PAR) program where debt and assets transferred with the property.
• Public-Private Partnerships (PPPs): PPP projects require long-term commitment and appropriate allocation of risk and, thus, are a fit for some adaptation projects.
• Social Impact Bonds: Investors with longer-term market returns who make payments when targeted social outcomes are achieved.
• Special Climate Change Fund (SCCF): Designed to finance and execute activities, programs and measures that relate to climate change in generally higher income countries.
• Taxes and Fees: Local governments can establish special resilience districts that assess taxes or fees. The California Earthquake Authority (CEA) is one model.

Conclusion

In today’s political climate, how can we pull this off? It is key to brand your resilience projects with a positive message (and offering solutions to a catastrophe). Your resilience projects promote safety, security and stability, and you can illuminate how they improve well-being of people, communities and property. Resilient infrastructure serves as a foundation less likely to crumble, flood, catch fire, be inundated, buckle or otherwise fail from the extremes of climate change. Herein lies a future that markets will depend on.

Originally appeared in Meeting of the Minds

[1] In the most basic definitions, “adaptation” is when an entity evolves to address changing conditions, while “resiliency” is the ability to bounce back and become stronger in response to changes.

[2] Union of Concerned Scientists, Climate Change in the US, the Prohibitive Costs of Inaction The Star-Ledger New Jersey On-Line: “Cuomo: Sandy Cost NY, NYC $32b in Damage and Loss”

[3] Special Thanks to Nick Shufro with JulZach Resilience for collaborating to compile these resources.

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• New tools for measuring vulnerability to climate impacts and assessing the cost-benefit calculations on new investments.
• New competencies needed to identify, design, engineer, build, finance and maintain complex resilience projects.
• New sources of financing for a combination of public and private resilience investments.
• Strategies for maintaining the viability of insurance and other tools for hedging climate risk in urban markets.

The report will develop specific recommendations for cities and investors in the field of urban climate adaptation that address three core questions:

1. Accelerating Innovation. Are there specific adaptation finance innovations under development that warrant acceleration, and what forms of collaboration (between cities and financial institutions or between different financial sectors) might support this acceleration?
2. Filling gaps. Are there gaps in current urban climate financing efforts that warrant more attention, and how might they be explored?
3. Building capacities. What capacities – technical expertise and institutional arrangements – will cities and financial sectors need to develop or enhance for large-scale, sustained climate adaptation finance?

Strategic Assumptions

The development of recommendations for urban climate adaptation finance is guided by the following assumptions about the state of the current market.

• Accelerating change. Over the next several decades, the effects of climate change in urban areas (sea level rise; extreme storms and precipitation; extreme heat) will continue to accelerate and intensify regardless of action taken on emissions reductions.
• Many different needs. To adapt to these impacts, the public and private sectors will need to make new investments in resilience strategies. These strategies fall into three different categories:
  • Reducing physical exposure to damage
  • Reducing social vulnerability to climate impacts
  • Hedging against future risks
• A new cost of doing business. Overall, the expenses involved in these investments will increase the cost of doing business in urban markets. However, investments in prevention will be typically far cheaper than investments in recovery. (FEMA estimates that the cost-benefit ratio of prevention vs. recovery is in the range of 6:1.)
• Significant scale. The scale of investment required will be quite large, often in the billions or tens of billions of dollars in larger cities. In most cities there is precedent for making infrastructure investments of this scale for other purposes.
• Some old, some new. In many cases, there are existing financing mechanisms that can be used to raise and manage capital for resilience investments. Some resilience measures can be integrated into existing infrastructure capital budgets without requiring separate, new resilience projects, (although most measures are likely to cause an incremental increase in capital costs). In other cases, cities will need to create new sources of capital and new ways of managing the investment of that capital.
• Private markets are starting to wake up to climate risk. In the last several years, it appears that private financial markets are beginning to internalize climate risk management into their calculations. The recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD) is an example of this, as is the declaration by Moody’s that they intend to take climate preparedness into account when they issue municipal bond ratings. But the implications of these developments for cities are still unclear.
• It takes a system. The need is not just for new sources of financing. Cities need to develop integrated systems that support climate adaptation investments. These systems will require:
  • New data and analytics (impact forecasting, risk assessments, performance measures).
  • Tools for cost-benefit analysis.
  • Standards for resilient infrastructure investment.
  • New planning processes to define risks and plan investments.
  • New governance structures and institutional relationships to support collaboration across sectors.

• Many challenges to overcome. There are a number of challenges that will need to be figured out in the process of building a well-functioning “system” for urban climate adaptation finance. Some examples include:
  • Inaccurate risk pricing. Many existing market mechanisms (insurance, property valuation, bond ratings, etc.) have not yet figured out how to internalize future climate risks into their calculations.
  • Difficult to quantify. There are no standardized methodologies for developing accurate cost benefit analyses, and the uncertainty of future risks makes the development of these methods complicated.
  • Difficult to monetize. Even though investments in prevention may be repaid by multiple orders of magnitude in future risk reduction, it is difficult to monetize this value in a way that it can be used to finance the prevention investments.
  • Difficult to divide. There is not yet agreement on how the costs and benefits of resilience investments should be shared between the parties making those investments and the parties most likely to benefit from them.
  • Legal limits. Even when cities are willing to tax themselves to make new resilience investments, some have legal limits on their ability to borrow that constrain them from acting.
  • Problems of scale. In many cases, the investments required span more than one municipal jurisdiction, but there is no established institution with the mission and authority to manage such regional investments.

• Timing matters. It is important for cities to “get ahead of” the adaptation investment challenge so that they avoid the “viscous cycle”. Depending on the timing of the risk, a failure to act can lead to reductions in property values, which leads to reductions in revenue, which further reduces the ability to invest. Once the “viscous” cycle starts, it is very hard to reverse.

The post Work in Progress: Financing Climate Adaptation by Cities appeared first on Innovation Network for Communities.

The Zone is composed of two stretches of mostly coastal land in the United States, covering 12 states. Atlantic Climate Zone spans 400 miles, from Washington D.C., Baltimore, and Philadelphia to New York City and Boston, and contains more than 33.7 million people in its major metropolitan areas. Pacific Climate Zone sweeps across 1,100 miles, from Los Angeles and San Francisco to Portland and Seattle, with about 24 million people in the largest metro regions. These Zone’s combined metropolitan areas alone generate about 23 percent of the entire U.S. economy’s annual output—a combined GDP larger than any nation except China and Japan.

When you use a climate economy lens to look at this population and economic data, adding climate change, physical and economic infrastructure, and political culture, a larger and intriguing picture emerges—a potentially robust response to the Trump Administration’s ferocious opposition to climate-smart policies.

Why add these particular elements? First, they are critical to the prosperity and wellbeing of urban economies in the 21^st century. As has been widely noted, a “climate-smart” economy—clean-energy technologies, green buildings and infrastructure, energy-efficient heating and cooling systems, electric vehicles, water-efficient utilities, and more—is growing rapidly and becoming a driver of urban wealth creation and a means to reduce the cost of living for households. At the same time, the risks of severe physical damage and business disruption from climate changes is growing; examples already exist worldwide and climate science tells us that things are only going to get worse. The cities, states, and regions that will be big winners in the emerging economy are those that take climate change seriously, as an opportunity and a threat, by forging the political leadership and consensus needed to invest in innovation and infrastructure. Second, these elements lend themselves to geographic mutuality, the connection and alignment among metropolitan regions and states that makes it possible to generate shared benefits that an individual city or state cannot realize by itself. As strategist Parag Khanna argues in Connectography, the global trends of urban connectivity across national borders, devolution of authority from central capitals to provinces and cities, and competition over global supply chains, energy markets, and flows of finance, technology, knowledge, and talent all lead “smaller political units” like cities and states to fuse together so they have the resources needed to survive.

Applying the climate economy lens reveals that these coastal urban agglomerations—the metro areas and states of the Pacific and Atlantic zones—look pretty similar, and quite different from much of the rest of the nation.

When it comes to climate change, California, Massachusetts, New York, and other coastal states and the cities we’ve mentioned are national and international leaders in reducing GHG emissions and building climate resilience and, In many cases, they have achieved strong “vertical” alignment of local and state policies. They are adopting and implementing public policies that require new and existing buildings to meet strict standards for energy consumption; transition as much energy supply as they control with renewable sources; promote a shift from driving to walking, bicycling, and use of public transit; and remove potential sources of GHG emissions from the waste stream. They are using their resources to stimulate the emergence of “green economy” businesses and jobs—especially clean-energy technologies—as a robust and sustainable sector. They are taking steps to assess the risks they face from increasing climate turbulence, to plan actions that will make them “climate proof,” and to develop the community, technical, and financial capacities to implement plans.

When it comes to infrastructure, the economies of the Climate Economy Zone’s two regions, especially their metropolitan areas, are based on a similar model for success: They are deeply embedded in the interconnected global trading economy and have developed, over the decades, world-leading business clusters in technology, finance, education and other sectors. They depend critically on competitive transportation and digital systems, corporate supply chain management, research and development assets, availability of financial capital, and well-educated and entrepreneurial talent. And they face similar challenges due to the national underinvestment in physical and communications infrastructure and the chronic underperformance of public education systems.

When it comes to political culture, the climate-economy regions have developed large constituencies and prominent stakeholder groups, including business leaders, which support aggressive climate action and have been willing to support substantial local changes, including increased public investment. They share a strong affinity for political leadership that fully acknowledges the practical and moral responsibilities of the nation, as well as its cities, to address climate change. One indicator of this is voting in the 2016 presidential election. In 10 of the 12 Zone’s states, Clinton defeated Trump by landslides, 10 to 29 percentage points, won another by 4 points, and narrowly lost one, while the District of Columbia went 92 percent for Clinton. Another indicator is found in survey data from Yale University: people in the Zone’s metropolitan areas and states are more likely than most other Americans to think that global warming is happening, caused mostly by human activities, and already harming people in the U.S., and that carbon emissions from power plants should be strictly limited and utilities should be required to produce 20 percent of their electricity from renewable sources.

This sketch of the Climate Economy Zone suggests a potential for “horizontal” economic, infrastructure, and political collaboration at the regional level, multiple cities and states, which has only been minimally tapped so far. Pacific Zone states, for instance, are slouching toward a regional price on carbon emissions; California has a cap-and-trade market, while Washington and Oregon have explored options. The three states are developing the West Coast Electric Highway, a network of fast-charging stations located every 25 to 50 miles on Interstate 5and other roads. Six states in Atlantic Zone are part of a regional carbon-emissions trading market. Core cities on both coasts work together on aggressive climate actions: eight are members of the C40 Cities Climate Leadership Group, six are in the Carbon Neutral Cities Alliance, eight are among the 100 Resilient Cities.

But much more could be explored and perhaps done. We tend to think of public policy making as occurring along the traditional vertical axis of federal-state-local authority, and this obscures the potential of horizontal approaches. We tend to think of cities as locations, and this obscures their growing interest and engagement in international relations. We tend to think of climate change as a problem of reducing GHG emissions through national government regulation of energy markets, but this obscures the crucial role of corporations and cities as end users in the energy supply chain. If we were to think more about Climate Economy regions not as separate states and separate urban regions, but as “countries within the country” that align around a shared framework of public policies to address climate change, business growth, and urban development—what opportunities might be revealed?

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The Innovation Network for Communities proposes to map efforts to address the financial needs of U.S. cities adapting to climate change and to develop insights and hypotheses about how to accelerate development of the capacities and innovations cities and financial markets need to enact extensive urban climate adaptation.

 Project Purpose

 This research project by the Innovation Network for Communities (INC) and Meister Consultants Group (MCG) will produce two deliverables:

A map/matrix of existing efforts to address financial needs of cities adapting to climate change. The map will take a broad view of existing efforts, including, for example, insurance, legal liability, and climate-risk assessment, not just debt financing of infrastructure; adaptation services as well as physical infrastructure; additional community effects, not just specific adaptation purposes). Research will focus on U.S. efforts, but will also review prominent non-U.S. efforts. The map will frame efforts by at least these six characteristics:

1. Climate Effects–extreme heat, sea level rise, flooding, etc.
2. City Vulnerabilities—physical, public health, economic, etc.
3. City Financial Needs—capital spending, services purchasing, incentives, research, planning, etc.
4. Financial Sectors—private debt, public revenues, private and public insurance, climate risk assessment/disclosure, philanthropy, etc.
5. Financial Mechanisms within Sectors—green/resilience bonds, tax increment financing, “last resort” insurance pools
   1. Types of Adaptation Projects Financed–infrastructure, services, incentives, etc.
   2. Stage of Development of the Mechanism—concept, prototype, mainstream, etc.
6. Additional Community Effects—metropolitan regional collaboration, co-benefits produced, equitable development, synergies with GHG reduction efforts, etc.

A report that analyzes the map’s implications for accelerating and institutionalizing the development of urban climate adaptation financing. The report most likely will focus on three questions:

1. How might innovations under development be accelerated, for instance through collaborations between cities and financial institutions or between financial sectors?
2. What gaps are there in current urban climate financing efforts that warrant more attention and how might they be explored?
3. What capacities—technical expertise and institutional arrangements—will cities and financial sectors need to develop or enhance for large-scale, sustained climate adaptation financing?

An underlying hypothesis of the project is that this mapping and analysis across financial sectors may reveal trends and opportunities that are not visible to more narrowly cast research that looks, for example, at a specific city vulnerability, financial need, or financial mechanism.

Both of these deliverables will inform the various practice communities of cities, NGOs, private financial sectors, and governments seeking to develop capacities and innovations for urban climate adaptation. They will be packaged into digital publication and distributed through mailing lists and other means.

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