How National Governments Can Increase Finance for Subnational Climate Action
C40 Cities and the Global Covenant of Mayors for Climate & Energy (GCoM)
C40 Cities and GCoM, with support from Bloomberg Philanthropies, launched guidance on massively scaling finance for subnational climate action. The report was developed as a resource for national government members of the Coalition for High Ambition Multilevel Partnerships (CHAMP), to provide them with implementation options, proven financial techniques, and coordination frameworks that can significantly increase finance for subnational climate action – in line with their CHAMP pledge.
The report makes the case for national governments to scale up finance for subnational climate action and outlines a range of proven finance techniques that national governments can deploy to unlock finance at scale by developing investment platforms and pipelines of subnational climate projects, in close partnership with subnational governments, development partners, and the private sector.
For Andy Deacon, GCoM Co-Managing Director, this report is an essential resource that can help CHAMP countries scale support for their subnational governments:
“To deliver the actions needed to fight the climate crisis in cities, national governments can clear the way and provide mechanisms to move beyond a project by project approach and deliver on the huge urban investment opportunity. This report provides them with practical examples and advice on next step to channel climate finance directly to subnational actors—especially mayors, who are on the front lines of addressing the challenges that impact people’s daily lives”
The report fills a knowledge gap by identifying a range of proven finance techniques and mechanisms that can be deployed by national governments to unlock finance at scale by developing investment platforms and pipelines of subnational climate projects, in close partnership with subnational governments, development partners, and the private sector.
Andrea Fernandez, a Managing Director at C40 and their finance strategy lead, highlights that the report defines specific implementation options of how national governments can significantly increase finance for subnational climate action.
“This is a powerful resource to help countries that have endorsed CHAMP understand the ways they can help drive efficient and scalable climate investments through partnerships with subnational governments, development partners, and the private sector. Developing investment platforms to deliver on commitments made through CHAMP is essential to implement the measures needed to cut emissions, enhance resilience and enable countries to unlock innovation and clean economic growth in cities”.
Main recommendations of the guide
National governments cannot immediately achieve the full scope of required subnational climate action; however, there is a range of immediate, high-impact acceleration levers that can, in the short term, significantly increase finance for subnational climate action:
- Use proven financial techniques and enabling regulatory frameworks to increase finance of subnational climate action. National governments can refine and adapt proven finance approaches for subnational climate action to advance their national climate and development objectives and create enabling regulatory frameworks for mobilizing finance through the domestic financial system (banks, bond issuance, stock exchanges).
- Aggregation small subnational projects into bankable larger projects and national programs that meet financier requirements. A primary impediment to financing subnational climate action is that subnational projects are usually small, especially in secondary cities, and therefore do not meet the requirements of either public or private financiers. However, some national governments have proven the effectiveness of aggregation mechanisms, using national programs and pooled finance.
- Mobilise private finance from the domestic market. The private sector has massive amounts of finance that could potentially be invested in development and climate action, provided that there are investment vehicles that meet bankability and investment requirements.
- Adopt whole-of-government climate-smart approaches. Effective intergovernmental coordination and effective institutional frameworks are often a challenge for climate action, with even small projects often requiring high-level expertise and technologies that are more accessible and can be scaled up at the national level, such as flood management.
- Request development partners to prioritise grants, concessional loans, and risk mitigation instruments to create bankable project pipelines that are integral to private sector mobilisation. National governments can optimise access to finance by presenting development partners with targeted requests that leverage each partner’s capacities in alignment with the specific actions required to unlock access to both public and private finance. The use of risk mitigation and grants is also critical to achieving the requirements for financial sustainability and bankability.
- Endorse a county-led subnational climate action plan. As the accountable government entity, national governments – in coordination with subnational governments, development partners, and the private sector – can serve as essential national facilitators in developing a results-based operational plan and implementation vehicles for developing and financing bankable subnational climate projects.
In terms of next steps, the report highlights how subnational governments, including cities, have a critical role to ensure the effective delivery of climate-smart social services at the local level: from diagnosing citizen needs to facilitating the delivery of services and disaster prevention. As the accountable government bodies at the front lines, they are essential in identifying priority investment needs, facilitating local climate mitigation and adaptation, and defining optimal ways to implement subnational climate action to ensure compliance with the NDCs and national development objectives.
