Support for the NUCA Programme Preparation Phase

Cities have an essential role to play in rapidly driving down emissions and building resilience to the effects of climate change, as they generate around 70% of the global greenhouse gas (GHG) emissions and produce about 80% of global GDP. Cities in South Africa, Indonesia, Brazil, Mozambique and Colombia are no exception. They are already affected by climate change including drought, heat waves and flooding. In this situation, national development banks (NDBs) and regional development banks are well positioned to become front-runners in financing urban climate action. They are typically more willing than commercial banks to be pioneers in new areas and are ideally placed to de-risk or cover upfront costs of innovative mitigation or adaptation measures.

The National Development Banks’ Urban Climate Action Programme (NUCAP) was initiated by the International Development Finance Club’s (IDFC) Climate Facility, as part of its efforts to support club members in integrating climate considerations into their activities. It aims to support the development of low-carbon and climate-resilient urban infrastructure. Five banks have expressed interest to implement this project and already have established track records of urban finance: Development Bank of Southern Africa (DBSA), Indonesia’s PT Sarana Multi Infrastruktur (PT SMI), Brazil’s Banco Nacional do Desenvolvimento Econômico e Social (BNDES), the Development Bank of Latin America (CAF) and, the Eastern and Southern Africa Trade and Development Bank (TDB).

adelphi supports the IDFC Coordination Unit housed at the agence française de développement (AFD) in carrying out the preparation phase of the project. The project outline and concept note have been approved for a grant of EUR 20 Mn by the German Ministry of the Environment (BMU) in September 2021, followed by an invitation from the IKI Secretariat to submit a detailed project proposal which will then be subject to further assessment by the German Government. The detailed proposal requires execution of preparatory and development activities involving major project participants and stakeholders.

Specific targets for NUCAP support will be public development banks who are part of IDFC; municipalities within intervention countries; private project sponsors; and facilitating national authorities. The project aims to address shortcomings at the city level in project preparation capacity and tackle unfavourable institutional frameworks. By increasing the capacity readiness of NDBs, funding volumes for low-carbon and climate resilient infrastructure will increase, too.

This will be achieved by:

• building capacity within NDBs and cities,
• developing a focused urban climate finance programme in each participating NDB,
• developing strategic urban climate financing pipelines,
• shaping financing instruments for these urban climate projects,
• working with regulators on improving framework conditions for urban climate finance by NDBs,
• mobilizing the private sector and,
• disseminating the experiences gained.