In line with the objectives of the European Green Deal and Green Industrial Plan for the EU, there is a pressing need to align financial flows and resources with the low-emission and resilient urban projects to support EU’s journey towards carbon neutrality by 2050. Recognising the urgency of the matter and the significant role of discovering new avenues of funding, Paris Agreement also calls for “making finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development” (OECD, 2022).
With the aim to reduce economic disparities and foster social cohesion between all Member States, the European Cohesion Policy reinforces a sustainable - environmentally and socio-economic - development for Europe. In that, the Cohesion Policy and more specifically, its urban dimension, presents financial instruments that support sustainable urban development in EU. This context emphasises the relevance of innovative financial schemes as a sustainable and complementary alternative to grant-based support that various instruments of EU Cohesion Policy offer to urban authorities.
The use of these schemes is observed and common in many sectors of urban development such as housing, infrastructure, energy renovation, transport, etc. However, the innovative financial schemes are not solely used in urban regeneration projects, rather, they are also impactful in social development. From addressing loneliness and integration of minority groups, to support to local bottom-up initiatives or SMEs and start-ups, they will allow to do more with less, and prioritise and support industries and social development initiatives. These novel financial schemes not only engage multiple sectors, but also are diverse in their formats and regulatory framework, originating from and mobilising both public and private investments (European Commission, 2020). This diversity in the financial schemes, their sources and frameworks, what they allow, and what they fund are arguably the most deciding factor in incentivising different sectors to decouple from carbon-intensive practices and transition to carbon neutrality.
In recent years and against the backdrop of recovering from the Covid-19 pandemic, there is an increasing need to lessen the financial burden on EU cities. This arises from the need to relive cities from the trammel of excessive loans for their development projects, boosting a more efficient use of already existing resources and exploiting the potentials of cities and municipalities. In the face of scarcity of resources, cities provide the perfect setting for experimenting with these innovative financial schemes; on the one hand, they bring this integrated and cross-sectoral approach, and on the other, they are drivers of transition towards a greener and more social EU. As such, cities are the perfect testbeds for testing these schemes.
Background
Acknowledging the importance of innovative financial schemes and their potentials for cities, the UIA Permanent Secretariat (UIA PS) conducts a knowledge capitalisation activity on the innovative financial schemes that were crucial parts of the projects implemented by its beneficiary cities during the 2014-2020 programming period. This study is carried out by investigating the entirety of 86 projects in cities funded under UIA; several UIA cities have innovatively mobilised their sources of financing to their fullest potential and for innovative purposes by relying on financial schemes to deliver their solution. Anchored to the strategic objective of fostering sustainable urban development by testing innovative and bold solutions to urban challenges, UIA projects are prime candidates for examining the effectiveness and reach of innovative financial schemes.
This study is carried by Ramboll Management Consulting, in supervision of UIA.