Unlocking financial flows for building resilient coastal cities
The US Inflation Reduction Act made a splash in the climate news. Over the next decade, the landmark legislation will allocate nearly $370 billion for climate and clean energy: a significant step in decarbonizing the US economy. A part of this package, $2.6 billion, will be dedicated to help coastal communities conserve, restore and protect coastal and marine habitats and resources, and to prepare for extreme storms and other changing climate conditions. If this represents less than 1% of the total amount, it sends a message that coastal adaptation cannot be ignored in climate action and more capital must be deployed.
Around the world, coastal communities are facing increased threats. In northeast India, many residents have been forced to rebuild their homes at least eight times in the past decade. In Africa, the continent’s largest city, Lagos in Nigeria, may soon become unhabitable due to severe floods.
While being exposed to multiple climatic and non-climatic shocks and stresses, coastal cities concentrate a large (and growing) portion of the global population, cultural assets, and critical economic activities such as transport routes, ports, energy plants, and the tourism sector. Average flood-related losses suffered by the world’s 136 largest coastal cities are expected to rise to USD52 billion per year by 2050. But if coastal megalopolises are extremely vulnerable to ocean changes, it is paramount to keep in mind that secondary cities are projected to absorb the majority of urban growth in the coming decades. Yet, these cities struggle to access climate adaptation finance due to a weak investment profile and often disjointed governance, as highlighted by the IPCC WGII AR6 report.
As world’s leaders are soon to convene in November in Sharm El Sheik for COP27, coastal cities are gearing up for an increase in climate adaptation actions and a push to switch the world’s attention onto the challenges they are facing.
In 2022, important milestones happened convening city leaders, ocean practitioners and industries to accelerate action for coastal cities adaptation. In Brest – more than 40 cities from 22 countries signed the Sea’ties Declaration on sea level rise; in Abidjan the first Cities COP took place in July, convening around 100 mayors from around the world who were able to discuss the adaptation of coastal cities.
Against this backdrop, and with the objective to deliver on the Race to Resilience’s target of making 4 billion people more resilient by 2030, the Climate Champions are partnering with leading cities’ networks and stakeholders to join forces to unlock financial flows for coastal resilience solutions for cities, communities and regions.
The Blue-Tinted White Paper, Investment Protocol: Unlocking Financial Flows for Coastal Cities Adaptation to Climate Change and Resilience Building aims to highlight the specific needs of coastal cities and inform investment decisions.
The need to develop an approach to adaptation specific to coastal cities
Investing in coastal urban adaptation requires a tailored approach. Investors should consider the four following characteristics.
First, the diversity of coastal territories prevents reliance on a single adaptation solution for the challenges faced by coastal cities in the world. It is about combining a wide range of responses (managed retreat, nature-based solution, accommodation) in order to fit local needs. Moreover, while densely populated and rich cities keep pursuing protection-based strategies, these remain and will become increasingly unaffordable and impractical for smaller and underserved settlements. New forms of adaptation need to be designed, in particular by integrating inclusive approaches that address the needs of marginalized populations as well as coastal ecosystems.
Second, because coastal cities governance is often fragmented at different geographical scales, building climate resilience requires a strong collaboration among actors of the territory. This multi-level coordination involves financial arrangements that go beyond the administrative boundaries of coastal communities directly affected by the impacts of climate change and to look at inland territories.
Third, in a context of high uncertainty about future climate change and impacts on the coasts, it is necessary to opt for adaptation measures that integrate future climate change. For this, investments must ensure long term resilience of the projects.
Fourth, we must keep in mind the abysmal imbalance between the financial resources of high- and low-income countries. The latter are often dependent on public grants and unattractive to private investors. Indeed, while national, regional and local public institutions have difficulty gaining the confidence of international donors, the private sector has little presence and is still very reluctant to invest.
Enablers to unlock financial flows in the Global South
Between low-income coastal cities and international financial institutions or Development Financial Institutions (DFIs) collaboration, a link in the chain is missing. On the one hand, the cities deplore the lack of financial means and human capacities to formulate substantial grant requests. On the other hand, donors have difficulties in identifying bankable projects and thus committing all the funds at their disposal. Supply does not meet demand. So, one first challenge is to structure the demand over the long term so that DFIs and cities in need of technical and financial support can work together more effectively.
To accelerate adaptation in coastal cities, private investments are required. However, the absence of mechanisms to convert the benefits of coastal resilience into predictable and clearly identifiable revenue streams is a current barrier. It is therefore critical to put a price tag on the different solutions, in particular on the co-benefits they offer. Multi-criteria analysis that takes into account elements that can’t be quantified or estimated such as equity, social acceptability, human wellbeing, vulnerabilities of the environment or landscape heritage, are the more appropriate approach to be promoted.
Finally, the acceleration of the blue economy globally raises many hopes with new opportunities to produce more clean energy, green transport, and sustainable food. But to be robust in the long term, this ‘’blue acceleration’’ must support a just and equitable transition, account for the impact of a changing climate and build the resilience of communities already suffering from these impacts.
For instance, the investments required for ports to provide the green fuel for ships should, in part, be directed to finance solutions which build the resilience of the ports’ infrastructure as well as the surrounding communities.
Solutions exist to finance adaptation and resilience in coastal cities but are currently not applied. COP27 is an opportunity for key players, such as coastal city managers, public and private funders and ocean-based industries to come together to tackle this major social challenge.