As Prepared for Delivery
It is my honor and pleasure to introduce Segment 2 of this side event on “Recovering better: innovative and sustainable financing for SDG Localization”.
The impact of the COVID-19 pandemic on local economy and SDG financing has been profound. Local governments are grappling with the decline in economic activity and the hardships caused by the lockdowns and community spread of the virus. COVID 19 did not only expose who are the real essential workers, it also exposed the real essential institutions, including cities and local governments.
With our partners we are working on solutions in this area. UNCDF has a proud record of 20 years of unbroken technical expertise in local government finance. This is now being deployed to connect urban investments with green blended finance through the Paris Agreement targets and other global goals is a route to inspiring a green, just and inclusive recovery at local level. It is necessary to mobilize all sources of finance through multi-level and multi-stakeholder collaboration.
UNCDF, as the UN’s flagship finance agency for the least developed countries, has been actively engaged in the Local2030 initiative with the focus of putting cities and local governments at the center of our efforts. For example:
Early in the pandemic we produced a widely circulated and frequently updated Guidance Note on local government finance and the COVID emergency which enabled local governments to reorganize their finances and work across departments to both deal with the medical emergency and the economic pain of the lockdowns. We led the session on finance in the UN Habitat and United Cities and Local Government live learning online sessions with mayors and local leaders from around the world. UNCDF also developed a rapid local government finance response through a system of budget codes and rapid deployment e-grants tied to the WHO guidelines for action. Over $3m was deployed to five countries directly by UNCDF and countries as diverse as Canada and Burkina Faso acknowledged that this guidance supported their response to the crisis.
Inspired by the earlier vision of localizing the SDGs, UNCDF and the United Cities and Local Governments (UCLG) together with FMDV built the Malaga coalition as a global financial ecosystem that works for cities and local governments. The International Municipal Investment Fund (IMIF), a 350m Euros Equity fund, has been created as an instrument of this coalition. The coalition understands that capital needs to be available at the right price and on the right terms for cities to be able to finance the required transformational SDG investments.
UNCDF is managing the technical assistance facility for this Fund and is joining with UN Habitat in a fused offering that will merge UN Habitat’s expertise in urban planning, its SDG cities initiative and its City Investment Facility (CIF) with UNCDF’s team of investment officers and support to the regulatory environment. This will bring the IMIF finance to the SDG cities and CIF.
The pipeline for the IMIF is sourced through various channels but passes through a common filter and is managed through UNCDF’s dual key system of impact measurement and due diligence. This guarantees the link between the cities’ investment and the SDGs. Sourcing includes 1) UCLG call for proposals; 2) ICLEI TAP network, 3) The Cities Climate Finance Leadership Alliance – which has accepted IMIF TAF as a member. These provide the possibility for co-financing with DFIs. Examples of ongoing transactions include rapid transport infrastructure in Kumasi, Ghana; waste to energy project in Chandpur, Bangladesh; and others.
In addition to the IMIF, which will largely make available equity investments, UNCDF believes that domestic capital markets and local currency debt finance provide a key component of a sustainable local government financial system. To this end, UNCDF is working with the ASEAN Secretariat, the Government of Tanzania, the Government of Bangladesh and others on the structuring of municipal bonds to be floated domestically. These debt financed investments will also pass through the dual key system. We have agreed to collaborate with UNDP in four countries on this pipeline.
It is our experience that the price of capital can be reduced if institutional investors from OECD countries are crowded in and if guarantees exist to ensure that local government blended finance does not impact sovereign credit ratings. This issue is highlighted in our flagship publication on subnational finance to be published in the fall. To this end, UNCDF is working with partners on the required investment vehicles and guarantees.
Localizing the SDGs means that cities and local governments must take ownership of them. Cities have a big role to play in all the SDGs, not just SDG 11. UNCDF will work to bring global green finance to cities and connect the Rio conventions to the cities by retooling local public finance, public investment and public private partnerships so that they can be measured in SDG terms whilst remaining fully local initiatives. This requires a strong public sector, strong civil society in addition to a strong private sector. For example, safe and secure streets are important for women, children and youth. UNCDF is supporting the financing of street lighting in Chefchoeun Morrocco through a debt instrument business model which, if successful, can be scaled up by other cities.
Creditworthiness, fiscal space and public financial management of local governments need to be improved and UNCDF and UN-Habitat are fusing their capacities in this area working with the UN Economic Commissions in a programme to rebuild local fiscal space in the aftermath of the COVID-19 pandemic. We have also led, with UN DESA the global initiative on local infrastructure asset management, recognizing the importance of this topic to local lives. Together with are partners, we provide evidence for advocacy with central governments that intergovernmental fiscal transfers and fiscal decentralization are tools for a rapid and effective response, and a pre-requisite for blended finance.
Local 2030 provides an excellent opportunity for the UN to collaborate on supporting local governments to recover from the pandemic, restore their fiscal space and build forwards better. We are looking forwards to participate in this, building on our rich history of local government finance and local economic development finance. UNCDF will open a window in its Dual Key pipeline for Local 2030 investments that derive from this cooperation.
With these examples, I look forward to hearing from the panelists about their organization’s innovative solutions to financing SDG localization. I hope to join efforts and partnerships with other members of Local2030 Coalition to advance the Local2030 Agenda and accelerate a green and resilient COVID-19 recovery.