Bridging the urban adaptation finance gap

To the concern about the very large urban adaptation finance gap must be added the worry that what finance exists does little to support local governments and civil society in urban communities. Guest blogger Arabella Fraser shares some insights from a recent workshop.

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Arabella Fraser
Arabella Fraser is a senior lecturer in global development at The Open University, UK
25 April 2022
The transition to a predominantly urban world
A series of insights and interviews designed to share the experiences of community leaders, professionals, researchers and government from the global South
An aerial view of dozens of shack housing in close proximity, with colourful roofs

An aerial view of an informal settlement in Johannesburg, South Africa. Research into urban adaptation finance can provide a view that lasts longer than project timeframes (Photo: IMF Photo/James Oatway, via Flickr, CC BY-NC-ND 2.0)

Previous blogs have discussed the inadequacies in urban adaptation finance from national governments and international agencies. This one builds on the discussion by examining the key elements identified in an online workshop that focused on 'Critical directions for future urban adaptation and resilience finance research’.

Finance is failing

The UN climate negotiations at COP26 underlined the need to increase and develop diverse and locally-led adaptation finance mechanisms to provide a more inclusive and effective climate change response.

The chapter on adaptation in cities and human settlements in the subsequent report of the Intergovernmental Panel on Climate Change described how finance is not reaching much-needed areas at the scale and pace required.

But it also highlighted that there is little research on:

  • How to bridge the gaps in adaptation finance to enable it to be managed effectively at the urban scale
  • The impacts of current finance mechanisms in urban areas, and crucially
  • The possibilities to develop more innovative forms of finance that reach the most vulnerable populations in urban areas.

Against this backdrop, the workshop brought together members of urban adaptation finance research and practice communities to reflect on what is new and distinctive about this finance, what is needed research-wise, as well as the ways in which research can inform and strengthen practice – and vice versa.

This is the latest in a series of blogs and interviews, curated by IIED senior fellow David Satterthwaite, examining different aspects of global urban change.

A new agenda needed?

Participants identified eight critical shifts in direction that could better orient urban adaptation finance research in the future:

1. Access

Current research focuses heavily on the direction and orientation of conventional forms of finance (such as international climate funds), but could seek to identify who can and can’t access the range of finance mechanisms currently being implemented – and on what terms.

Research can play a critical role in revealing who gets what in funding and financing initiatives. This includes a focus not only on which cities and urban contexts are included (with small to medium cities neglected), but also which communities, spaces and issues miss out. 

2. Capacity

A narrow perspective on adaptation finance – rather than urban investment – coupled with a perceived lack of technical, financial, institutional and adaptive capacity at local government level has compounded the urban adaptation gap. Research is needed to understand the fundamental capacities to mobilise and deploy finance and investment, and how local capacities are included.

3. Innovation

Research is needed to explore how new institutional mechanisms can leverage more and more equitable finance. The key role of local governments and institutions should be emphasised in adapting conventional finance or developing new mechanisms.

New financial enablers (such as crowdfunding and cryptocurrencies), and socially-led innovations (including savings groups, community insurances and participatory budgeting) may also have an important role to play. 

4. Diversity

Place-based research can provide a holistic view of how different financing mechanisms – from traditional sources (such as aid, loans, bonds and insurance) to new modes (such as crowdfunding and public-private blended initiatives) – come together in particular locations to exert an overall impact upon urban risks and adaptation.

This includes how finance-mediated adaptation interventions influence regional and urban real estate markets, with consequences for gentrification, land tenure shifts and urban shrinkage, devaluation and decline. In this way, research can showcase the potential for diverse modalities and types of funding and financial initiatives to support urban adaptation.

Uganda-based Young African Refugees for Integral Development (YARID) used crowdfunding to raise funds to support communities in informal settlements during the COVID-19 pandemic

5. Scale

Access to urban adaptation finance is strongly driven by relationships across local, national, regional and global institutions. A scalar perspective in research provides vital insights into the politics of such alignments around different financial mechanisms, and in different devolution contexts. 

6. Vision

Research can provide a long-term perspective, beyond project timeframes. This can reveal the long-term legacies of adaptation processes and their potential for transformational changes, or in exacerbating risks.

7. Complexity

We have a growing understanding of the complex interdependencies between urban development processes and risks, and associated uncertainties. Research can highlight how this might be acknowledged in relevant financing mechanisms (such as in insurance systems).

It can also unpack how finance for urban climate mitigation and sustainable development initiatives influences both the context for urban risk, as well as possible synergies and trade-offs with urban adaptation financing mechanisms. 

8. Working together with multi-stakeholder and cross-sectoral partners

This broad perspective is required for mobilising mechanisms to fund urban adaptation. There is huge potential for critical research to inform the growing efforts of donors and private financiers to broker new project financing streams for urban administrations.

In addition, research can show the potential of local civil society initiatives – for example the many community-led informal settlement upgrading programmes by slum/shack dweller federations that include adaptation measures, the local funds the federations’ savings groups manage, and the enumerations and mapping of informal settlements they undertake to build resilience.

These demonstrate how to build partnerships at scale with local governments and other actors.

Research has huge potential

Research can identify openings for structural change and social justice in financing urban adaptation, alongside supporting imminent changes to leverage finance and allow for immediate ‘no regrets’ options. This allows us to move beyond seeing urban adaptation finance research as a niche research issue, to a much broader and impactful understanding of how such finance relates to multiple fields of enquiry about urban ecologies, economies and governance.

With thanks to Giuseppe Forino, University of Nottingham; Vanesa Castan Broto, University of Sheffield; Alessandro Busà, University of Leicester; Yue Cao, Overseas Development Institute; Amar Causevic, Stockholm Environment Institute; Esbern Friis-Hansen, Danish Institute for International Studies (DIIS); Stephanie Garcidueñas Nieto, University of Antwerp; Fritz-Julius Grafe, University of Zurich; Hanna Hilbrandt, University of Zurich; Sahar Hofmann, Trier University; Lisa Junghans, German Development Cooperation – GIZ; and Enora Robin, University of Sheffield for their contributions to this blog

About the author

Arabella Fraser is a senior lecturer in global development at The Open University, UK. Her research focuses on the social and political implications of climate and disaster risk for urban development and development practice.

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