- Nature-based Solutions provide great opportunities for resilient and future-proof cities.
- Private investment is needed to accelerate and scale the implementation of Nature-based Solutions as public funding is not sufficient.
- To unlock private investment, we need to develop new, innovative financing arrangements with clear and recognizable components, reflecting the various incentives of the different financiers. These can range from cost savings and marketing benefits to increasing the value of real estate.
- Public-private collaborations are the way forward when it comes to innovative financing mechanisms. Next to providing funding, public actors have a key role to play in becoming effective process managers of developing new and more accessible financial arrangements.
Cities and their natural environment
Urban areas are promising centers of innovation, culture, and commerce. However, with the growth of cities has come the growth of their environmental footprint. Urban areas are accountable for 75% of natural resource consumption, 50% of global waste production, and 60-80% of greenhouse gas emissions (Ellen MacArthur Foundation). Not only do cities have an (often negative) impact on nature and the environment, they are simultaneously confronted with major environmental challenges and are increasingly prone to pollution, flooding and heatwaves. Today, about half of the global population lives in urban areas. With global urbanization trends projected at 68% by 2050 (United Nations, 2018), we need to reconsider how we plan, design, work and live in our cities.
Nature-based Solutions for future-proof cities
There is widespread interest in developing Nature-based Solutions as they hold a lot of promise for cities to become more resilient. By implementing green roof strategies, adding green pockets to streets, or developing natural drainage systems, cities are turning towards nature to develop vibrant and sustainable urban settings. Nature-based Solutions are a powerful tool in addressing the various urban challenges while connecting the needs and interests of different stakeholders. For instance, public parks provide great spaces for recreation for the city inhabitants and comfortable habitats for the cities’ other living creatures. Community gardens stimulate food sovereignty and social interaction between people. And water squares and wadis support buffering and infiltration of water, preventing flooding and damage to infrastructure. Hence, by providing a diversity of benefits, Nature-based Solutions are not only in the interest of city inhabitants but also of developers, utility and insurance companies, healthcare organizations, and municipalities.
So why don’t we yet see green urban oases?
While the potential of Nature-based Solutions is increasingly being recognized, the actual implementation does not happen seamlessly. Public funding is often not sufficient to meet the high implementation costs. Hence, we need a capital injection from other actors as well. But who is paying for natural infrastructure and the resulting benefits that can be enjoyed by numerous stakeholders? Budgets and investments are often available for specific ends, such as vitality, safety, climate, or nature. We have to blast through this silo thinking and look more holistically at the various challenges to successfully seize the opportunities that Nature-based Solutions provide. Having numerous beneficiaries is one of the key strengths of Nature-based Solutions, so let’s make use of this strength and develop innovative financing mechanisms that account for that plurality.
We need new, innovative financing mechanisms
To stimulate (private) investment in Nature-based Solutions, we need to develop new, innovative financing mechanisms. The whitepaper Investing in a Green Urban Future, drafted by Clara Pietrek during her internship, features inspiring examples from four European cities: Bologna, Copenhagen, Glasglow, and Hamburg. These examples tell us that collaborations between different public and private actors are the way forward when it comes to innovative financing mechanisms. Public budgets can be effectively combined and public funding can serve as a springboard for private actors to invest in Nature-based Solutions. For collaborations to become successful, it is key to understand who benefits from what and to communicate this effectively. These benefits can range from cost savings to increasing the value of real estate to marketing benefits. Each stakeholder needs an incentive to engage in Nature-based Solutions projects and financial arrangements need to reflect these various incentives by structuring clear and recognizable components.
While these European examples provide great inspiration on how to successfully finance and implement Nature-based Solutions, they are not truly innovative as they still largely rely on public funding. Hence, the next step is to develop more, and more accessible, financial arrangements to attract private investors and scale up the implementation of Nature-based Solutions. This requires an active role of governments, municipalities, and other public stakeholders to go beyond funding and become effective process managers of new financial mechanisms.
Do you want to learn more about the European examples and how innovative financing mechanisms are key to the implementation of Nature-based Solutions? Then I would like to invite you to read the whitepaper Investing in a Green Urban Future that we recently launched. Do not hesitate to get in touch with us if you would like to discuss opportunities for successfully financing Nature-based Solutions in your city.