Cities Investment Facility Feasibility Fund
Background
The Cities Investment Facility (CIF) programme is a multi-stakeholder/ multi-stage initiative established by UN-Habitat to provide project preparation assistance to cities located within Low and Middle-Income countries (LICs & MICs), as viewed through an SDG lens. By providing funding and development support, from pre-feasibility through to project financing the aim of the programme is four-fold.
Feasibility Fund - Introduction
As part of the CIF, UN-Habitat is seeking philanthropic/ foundational grants and country donations to establish the Feasibility Fund which is to be utilized to provision specialist services that support and de-risk the concept and early feasibility preparation stage – work performed by Cities Investment Advisory Platform (CI Advisory Platform) partners, acting in a non-profit capacity, and third-party advisory partners – prior to private investment in the mid-to-late-stage project preparation undertaken by the Cities Investment Vehicles (CI Vehicles).
The fund is earmarked specifically to support expenses related to initial technical, environment & social, financial, and legal advisory work. Funding will further support capacity building amongst local and national stakeholders to ensure alignment between private funders and government.
Initial donations to the fund are to be directed to projects that are more advanced within the CIF pipeline. The average spend per project is estimated at USD 700 thousand.
UN-Habitat is seeking philanthropic grants and donations totalling an initial USD 50 million to support 100+ projects through the Fund. This amount is expected to induce additional contributions and be further complemented though grants from UN-Habitat’s and partners’ donor funded projects earmarked for specific projects. Where possible, costs required for the preparation of SDG Reports and Pre-Feasibility Reports would be recovered with financing partners and allow the program to exceed the targeted number of supported projects.
The Operational Principles
The fund contributes to mobilising private investment through the following:
Evergreen Nature
The feasibility fund's evergreen nature is crucial in securing private funding since it assures the fund's long-term viability. The fund can sustain itself and continue supporting future urban development initiatives by obtaining success fees from supported projects. This approach gives donors confidence that their donations will have a long-term impact and support ongoing sustainable projects.
Jurisdiction Optimization
The feasibility fund will be located in regions with UN-friendly tax considerations and a favourable legal and regulatory framework for private capital development to appeal to investors and donors. Ideally, these jurisdictions will provide incentives and tax benefits that enhance private sector involvement.
Easy fund receipt and deployment
The feasibility fund will be set up to ease fund receipt and deployment. This simplified and streamlined process for receiving and deploying funds will enable an efficient flow of capital, allowing for donors' participation and timely preparation of projects which ultimately attract private capital investment.
General Principles
Inclusivity and Diversity
The Fund shall be global in reach (any country can contribute and receive from the fund)
Accountability and Transparency
The Fund shall be externally audited annually, with reports published to public. The promoters will need to sign a cooperation agreement that will ensure that they will align to international best practices (e.g. OECD principles) throughout the entire procurement process.
Level of Funds
The Fund shall aim at achieving 20M in the first round (estimated amount to generate impact).
Maximum impact
A minimum of 90% of Fund shall be used for Project Preparation purposes.
Cities Investment Facility process flow, powered by the Feasibility Fund
Proposed Structure of the Feasibility Fund
Statutory Board
The statutory board shall be composed of 3 external experts with a proven track record in infrastructure finance and sustainable urban development in emerging markets.
Their responsibilities will include:
- Oversight of the fund operations in line with the agreed investment strategy of the fund.
- Participation in the annual meeting and review of the annual report.
The allocation of funds from partners may be non-earmarked or earmarked as follows:
Project Selection Committee |
Technical Committee on Project Preparation |
|---|---|
The project selection committee shall be composed of 5 members, as follows:
Their responsibilities will include:
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The technical committee shall be composed of 5 members as follows:
Their responsibilities will include:
Why this structure makes sense?
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How is it Operationalized
The CIF Feasibility Fund will be operationalized over two phases from 2024 to 2029. In the first phase (2024-2027), the fund will raise $20 million to support 28 projects, with 18 expected to reach financial close. The second phase (2028-2029) will be funded through success fees from projects developed in Phase 1, ensuring the fund remains evergreen and self-sustaining.
Phase 1
Goal: Raise $20 million through seed grants from international development finance organizations, philanthropies, and high-net-worth individuals.
Impact: Support 28 projects, with 18 expected to reach financial close.
Phase 2
Goal: Sustain the fund through success fees from projects supported in Phase 1.
Impact: Expand the fund’s reach and support additional projects, reducing dependency on new public grants.
The Catalytic Effect
UN-Habitat estimates that every US$1 million invested in feasibility activities by the Feasibility Fund will unlock an additional investment of $2 million by the CIF’s CI Vehicles. In turn, it is anticipated that an additional $30 million+ of construction financing will follow. The fund will seek to further leverage contributions by recovering some of its investments through project capital providers and redeploying this income stream into new project development.
How Donors can Participate
The allocation of funds from partners may be non-earmarked or earmarked as follows:
| Donors shall be encouraged to make non-earmarked multi-year contributions to the Feasibility Fund. This maximises the flexibility for the Steering Committee to define the use of funds based on principles of the Fund and likelihood of success. |
| Donors that prefer to make earmarked contributions may earmark their contributions to the specific outcomes and geographies. |
| Funds can also be channelled directly from the source to Implementing Partners to undertake feasibility advisory work – where so, separate contribution to cover any secretariat/ Service Provider costs is encouraged. |
CIF Pipeline Sourcing
Submissions are evaluated based on their SDG alignment. The programme’s most recent Call for Proposals attracted submissions throughout the Global South. 44 in total were submitted with all projects aligned to SDG 11, “Sustainable Cities and Communities” while 80% were aligned with SDG 13, “Climate Action”.
Future open calls will be broadcast and conducted to broaden and enhance the current pipeline. Further, the programme intends to expand its reach through direct engagement with national governments to identify and aggregate common infrastructure needs across multiple cities within a given country.
The Cities Investment Portal (CI Portal) is an online platform that connects city development projects with investors seeking to finance projects thatare economically, socially, and environmentally sustainable.
The Cities Investment Advisory Platform (CI Advisory Platform) aims to bridge the gap between sustainable infrastructure projects and private capital investor requirements. The CI Advisory Platform implementation partners shall support upstream projects to align better with the UN Sustainable Development Goals, ensure bankability, and de-risk the early preparation phase. Project promoters receive advice and guidance on early project preparation, development, and financial de-risking. The CI Advisory Platform work will be the primary beneficiary of the Feasibility Fund
Cities Investment Vehicles (CI Vehicles) are privately funded and provide development finance and bankability guidance for projects that have reached the mid-stage of development. Projects have been prepared and de-risked with the assistance of the programme’s CI Advisory Platform partners and now require the typically more significant investment needed to complete development.
Project Preparation Responsibilities by Implementing Partner
Types of Supported Infrastructure
- Affordable Housing
- Energy
- Water & Sanitation
- Waste Management
- Transport & Mobility
Commonly Impacted SDGS
![Commonly Impacted SDGS](http://citiesinvestmentfacility.org/wp-content/uploads/2022/06/Commonly-Impacted-SDGS.jpg")
Contact
Erastus Njuki
erastus.njuki@un.org
unhabitat-cip@un.org
Programme Manager,
Cities Investment Facility, UN-Habitat
