In the margins of the 12th Session of the World Urban Forum, the Cities Investment Facility (CIF) hosted the second iteration of its High-Level Meeting in Cairo, Egypt on 2 November 2024.
This meeting built on the commitments of the first High-Level Meeting in Istanbul, Türkiye on October 30, 2023, including the creation of a Knowledge Hub on Financing for Sustainable Urban Development.
An objective of the High-Level Meeting was establishing a Knowledge Hub on Financing Urban Development as an opportunity to inform, guide and discuss UN-Habitat’s financing for sustainable initiatives, through expert advice, knowledge development and exchange. By facilitating knowledge-sharing platforms among municipalities, UN-Habitat and CIF aim to enable cities to exchange experiences, learn from best practices, and improve project preparation efforts across regions. In this regard, the experts emphasized the necessity of frameworks that address the specific contextual needs of cities, moving away from a one-size-fits-all model. This approach enables financing solutions tailored to each city’s unique financial and regulatory context, thereby providing more effective support. Additionally, providing capacity-building initiatives centered on sustainable urban finance empowers municipal officials with the skills and resources necessary to develop, finance, and manage projects effectively.
To kick off the afternoon Roundtable Session, “Activating the Feasibility Fund as an Instrument to Finance Sustainable Urban Development”, a thought-provoking question was posed to the audience, “what would the balance sheet of the world be worth today?”
A study conducted by McKinsey & Co., revealed that the world’s balance sheet was worth in excess of $500 trillion today —begging the question: “where is all this money?” In real estate that’s where!
Currently, 70% of the world’s assets are tied to lands and buildings in cities globally. There is a tremendous amount of wealth lying idle that cannot be monetized to support a better quality of life for the people living in cities. Land-value is crucial given the need and want that exists for people to produce economic activity on it. Hence, if cities cannot capture land value and make use of 70% of its assets, they start off on the wrong foot in financing sustainable urban development. Advocating for land value capture as a funding approach for subnational entities, such as through land taxes, can provide municipalities with recurring revenue streams, enabling them to leverage increased land values generated by public infrastructure investments. By leveraging municipal real estate portfolios, cities can create new funding avenues, enhancing financial stability through the strategic mobilization of public assets. Additionally, advocating for decentralization and increased local autonomy in financial decision-making supports cities in gaining control over their finances and projects, enhancing their capacity for independent project development and financing.
The audience also asserted the need to balance a project’s bankability and a city’s ability to generate revenue. For project preparation facilities (PPFs) and cities, revenue generation is crucial to ensuring and attracting investment. Cities need to be able to fulfill their outstanding liabilities in full and on time and be able to generate revenue.
Assisting municipalities in improving creditworthiness through strengthened financial management, transparency, and strategies for own-source revenue generation enables cities to access financing without incurring unsustainable debt levels. Furthermore, supporting cities in generating own-source revenues improves their financial resilience and strengthens their ability to fund, operate, and sustain urban projects effectively. As a recommendation from the experts, local governments should also promote the appointment of Municipal Chief Financial Officers (CFOs) as a way of professionalizing financial management, enhancing creditworthiness, and strengthening engagement with financial markets. In helping cities optimize their own revenue sources, UN-Habitat avails the Rapid Own-Source Revenue Tool (ROSRA) to quantify revenue leakages and deconstructs known bottlenecks to identify root causes and entry points for reform. By supporting local revenue administrations in better understanding/communicating the weaknesses of their own-source revenue systems, cities can enhance their creditworthiness and subsequently attract and sustain private investment.
The experts also asserted that the Cities Investment Facility (CIF) needed to implement a “blow-up approach” —charting into untapped territory of the PPFs and doing what has not been done before in a way that creates a stark differentiation between CIF and other PPFs. The experts argued that refining CIF’s strategy by analyzing other PPFs approaches and identifying market gaps would help differentiate its offerings and avoid duplication in the urban finance landscape. Moreover, the experts suggested defining a targeted asset class—such as sustainable urban mobility, affordable housing, or climate resilience—could strengthen CIF’s value proposition, attracting investors who prioritize these areas within their portfolios. Building proficiency in structuring Special Purpose Vehicles (SPVs) was also declared as vital to market CIF’s potential in closing the infrastructure gap by isolating risks, establishing clear governance structures, and appealing to investors. As a final recommendation, the experts advocated focusing on projects with high catalytic potential that stimulate further development or yield significant multiplier effects as a way to amplify the impact of CIF’s Feasibility Fund investments.
So, what is CIF’s bargaining power in the urban finance landscape? CIF’s strength lies in its ability to tap into the private sector to finance sustainable urban development. Unlike facilities that rely exclusively on grant financing, CIF employs an innovative success fee model that reinvests earnings, creating a self-sustaining, evergreen fund capable of scaling over time. By promoting private sector engagement and leveraging its blended finance approach—combining public, private, and philanthropic funding sources—CIF can reduce risks, align stakeholder interests, and enhance its capacity to finance impactful urban projects. This approach positions CIF to establish market leadership in driving sustainable urban development.
In closing the three pillars guiding UN-Habitat’s mission: Impact, Aggregation, and Transformation. He highlighted the significance of uniting diverse resources and stakeholders to drive systemic changes that can elevate quality of life in cities across the developing world ; with (1) a focus on aligning projects with national and municipal development agendas to ensure they integrate seamlessly with broader strategic plans, gaining coherence and higher levels of institutional support, and (2) fostering collaboration among diverse actors to pool resources, expertise, and innovations for transformative urban development.
This Second High-Level Meeting on Financing concluded with a renewed commitment to collaborative action, aiming to unlock sustainable urban development opportunities that align with both local contexts and global sustainability goals. Moving forward, CIF is prioritizing pilot projects as the starting point for its efforts, using them to demonstrate feasibility and measurable impact. These projects will serve as proof of concept, showcasing successful implementation while building the foundation for scaling effective models across broader urban contexts. Concurrently, CIF is embedding impact-focused design principles at the inception of its initiatives, enabling access to contingent, blended, and climate finance streams that balance social and environmental returns with financial performance. Equally essential is CIF’s strategy to tailoring project structures to meet the distinct requirements of diverse investor categories. This approach ensures that targeted funding is secured by aligning projects with investor expectations, fostering deeper engagement, and enhancing the overall attractiveness of urban development initiatives. These strategic actions are expected to collectively position CIF to lead innovative urban financing efforts, advancing transformative solutions for sustainable urban development.
