Mobilizing Business and Finance at Habitat III: Change, Execution and Innovation

Published: Sunday, October 2nd, 2016 by Lenora

city-made-of-money-a-project-i-created-for-my-3d-environment-class_733686Impatience to move forward on the New Urban Agenda reaches its height at Habitat III. Over four October days in Quito, a global multitude will strategize on how to execute this ambitious, aspirational and multi-stakeholder framework for developing “the city we need.” How can Habitat III be as effective as possible at mobilizing business, finance and investment?

Financing and implementing the New Urban Agenda needs the same sense of purpose and energy. In fact, much has changed since the last World Urban Forum in Medellin to make urban innovation for all achievable.

Indeed, UN-Habitat must do better at this part of its mission. Governments and households can’t fund the whole Agenda. Business, finance and investment has to be activated for everything from “smart” digital cities to job-creating entrepreneurial dynamism to inclusive neighborhoods and social infrastructure to sustainable energy, transport and other critical green infrastructure. This includes big companies as much as SMEs and, more than ever, investors that strive for returns across the five capitals – financial, physical, human, natural and social capital.

UN-Habitat does succeed in uniting big multinational firms around sustainable and inclusive cities, especially those in infrastructure, materials and planning. These companies have a big stake in the economics of building cities; they also have big CSR agendas and PR budgets. Yet, UN-Habitat must also engage the rest of the private and financial sectors’ spectrum. It would help to raise the visibility of this need and to build on-the-ground partnerships across a broader slice of businesses, especially more real estate and energy developers, utilities, industrials and materials companies, financial institutions and investment managers. At the smaller end, urban social enterprises need engagement, visibility and resources, too.

Joan Clos, Executive Director of UN-Habitat, insists that “Good urbanization is a self-financing vehicle” for achieving a shared utopian future in a Citiscope interview. While this is true in the best cases, we don’t have another 20 years to get early and broad engagement of the business and financial sectors. The impacts of climate change, rapid urban migration and the tragic failures of social and economic inclusion in both developed and developing country cities are already apparent. The need is too urgent.

Fortunately, much has changed since Habitat II. These innovations can help propel the New Urban Agenda:

  • Hard lessons about financial innovation and over-development at the margins of our cities came out of housing crises in both developed and emerging markets. This has helped build consensus around and citizen demand for more compact, revitalized urban centers and polycentric economic development. Regulatory trends are supporting this evolution.
  • The Paris accords coming out of COP21 last December pressed not only for national plans to lower emissions. Cities played a central role in leading this historic agreement. It also brought business and finance into the spotlight with commitments to contribute toward meeting ambitious goals.
  • Capital markets are beginning to respond more enthusiastically. The issuance of green bonds to finance urban sustainability at scale is growing rapidly as a lever for cities. These instruments are already financing green affordable housing, sustainable water, efficient buildings, mass transit, solar and wind power, electric vehicle charging stations and more for cities. New real estate investment vehicles are focusing on rentals and affordable housing. Impact investors have moved into housing finance.
  • Advanced and sustainable urban transport is knitting cities together and reducing pollution and emissions. Today that means metros, light rail, bus rapid transit, cable cars, bike paths and electric vehicles. Tomorrow, it will also mean autonomous cars and buses. Housing and mixed use development is starting to be organized around transit hubs.
  • Clean energy is now cheaper in many places than conventional, polluting fossil fuels – and growing faster. Technological advances in energy and power, plus large scale infrastructure investments, mean cleaner air, decentralized solutions, lower life-cycle costs and, potentially, community management.
  • Smart cities initiatives are going beyond transport and power and generating massive data that could build knowledge about what works faster. Homes, communities, governments, traffic, security, education, health, water, tourism, waste management – everything is being connected and measured. Smart is also being made inclusive.
  • Housing and construction technology has advanced rapidly to build faster with higher quality, more energy and water efficiency and more community involvement.
  • Social housing enterprises and mission-aligned developers are refining hybrid business models that respond to the entire housing ladder and do more than provide shelter and physical infrastructure.

These advances – and this isn’t an exhaustive list – should give hope. This is why “good” urbanization should generate sufficient returns to ensure our cities are also inclusive.

The caveats revolve around planning and execution (not to mention political will!). One of the biggest frustrations of green building professionals is that their work is often tacked on at the end of projects when major design decisions have already been made; in fact, they need to be involved from the beginning, at the concept stage.

The same thing goes here. The business and financial actors who execute on these urban “innovations” have to be a part of the process and, crucially, the early conversations about making them inclusive and sustainable from the beginning, connecting all neighborhoods, generating jobs, providing cleaner energy and water and building housing for all.

UN-Habitat is trying to hold the hearts and souls of the world’s cities in trust for all people, especially and the billions of poor and excluded citizens who live in them all over the world. To realize the New Urban Agenda, it will need a bigger tent.

If you want to talk about the role of business, finance and investment in realizing the New Urban Agenda, Habitat III’s Business Assembly will hold its convening on Sunday, October 16 (more information here). I look forward to speaking on social enterprise, impact investment and financial innovation for cities during that program. If you’d like to connect while in Quito, get in touch. See you there!