Finance and De-Risk Heat Adaptation Projects

The Finance and De-Risk Heat Adaptation Solutions step provides guidance on how to identify financing options for risk reduction and preparedness interventions, including how to leverage private actors, public funding, and community resources.

Implementing heat risk and impact reduction projects necessarily involves finding sources of funding and financing, which will depend on the type of project being considered, budget, and creditworthiness. Identifying the potential returns from a given project—both economic and health benefits—is often the first step to make the case for either funding or financing.

You can advance this step in parallel with Develop an Education and Engagement Strategy and Explore Heat Adaptation Solutions. This step should be initiated prior to or as a component of Create a Heat Action Plan.

There are two main options available for cities, funding, in which the city does not have primary financial responsibility for the project, and financing, in which the city is responsible. Given recent interest in climate resilience projects, there are funding mechanisms available to support adaptation and mitigation measures, such as the Green Climate Fund or the Adaptation Fund. The private sector is increasingly interested in investing in these projects as well.

A government may also utilize traditional finance sources, loans or public-private partnerships to invest in adaptation measures in a manner similar to how a city might finance a bridge, for example.

• Intergovernmental transfers
• Taxes
• Land value capture
• User fees/tariffs
• Fines/penalties redirected for other uses
• Official development assistance
• Dedicated climate funds

Resource:

• Beating the Heat
  See Chapter 12 of the Beating the Heat handbook developed by the Cool Coalition, the UN Environment Programme, RMI, Global Covenant of Mayors for Climate & Energy, Mission Innovation, and Clean Cooling Collaborative

• Dedicated climate funds
• Government-issued debt
• Public-private partnerships

Resource:

• Primer for Cool Cities
  See Chapter 7 of the World Bank’s Primer for Cool Cities for an introduction to this topic.
• Funding Trees for Health
  For examples of the financial barriers to urban greening and how to overcome them, see pages 9-13 of Funding Trees for Health by the Nature Conservancy.
• BiodiverCities by 2030: Transforming Cities’ Relationship with Nature
  For an example of the financial, biodiversity, and urban heat island reduction benefits of restoring a river in a city, see page 33 of World Economic Forum’s BiodiverCities by 2030: Transforming Cities’ Relationship with Nature, published by the World Economic Forum.
• Integrating Green and Gray
  For more information on potential cost reductions, economic co-benefits, and estimating green infrastructure costs, see pages 53 and 54 of Integrating Green and Gray: Creating Next Generation Infrastructure, prepared through a partnership of the World Bank Group and World Resources Institute.
• Beating the Heat
  For a description of potential funding sources to support urban infrastructure projects, see pages 182, 185, 190, and 191 of from the Beating the Heat handbook developed by the Cool Coalition, the UN Environment Programme, RMI, Global Covenant of Mayors for Climate & Energy, Mission Innovation and Clean Cooling Collaborative.
• Global Standards for Nature-based Solutions
  For more information on why nature-based solutions are economically viable, see page 12 of the International Union for Conservation of Nature’s Global Standards for Nature-based Solutions.

Even in cities with considerable cooling infrastructure in place, some heat-related risk will still exist during heat events. One method of ensuring that the government has liquid assets to put toward responding to a heat event is the purchase of an insurance product, particularly parametric products that disburses money in a more timely manner than traditional insurance. These products fund the immediate response necessary to save lives during a heat wave, from setting up cooling centers to running awareness campaigns.

Around the world, various frameworks and pilots are being explored or developed for heat risk transfer or related humanitarian interventions including forecast-based humanitarian payouts during heat waves by, for example, the Start Network in Karachi, Pakistan and the International Federation of Red Cross and Red Crescent Societies (IFRC) in Hanoi, Vietnam, and commercial options in Delhi, India and California, United States. These are examples of a new type of mechanism for ensuring that cities have the funds on hand, when they need them, to roll out a heat wave response plan.