Pioneering the first ever Belgian Climate City Contract
Written by Peter-Jan Roose
The overall momentum for net-zero aligned strategies is growing. While some argue that it’s just not fast enough, others hold the opposite view. At BrightWolves, we firmly believe that every small snowball effect contributes to our shared global objective: avoiding climate disaster.
The neglected significance of our cities
To kick things off, let's delve into the often-overlooked facets of cities:
Reality 1: they are responsible for more than 70% of global carbon emissions, although they only occupy a mere 3% of the Earth’s surface.
Reality 2: they serve as hubs for economic activity, knowledge generation, groundbreaking innovation, and the development of new technologies.
Reality 3: throughout the annals of history, they have often led the way in pioneering change and progress, and today is no exception.
With these undeniable facts in mind, one might question why we aren't directing more attention towards the pivotal role that our cities fulfill in the broader journey toward a net-zero economy.
Pioneering the first Belgian Climate City Contract
Belgium is not the most progressive country when it comes to climate action. However, the country has seen several cities making strides in climate action. Yet, one particular city has emerged as a trailblazer, setting the pace for over a decade.
Recently it was selected to embark upon an unparalleled climate initiative under the EU NetZeroCities Pilot Cities Programme, marking Belgium’s first-ever Climate City Contract (CCC). The CCC represents a groundbreaking governance innovation to surmount barriers in achieving climate neutrality, encompassing three interconnected elements: (i) commitments, (ii) actions and (iii) investments.
Source: https://netzerocities.app/QR-CCC
Embracing a new financial paradigm for an 85% GHG Reduction by 2030
To achieve an ambitious 85% reduction in greenhouse gas emissions by 2030, a paradigm shift in finance is imperative. In financial terms, a new paradigm represents a revolutionary departure from established beliefs and practices, ushering in innovative concepts and approaches.
The city’s commitments and action plan translated into an investment of approximately €10,000 per citizen per year, between now and 2030. This sizable financial commitment, requiring billions of euros, is necessary to accelerate the decarbonization efforts of a medium-sized Belgian city.
The solution, in this context, necessitates the embrace of a new financial paradigm. Six key takeaways stand out, which are worth sharing:
Co-create towards one common objective A city functions as a complex, interconnected network of local, regional, national, and international stakeholder groups. Each of these bring its unique perspectives, strengths, experiences, and risk tolerances. Despite this complexity, a city's strength lies in its capacity to serve as a nucleus of knowledge and expertise, waiting to be harmonized.
Leverage a broad support base Fostering open sharing of experiences, insights, concerns, opportunities, and collaborative efforts aimed at a common objective is a compelling narrative to present to the financial markets. This unified approach harnesses the power of collective action and expertise, reinforcing the city's appeal as a robust and forward-thinking investment opportunity.
Prioritize early breakthroughs The key to success lies in channeling efforts towards early breakthroughs. This involves identifying a carefully chosen set of projects or investments that will not only kick-start the emissions reduction but also serves as an accelerator for future projects. These early accomplishments will not just be a testament to the commitment towards the one common objective but also act as compelling evidence to financial partners that you will be able to deliver on the promises made.
Unlocking risk mitigation within the City While identifying and assessing potential risks, it becomes evident that a city holds the key to many mitigation strategies. In many investments, time presents one of the most challenging risks to navigate. Fortunately, the city itself can play a pivotal role in mitigating this specific risk. Leveraging the city’s internal dynamics, resources and policy levers, can significantly enhance the ability to deliver projects on time.
Maximizing the value of co-benefits In the quest to attract external investment, it’s crucial to leave no stone unturned when it comes to monetizing co-benefits. While investments in projects related to emission domains like “built environment”, “energy systems” and “waste & circular economy” may appear financially attractive when considering future cashflows alone, this method might not render most projects as "investment-worthy." Therefore, it’s imperative to dedicate substantial time to identify the non-financial benefits embedded within these projects. This includes aspects like carbon reduction, health improvements, enhanced air quality, biodiversity, and climate adaptation. Some of these benefits can be quantified in monetary terms, while others hold intrinsic value to various stakeholders. By identifying and recognizing the value in all these aspects, you can compile a list of potential sources of investment, expanding horizons and making a compelling case for a broader range of projects.
Navigating roadblocks in the financial sector The financial sector presents a landscape filled with formidable obstacles. Various categories of investors come with specific expectations and rigid conditions that must be met. It's a widely acknowledged truth that steering change in the financial sector is like maneuvering a massive tanker, characterized by its inertia and resistance to swift change. The sheer magnitude of investments required to facilitate the actions, necessitates the activation of a broad spectrum of investors. The extent to which you can access this wide array of capital sources hinges on your capacity to align with each investor's unique expectations and conditions. This challenge becomes even more complex when contemplating the deployment of novel financial instruments or the establishment of new financial structures to support overarching objectives. For instance, issuing a City Green Bond to local markets may prove less daunting than issuing one on the global stage, underscoring the intricacies involved in navigating the financial landscape.
Interested to know more about the role of City’s in the transition towards a climate neutral economy? Contact Peter-Jan Roose or Leendert Santens.
Interested to hear how one of our interns experienced working on this project and what he learned? Read Vincent's article here!