Cities are already feeling the effects of climate change
2023 was the hottest year on record, but the average global temperature is set to rise even further and with it, the impacts of climate change. According to the European Climate Risk Assessment, Europe is the fastest warming continent in the world and current policies and adaptation actions are not keeping pace with the rapidly growing risks.
Cities are already feeling the effects of climate change. Extreme heat, droughts, wildfires, floods, storm surges, rising sea levels and biodiversity loss are a reality for many. In the European Union, cities and urban areas are home to nearly 340 million people and generate 85% of Gross Domestic Product. To protect citizens, business and infrastructure services, while supporting economic competitiveness, we must increase financing to make urban areas more resilient to climate change.
The good news is that adaptation is increasingly a priority for cities. According to a recent survey by the European Investment Bank of 744 municipalities, over 60% plan to increase their investment in climate change mitigation and adaptation over the next three years. Modernisation and infrastructure adaptation remain the primary focus across all EU regions. For example, Portugal’s National Climate Act envisages over 300 local climate action plans. This is supported by national and local-level resilience-oriented construction standards and requirements.
This March, the European Commission published a communication on managing climate risks - protecting people and prosperity. The Commission underlines that attracting and facilitating private investment is fundamental to successfully addressing climate risks and building climate resilience. The European Investment Bank is working closely with the Commission, as well as countries, cities and the private sector to finance adaptation measures. Last year, we devoted a record €2.7 billion to adaptation projects globally. We aim to do even more this year and in the years to come.
The Bank has several financial instruments and advisory services to support adaptation measures in cities. We are financing large infrastructure projects in areas such as climate change resilient urban transport and flood prevention across the EU. In addition, urban framework loans to municipalities are especially well-suited to support investments in adaptation.
Framework loans help cities to finance medium-to long-term capital investment programmes. They are useful because adaptation investments are typically needed across many sectors, such as water and transport infrastructure, and may comprise numerous small projects that would be difficult to finance individually. The European Investment Bank’s framework loans also finance other objectives including clean energy, hospitals and schools. Moreover, the loans can be drawn down over several years, to match a city’s project preparation capacity and the availability of other financing.
Recent examples include the EIB’s framework loan to the City of Florence to support its Urban Development and Climate Strategies – including investments in river restoration, bio-diverse water retention basins, sustainable drainage solutions, and sustainable mobility. We also financed Krakow’s City Adaptation Plan, which includes sustainable mobility, green spaces and public buildings such as schools and hospitals.
The EIB’s ADAPT advisory platform, offers cities a range or advisory services to support their adaptation plans. For example, we have worked with the Lisbon Metropolitan Area on the project pipeline of its Climate Change Adaptation Strategy, helping to identify priority projects and additional adaptation measures. In the Italian city of Taranto, we are advising on the implementation of investments under the city’s Green Belt strategy, which includes urban parks and green areas to restore degraded land. In addition, we are working with the region of Andalucía to integrate climate change considerations into its sustainable urban mobility planning.
Social considerations need to figure prominently in climate adaptation projects. This is because lower income and vulnerable citizens tend to be at greater risk, as they are both more likely to live in vulnerable locations and less able to relocate. They are also less able to invest in the resilience of their homes, or otherwise adapt to extreme weather events. There is a need to build a “just resilience” to the impacts of climate change, just as there is a need for a “just transition” away from fossil fuels towards low-carbon technologies.
To cope with the inevitable consequences of climate change, cities need to invest much more in adaptation measures and their capacity to prepare and deliver them, which is a challenge for many with constrained budgets. To assist, the EIB is looking at innovative financing structures to unlock investments in adaptation, such as using revenue streams from mandatory or voluntary payments from businesses or citizens wishing to avoid future climate change-related damages.
The EIB seeks to deepen its relationships with cities and urban areas across the EU. City networks like Eurocities have an important convening power that allow us to discuss investment barriers and adaptation priorities with cities and show potential solutions. We are here to help. Call us.
