World Bank calls for investment in urban resilience

Natural disasters and climate change are having devastating effects on cities and their people. By 2030, natural disasters may cost cities worldwide $314 billion each year. This is according to a new report by the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR), which calls for significant investment into making cities more resilient.

‘Investing in Urban Resilience’ cautions that rising numbers of natural disasters, as well as a growing number of economic, social and environmental shocks and stresses, pose the greatest risk to rapidly growing cities. It says the high density of people, jobs and assets which make cities so successful ironically makes them extremely vulnerable to the wide range of natural and manmade shocks and stresses increasingly affecting them today.

“Rapid growth, without efforts to boost resilience, is exposing cities around the world to huge risk,” said Ede Ijjasz-Vasquez, senior director for the World Bank’s Social, Urban, Rural and Resilience Global Practice. “Population growth and human migration are on the rise, and climate change is poised to have dramatic effects, which means we’re approaching a tipping point for the safety of cities all over the world. We need to invest today in resilience measures that will help secure a safe and prosperous future for our cities and the people who live in them.”

The report cautions that failing to invest in making cities more resilient to natural disasters, shocks and stresses will result in significant human and economic damages — with the urban poor bearing the brunt of losses. If high climate impact coincides with inequitable access to basic infrastructure and services, natural disasters will force tens of millions of urban dwellers into extreme poverty and may cost cities worldwide $314 billion each year by 2030 — up from around $250 billion today.

With global capital seeking ever-elusive returns in the current interest rate climate, institutional investors and sovereign funds have increasingly signalled willingness to consider financing investments in the developing world. Yet while $106 trillion in institutional capital are available worldwide for potential investment, only 1.6% of it is invested in infrastructure — let alone in making that infrastructure resilient.

“Investors are struggling with a range of obstacles when it comes to investing in resilience,” said Francis Ghesquiere, head of GFDRR. “More often than not, the capacity of municipalities to integrate risk reduction components in their programs, and to access funding, is limited. We need to find innovative ways to overcome these challenges if we are to avoid the disaster of tomorrow.”

The report points to a number of major obstacles limiting resilience investments in many developing cities, including:

• lack of local government capacity to plan, finance and implement resilience projects;
• challenges in project preparation, including high upfront costs;
• lack of private-sector confidence.

While governments cannot always address all these obstacles on their own, the report indicates that there are a few things they can do to increase investment in resilience. For example, municipal governments can create a local policy environment that encourages resilience, for instance, by implementing modernised and well-enforced building codes. By creating a pipeline of well-prepared, investor-ready projects, local governments can make it easier and more attractive for investors to fund resilience projects in their cities.

The global need for urban infrastructure investment amounts to over $4.5 trillion per year, of which a premium of 9–27% is required to make this infrastructure low-emissions and climate resilient, according to the Cities Climate Finance Leadership Alliance (CCFLA). The World Bank aims to meet some of this challenge through an expansion of its Resilient Cities Program, by leveraging $25 billion a year in additional capital to benefit one billion people in 500 cities and lift 50 million people out of poverty. This would represent a significant increase from the roughly $2 billion it currently invests annually in urban resilience.