Investing in inclusive, climate-resilient and sustainable public services and infrastructure at the subnational level is a pre-requisite for achieving the Sustainable Development Goals (SDGs) and all related global agendas. Local and regional governments have a key role to play in this regard: as the level of government closest to citizens, they are the first to respond to people’s needs and demands by providing quality basic services for all, urban infrastructure and fostering sustainable urban and territorial development
Local and regional governments around the world already account on average for 37% of public investment. However, in many countries, the legal, institutional and fiscal frameworks in which they operate do not always provide them with the capacity, resources and support required to proactively contribute to the localisation of the global agendas. Ensuring appropriate fiscal, political and administrative decentralisation based on the principles of subsidiarity with subsequent adequate financial means, is key to empower local and regional governments as policy-makers, as recognised in the New Urban Agenda, in order to reach the global goals.
In addition to the New Urban Agenda, other international agreements, in particular the Addis Ababa Action Agenda (paragraph 34) and, to some extent, the Agenda 2030 (SDG 17), acknowledge the need to strengthen local fiscal systems, ensure a better allocation of national fiscal revenues through fair, regular and predictable intergovernmental transfers, and facilitate access to responsible borrowing, adapted to local and regional contexts, in order to enable local and regional governments to deliver on their mandates and make the capital investments needed to achieve sustainable development.
In this framework, UCLG has placed the issue of local finance at the heart of its strategic priorities. Building on the work of the Committee on Local Finance for Development, UCLG adopted in 2018 a renewed Strategy on Localising Financing for Sustainable Urbanisation, in close collaboration with the Global Fund for Cities Development (FMDV). This Strategy comprises three main priority work streams:
An evidence-based advocacy component
An interaction and sharing component
A “taking-action” component
The advocacy work is primarily driven by the Malaga Global Coalition for Municipal Finance, a multi-level and multi-sectoral coalition which mobilises the ecosystem of stakeholders engaged on municipal finance: local and regional government leaders, Ministers, UN agencies, Development Finance Institutions (DFIs), national and subnational development banks, public and private banks, credit rating agencies, and universities. This Coalition has been convened regularly by UCLG, UNCDF and the city of Malaga since 2018 to discuss strategies and develop common positions with a view to reshaping a new financial ecosystem that works for cities and local governments.
In addition to strengthening this Coalition, UCLG is working to bring the voice of local and regional governments to the main global fora on financing, in support of their fiscal autonomy and access to sustainable long-term domestic and external finance. Over the past three years, UCLG has actively participated in the ECOSOC Forum on Financing for Development, an annual meeting to monitor the progress of the Addis Ababa Action Agenda. In 2018, UN-Habitat, UNCDF, UNDP, UCLG and FMDV also co-organised the Venice City Solutions 2030, a multi-stakeholder dialogue on financing the implementation of the SDGs at the local level, whose recommendations were brought to the UN High Level Political Forum in 2019. On the specific topic of climate finance, UCLG participates in the discussions of the Cities Climate Finance Leadership Alliance along with FMDV, the Finance Technical Working Group of the Global Covenant of Mayors, as well as the thematic working group on finance of the Climate Chance Association.
Our advocacy work draws extensively on the work of the World Observatory on Subnational Government Finance and Investment, a joint initiative of the OECD and UCLG in partnership with UNCDF, with the support of the French Development Agency (AFD), the Decentralisation and Local Governance (DeLoG) network, and the Council of Europe Development Bank (CEB). This Observatory aims to improve knowledge on local finance and inform capacity-building and policy-making processes on fiscal decentralisation at the national, regional and global levels, through the production of accurate and systematised information and data. Recent outcomes include the release of the Observatory’s 2019 Report, which compiles and analyses information on subnational government structure and finance in 120+ countries.
More information is available on the Observatory’s website: http://www.sng-wofi.org/.
Interaction and sharing
A second component of the strategy is the setting-up and facilitation of a platform for peer-learning, dialogue and experience-sharing between local end regional governments, with a view to defining actionable recommendations.
Drawing on the experience of several of UCLG regional sections (Africa, Europe and Metropolis in particular) a Community of Practice on Local Finance is currently being set up to facilitate exchanges between locally elected officials in charge of financial matters and to guide the implementation of UCLG’s Strategy on Localising Financing for Sustainable Urbanisation. Two preparatory meetings in 2018 in Madrid, during UCLG's World Council, and in 2019 in Durban, during UCLG's World Congress, confirmed the importance of holding regular meetings of this Community of Practice, around specific themes of common interest.
Taking Action: Unlocking access to capital markets for local and regional governments
Two main initiatives are currently being developed by the UCLG network to facilitate the access of local and regional governments to financial markets, one at the global level – the International Municipal Investment Fund –, the other at the African level – the Africa Territorial Agency.
The creation of the International Municipal Investment Fund (IMIF) was approved by the UCLG Executive Bureau in Madrid in 2018, as part of UCLG strategy to assist cities and local governments in accessing finance and mobilising public and private resources for sustainable urban projects.
The IMIF is a joint initiative of UNCDF and UCLG in collaboration with FMDV which is intended to be a transformative instrument initiated by and for local governments to develop the municipal finance market in developing and emergent contexts under two facilities:
The Technical Assistance Facility (TAF), led by UNCDF with the support of UCLG and FMDV aims to develop a pipeline of investable projects and to help local governments finalise their investment process through technical support.
The Investment Facility, entrusted to a third-party asset manager, Meridiam, is responsible for raising the necessary capital and investing in projects proposed through the TAF process that respect the investment conditions. The Investment Facility has the ambition to raise an initial capital of € 350 million.
As of 2020, 10 pilot municipalities from Africa, Latin America and Central Europe were preselected for potential access to the Fund. Various options are currently being explored to feed the pipeline of projects that could be submitted to the IMIF in the medium and long term.
The Africa Territorial Agency (ATA), spearheaded by UCLG-Africa, is drawing on the experience of Agence France Locale. It consists of a cooperative fund, 50.1% of which is contributed by 100 founding member cities (each contributing 100,000 Euros) and 49.9% by other financial institutions (including the African Development Bank), which is intended to leverage funds on the financial market and enable cities to access long-term financing for capital investments in infrastructure and public services.
As of mid-2020, 50 cities from 25 countries have demonstrated their commitment and subscribed to the ATA.
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