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05 February 2021

Covenant of Mayors and Smart Cities Marketplace encourage dialogue between investors and cities

Covenant of Mayors Smart Cities Marketplace Webinar

In their jointly organised webinar on January 28th, the Covenant of Mayors and the Smart Cities Marketplace discussed the needs of cities and what investors are looking for when considering to finance local climate and energy actions.

The Covenant of Mayors and the Smart Cities Marketplace share the common objectives to advise and support cities to access financing opportunities to ensure sustainable solutions for climate and energy actions.

During the webinar, representatives of the city of Groningen and the Smart City Infrastructure Fund presented their perspectives and experiences on what cities need and what investors are looking for when investing in cities climate related work. Speakers from the Matchmaking team of the Smart Cities Marketplace and the Covenant of Mayors office presented how the two initiatives are supporting both actors to bridge the finance gap.

The needs a city might have were presented by Franzisca Beeken from the city of Groningen. Groningen has set up ambitious targets for the city’s energy transition and has developed an action plan for the fields energy (heat) production and heat demand reduction with the goal of becoming CO2 neutral by 2035. The city has already cultivated a portfolio of energy transitioning activities and shared their key learning points from the energy transition process during the webinar. One key learning is the importance of including citizens in the energy transition plans of their city as early as possible to achieve effective public participation. In this framework, the process of energy transition must be trustworthy for the citizens and sustainable. What is seen a challenge for Groningen are the high estimated costs for installation of district heating – one of the fields the city is focussing on. To make Groningen CO2 neutral, a total investment of approx. 10.000 € per inhabitant would be needed.

Sharing the perspective of the investment sector, Carlos Sanchez of the Smart City Infrastructure Fund and member of the Smart Cities Marketplace Investor Network introduced the opportunities and the risks of making investments. In a first step, it is important that a city identifies what it really needs to implement its climate and energy actions and that it tries to understand how these needs can be financed. This approach helps a city understand which pot of money it should target, for example a short-term hedge fund or a public grant.

Also important is the clarity of the cash flow; that includes the city’s understanding of the funding’s origin and the risks coming along as well as the consideration, in this framework, where to get the investment from. Last but not least, when searching for suitable financing, both parties – the city and the investor – should understand the risks of investing in an energy project. There is, nevertheless, another challenge when reaching out for local investments and that is scalability. While it is important for the city to keep its local identity, investments are more likely to be granted when cities and communities come together and join forces, forming a cluster of small initiatives.

So, how can cities access financing?

Movements and undertakings like the Covenant of Mayors and the Smart Cities Marketplace can help cities navigate the finance landscape. The opportunities provided by the Covenant of Mayors were introduced by Anja De Cunto, representative in the field of Capacity building on funding and finance. There is a gap in basic understanding of different funding and financing options and the Covenant of Mayors can help by providing an overview of those options as well as case studies on how these different funds were already used by cities across Europe. The covenant also just launched the twinning programme to facilitate peer to peer exchange on challenges and solutions. 

Jorge Rodrigues de Almeida, Matchmaker for the Smart Cities Marketplace, introduced the actions of the Smart Cities Marketplace to bridge the gap between finance and project development. Among those actions is the cultivation of the Marketplace Investor Network and the currently launched Masterclasses of the Smart Cities Marketplace. The Masterclasses address representatives of city administrations and smart city project developers who are on the lookout for investors. To register for this no cost masterclass just send an e-mail to matchmaking@eu-smartcities.eu.

The webinar was concluded with a dialogue among speakers and participants. The participants were politicians and city officers, project developers and experts working on how to finance cities climate ambitions. Part of the concluding remarks was the intervention from the office of MEP Mr Pierre Larrouturou on the role of the new EU budget 2021-2027 to support climate finance in cities. In order to achieve the energy transition at the local level of a city, the existent need of financing the development as well as the implementation of solutions has to be met. There are much more European mechanisms needed, but budget support like the EU Recovery Plan are a good first step towards more solidarity in climate financing. 

Do you want to take part in a future Smart Cities Marketplace Masterclass on new topics? Write an email to matchmaking@eu-smartcities.eu with the title ‘Masterclass’ to begin the process. Do include if you seek a Masterclass on a specific topic, such as ‘mobility’ ‘PED’, ‘Urban data’ or a suggestion of your choice.