Climbing the financial tree
To get finance for your climate adaption project is like climbing a tree. You have to pick the right branches to get all the way to the top.
The first branch is the easiest to reach. You have to be sure that the total cost of investment equals the benefit to society. This is very often the case. The loss from “too little and too late” climate protection is often substantial – irrespectively of if it is paid by the government, insurance companies or private parties. Besides, intelligent climate adaptation can generate a city that is more livable, for all that that is worth.
The next one is harder. Is there a business case? Can the investors actually get their money back? For instance, if the local government invests in making the city better and safer, can it raise taxes accordingly? Or if a private land-developer takes the lead and protect a part of the city, can he collect revenues from all the parties that benefits? It is not only a matter of jurisdiction. It is also hard to measure the multiple benefits – how much is a new park (and water protection barrier) worth?
But even if there is a business case, it might not be a legitimate one. In a Danish context we have, in general, a long tradition for strong government and (semi)public funded infrastructure. Even though coastal barriers by private dike guilds are the exception, an understanding that protecting and upgrading our cities should be decided democratically and funded by public means, could well be the consensus. To put it differently: it might be the case that public institutions are short of money and that private investors would like to tip in, but none-the-less this is not considered political acceptable (“why should private investors benefits from our misfortune”).
Still hanging on? Now the next thing to look for is “who-will-receive-the-money”-branch. It might seem trivial, but no-one will allocate (substantial) money to an unknown party. The receiver needs to be solid in economics terms, transparent in terms of responsibility and skilled and trustworthy when it comes to the people in charge. The obvious choice is to use agencies already in place. But big projects span many boundaries as they typically involve multiple municipalities and landowners. For the utilities it is not obvious to deal with the non-water issues like urban development (and anyway rising seawater is not what they are paid to handle by the water bill). For the municipality there is a limit to how much the taxpayers’ money can be spent on creating value for specific landowners or in neighboring municipalities. For this reason, a public-private partnership of some kind need to be formed. A “special purpose vehicle” it is sometimes called (even though it seems to be a hard choice for tree climbing).
And then finally, with the organization and money in hand, you will need to work out a strategy for how you can “eat the elephant” in a manageable way. Half a dike is not much of a dike. A new part of the city half-empty is more than half-empty. At the other hand making the solution in one go might make you drown in complexity and impatience. The trick is to break it up in sub-sets that are small enough to be managed and big enough to create value in their own right.
Quite a climb. In particular, because no-one, in a Danish context at least, has really done it before. If you manage it, you truly deserve the title of being the biggest gorilla in the financial forest.
Last time we looked into the different physical solutions to manage the flow of water. (You can find an overview here). Now it’s time to figure out the moneyflows or how we get to the top of the financial tree. We would love to get your input to the following questions:
- How do we create a business case, around large-scale coastal protection?
- When is it legitimate to let private investors take the lead on protecting and developing our cities?
- What type of organizations can we form, who can handle the investment?
Please add your suggestions and comments below.