Nepal is extremely exposed to natural catastrophes. And as the climate change effect continues, Nepal’s climate vulnerability accelerates overwhelmingly to all lives. Municipal authorities often have deficiency in managing financial skills requirements to set its frame of green infrastructure development. Nepal’s capacity development to manage climate finance improves its position to combat climate risks and spur investment in its greening zone extension. Ongoing Cop28 commitments have a greater prospect for Nepal’s financing policy of urban climate smart investment opportunities diverting flow to municipal dependency on locals.
Climate-smart investments for urban financing are precarious in addressing the encounters of climate change in urban areas and developing cities of Nepal. Nepal’s efforts of greening and building urban infrastructure by urban financing entice all stakeholders for investment fund observation. Investment on greening projects supports achieving the goals of the Paris agreement. However, for Nepal, urban development financing can be a challenge. Considering the changing environment and vulnerability of people’s lives, some of the key strategies are required for Nepal since it has to reach out for financing climate-smart investments in most of the urban areas. The development finance for climate–smart investments can be achieved from own county mechanisms, different development agencies and donor countries. Nepal’s deficiencies are receiving loans, grants, technical assistance, and other forms of support to help urban infrastructure investment.
The role of institutions can strengthen the practices of capacity building to an observation of investments. Systematically, public-private partnership can be valuable for Nepal by which Nepal has already experienced in practicing public enterprises in Nepal. Various projects are implemented under the models of Public Private Partnership (PPP). The government may utilize this type of capacity for financing climate-smart investments in urban areas. The institutional policy targets have to be prioritized in providing climate-smart investments. Considering the demand for urban development and supply side, both actors together can take risks and rewards leveraging financing for sustainable infrastructure. There is also the greater scope of green bonds in Nepal. Nepal may take sample projects, test and acquire outcomes to environmental benefits, renewable energy, energy efficiency, and sustainable transportation for the rapid development under the framework of digital Nepal.
Similarly, carbon financing provides a source of financing for climate-smart investments if Nepal gets commitments of funds from other countries as it has greater potentialities for funding through carbon credits and carbon compensation programs which can provide revenue plus for sustainable infrastructure development projects accumulating sustainable investments. Another capacity like municipal bonds can be a convenient source of finance for climate-smart investments utilizing local tax and fees for urban development. Nepal may approach crowdfunding type funds from individuals via online platforms or offline for green projects. Municipal finance is a reliable source of local development financing for service delivery effectiveness at the local level. But it needs smooth strategic programs to raise the tax system ability. In the case of Nepal, it takes steps to reform the solution by the property tax system too. If Nepal ensures that local resources itself could be sufficient for climate-smart investments on building cities like Kathmandu and other green resilience areas, COP 28 funds may deduct intergovernmental transfer liability as an additional reserve to support each other checking the overburden. The resource flow may be diverted towards construction of crucial amenities, such as water and sanitation, green infrastructure as well as investments in infrastructure, such as roads and public transportation development.
In urban areas, bond financing is essential for investors to raise capital formation for urban development infrastructures. All municipalities can reform to collect revenues like fees and other types of taxes. At the municipal level, the digital capacity ensures a knowledge driven financing system effectively. The investment for infrastructure based skill training on financial management, budgeting, and revenue generation build the framework for financing climate-smart investments in urbanization. How can the city dwellers find support and reform practices is the key question.
By regional integration and economic cooperation, Nepal can fulfill the requirements of regulatory framework, capacity of organizations, and financial access for markets even to receive sub-national borrowing as a strategy to digital Nepal and greening Nepal. COP 28 basket fund could be the part of funding climate smart investment. Nepal may improve legal and regulatory charter that support subnational borrowing, borrowing limits, borrowing conditions, debt controlling, revenue sources, debt levels, and debt management capabilities which ensure transparency, accountability, and sound financial management in order to call on donors and support for financing urban climate smart investment. Creditworthiness on the other side seems a greater prospect to raise borrowing capacity reforming financial management practices but side by side may not be hassles free from ability to borrow. By promoting the local capital market Nepal can reform market access for financing urban climate smart investment opportunities. Advanced countries have a greater responsibility toward Nepal for financing urban climate smart investment projects. Greening project implementations partners can balance the demand and supply of investment for city transformation. Fastest growing technology and innovation competition can help Nepal’s transformation by automation, greening and balancing the economic and political power with other states in the world.
In conclusion, innovation on financial aspects improves the delivery of government services. COP 28 fund utilization framework of Nepal should be transparent, systematic, accountable and efficient. Without capacity, the investment basket may not fully fill the current needs of urban development assessment. Nepal has to learn from many advanced practices of financing for the growing prospects of urban development. Geopolitically, Nepal’s relation with two close big nations may broaden the aid volume to Nepal for green financing as well. Other regional organization, and states should frame new methods of financing in the days to come if Nepal should adopt some key measures of investment approval system. Climate-smart investments in Nepal should entail an array of goal setting, correlating policies, coordination of strategies to development finance, public-private partnerships, green bonds, carbon financing, municipal bonds, and crowd funding by reforming financing mechanisms to deal with climate change consequences and sustainable development of urban infrastructure. Strategically, property tax reform, intergovernmental transfers, public-private partnerships, bond financing, capacity building, and citizen commitment, investment act and laws, institutional capacity, capacity building process, creditworthiness, market access, sub-national borrowing system should have to be corrected for efficient financial management initiating practices of the financing climate-smart investments sustainably in all municipal cities of country Nepal.
Rudra Pd Ghimire, PhD, is an Assistant Professor at Kathmandu University.