Asia’s bustling, congested cities urgently need financing to respond to intensifying climate impacts, but experts say governance fragmentation and data transparency gaps are hindering investor confidence.
The Asian Development Bank (ADB) estimates that the region’s cities require about US$1.7 trillion in annual infrastructure investment through 2030 to adapt to climate change while sustaining economic growth.
But overlapping national, provincial, and local governance structures can cause uncertainty for investors, who want to see long-term planning and policy consistency before investing in green infrastructure projects, said architect Cheong-Chua Koon Hean at the Cities: Possibilities Singapore event on Wednesday.
Cheong-Chua, who is chair of the Lee Kuan Yew Centre for Innovative Cities and professor of practice at the Singapore University of Technology and Design, added that there was a shortage of bankable adaptation projects in Asian cities, which often lack the technical capacity to allocate risk and measure outcomes. “That means that private capital becomes extremely cautious,” she said.
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Long-term infrastructure projects, such as mass rapid transit systems, water resilience projects, and district cooling, are very difficult to finance.
Cheong-Chua Koon Hean, chair, Lee Kuan Yew Centre for Innovative Cities
Local governments tend to have narrow revenue bases and short budget cycles, she said. “This means that long-term infrastructure projects, such as mass rapid transit systems, water resilience projects, or district cooling, are very difficult to finance.”
Social and political risks can also limit investment into urban sustainability projects, Cheong-Chua said. “Social stability is a key prerequisite for pursuing climate-resilient initiatives. If the city lacks basic amenities, jobs, affordable housing, and there’s a very high cost of living, then it can lead to social unrest – and that will reduce political support and derail climate actions,” she added.
Cheong-Chua Koon Hean (left), chair, Lee Kuan Yew Centre for Innovative Cities, on a panel with CapitaLand’s Vinamra Srivastava (centre), and Andre Bald, lead urban specialist, World Bank. Image: Eco-Business
Her comments follow progress made at the COP30 climate talks to recognise the role of city governments in realising the ambitions of the Paris Agreement, although the Local Governments and Municipal Authorities Constituency, a coalition of city governments, noted the lack of new mechanisms to guarantee access to climate finance for cities, particularly in the Global South.
Investors need predictability
Speaking from the private sector perspective, CapitaLand Investment chief sustainability and sustainable investments officer, Vinamra Srivastava noted that climate adaptation projects do not attract the same level of capital as mitigation, and the private sector contributes barely 3 per cent of adaptation financing globally.
This is partly because of a lack of high-quality data and uncertain financial returns from adaptation projects.
“Private sector investors are looking for predictable cash flow and clear returns. A lot of adaptation projects are focused on avoidance of loss – and in financial return-on-investment analysis, it’s very hard to quantify loss prevention,” Srivastava said.
A characteristic of adaptation projects is that there is a mismatch between the investor and who benefits from that investment, he added. “If you build a sea wall or an early detection system, the financial benefits are dispersed across society, and do not only benefit the private capital investor – so it becomes very hard for investors to model.”
Policy certainty is key to unlocking capital for infrastructure, Srivastava noted, citing India as an example of where renewable energy deployment was proliferating rapidly as a result of policy intervention. Renewables capacity reached more than 50 per cent in India late this year, with the western coastal city of Diu becoming the first city to run on 100 per cent renewables during the daytime.
“If markets in Asia open up corporate power purchase agreements in a manner that’s financially suitable for offtakers, then you will see huge private sector flowing into infrastructure projects – especially in the energy sector,” he said.
Climate-vulnerable Southeast Asian cities such as Manila, Bangkok and Jakarta currently face a significant investment gap. While the regional bloc allocates about US$210 billion annually to adaptation, it only receives about US$2.5 billion, with water and sanitation, green infrastructure, renewable energy and transport key sectors in need of capital.
