How to unlock financial solutions for smarter cities

“Make your innovation attractive to funders from the start,” says co-author of a new IRIS report .

By Gloria Pallares

Cities seeking to implement smart energy, mobility and ICT systems need to have the adequate technology and regulations in place, and just as importantly, the resources. However, navigating the European financing landscape and complying with eligibility requirements is often challenging.

A report launched by the IRIS Smart Cities initiative outlines key EU financing mechanisms and provides guidance on how to identify suitable opportunities, approach funders and access resources. The objective is to build the capacity of local governments and service providers who intend to deploy innovations –from better heating systems to car-sharing platforms.

We spoke with co-author and expert with the Impact Management Consulting Group (IMCG) Johan Emanuel on common pitfalls, tips to unlocking financial solutions for more sustainable urban environments, and the trends that will shape the future of financing. The conversation has been edited for length and clarity.

What are some of the most common financing mistakes cities and solution providers make?
They are often focused on the technology development process and create teams that lack business development skills. An engineer does not have the right expertise to engage with, say, the European Investment Bank Group. It is important to have specialists who can build the financial attractiveness of an innovation from the start and make the case for its scale-up or replication with funders.

What do you need to make your project attractive to potential funders?
Regardless of the size of your project, you need at least three things to convince a funder: a feasibility study that lays out the proves of concept you have conducted; a business plan that demonstrates how your innovation fits into the broader business ecosystem; and an implementation plan that explains how you plan to see the project through –this is extremely important to gain a funder’s trust.

To what extend could cities leverage off each other’s experience with resource mobilization?
Funding solutions developed by a local institution can potentially be used by similar partners elsewhere, accelerating the deployment of innovations. Applying for funding is a time-consuming process, so we really hope our report encourages collaboration between cities seeking to get smarter. That would benefit everyone.

How can cities prepare for emerging financing requirements in Europe?
By building evidence for the environmental sustainability of the innovations they want to deploy, for example, in terms of reducing greenhouse gas emissions. The European Investment Bank Group, which is the leading funder in the EU, has started calling itself ‘the EU climate bank’ as part of its 2021-2025 roadmap and in line with the European Green Deal. Before, I mentioned three things you need to convince a funder –sustainability is the fourth one.

Where should cities start their search for funds?
They are more likely to fulfill the eligibility requirements of local and regional funding instruments, so that should be their starting point. Then, they can move on to national and even international entities.

IRIS Smart Cities deliverable 3.7 ‘Financing solutions for cities and city suppliers’ is available on the IRIS website now

23 Feb 2021

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