Welcome to the Fund and Finance Heat Action module! The Fund and Finance Heat Action module provides guidance on how to quantify potential benefits from heat resilience and preparedness interventions and identify sources of funding and financing.
Investing in heat resilience does not always require new sources of funding or financing. In many cases, heat-related considerations can be integrated into existing or ongoing plans, guidelines, and projects with minimal added financial cost. However, heat-related planning and projects can also require new capital investment and dedicated operational budget. Factors such as geographic context, governance structure, project partners, local regulations, available budgets, and creditworthiness will influence available resources. Identifying the potential returns from a given project—both economic and health benefits—is also often an important step in making the case for either funding or financing.
Essential Actions, Outputs, and Outcomes from this Module
Identify the potential benefits from a given project – economic, health, and political – to make the case for funding and/or financing.
Identify available funding or financing sources for your project(s), such as loans, public-private partnerships, grant funding, and private sector financing instruments, in collaboration with project partners.
Initiate outreach to the relevant institutions, either directly or with/through partners.
Document listing the selected projects and the potential returns.
Outreach materials such as emails or grant proposals for relevant funders.
Identify available funding and financing mechanisms.
Assess the social and economic benefits of heat resilience strategies.
Understand how a disaster risk finance approach can be applied to heat.
The Essential Actions, Outputs, and Outcomes include the core elements of the more comprehensive approach described throughout the rest of the module. We know that time, resources, and capacity can limit the breadth and depth of interventions you undertake. Simply beginning to explore these modules and consider what solutions are appropriate for your context is a critical step toward building your jurisdiction’s heat resilience. At any point, reach out to Arsht-Rock using the contact form at the bottom of the page with questions and comments.
Paying for heat resilience projects
Sources of funding and financing for heat resilience range from public finances or public-private partnerships to commercial or concessional loans and grant funding from local, regional, or national governments and humanitarian, development and philanthropic organizations. Working with your national government may open up direct funding, such as through funding from the Inflation Reduction Act in the United States, or new sources of finance through international mechanisms like the Green Climate Fund or the Global Environmental Facility.
Given heat’s cross-cutting impacts, a variety of funds–for health, energy efficiency, emergency response, etc.–might be utilized for heat resilience projects. Look broadly across sectors and funding streams when beginning your search.
- Intergovernmental transfers
- Land value capture
- User fees/tariffs
- Fines/penalties redirected for other uses
- Official development assistance
- Dedicated climate funds
For a description of potential funding sources to support urban infrastructure projects, see pages 182, 185, 190, and 191 of from the Beating the Heat handbook developed by the Cool Coalition, the UN Environment Programme, RMI, Global Covenant of Mayors for Climate & Energy, Mission Innovation and Clean Cooling Collaborative.
- United States
For a guide on how US local governments can design more fundable climate resilience projects, see the Ready-to-Fund Resilience Toolkit, created by the American Society of Adaptation Professionals and Climate Resilience Consulting
- Development finance
- Government-issued debt
- Public-private partnerships
See Chapter 7 of the World Bank’s Primer for Cool Cities for an introduction to strategies for financing urban cooling.
For a seven-step framework to understanding financing for conservation and nature-based solutions, with a particular focus on Europe-based organizations, see Page 7 of Investing in Nature: Financing Conservation and Nature-base Solutions.
Disaster Risk Finance
Even in cities with considerable cooling infrastructure in place, heat-related risks will intensify during heat events. Disaster risk finance instruments help to ensure that the government has liquid assets to put toward responding to (or anticipating) a heat event, for example using insurance. These instruments can fund the immediate response necessary to save lives during a heat wave, from setting up cooling centers to running awareness campaigns, as well as to help meet huge costs to businesses, governments, organizations, communities and households in terms of wider health impacts, reduced productivity and damage to infrastructure.
Using Disaster Risk Finance for Heat Resilience
Watch to learn what disaster risk finance is and how it can be applied to be financially prepared for the impacts of a heat wave from Zoe Scott, Consultant at Arsht-Rock.
Around the world, various frameworks and pilots are being explored or developed for heat risk transfer or related humanitarian interventions including forecast-based humanitarian payouts during heat waves. A few examples include the Start Network in Karachi, Pakistan, the International Federation of Red Cross and Red Crescent Societies (IFRC) in Hanoi, Vietnam, and commercial options in Delhi, India and California, United States. These are examples of a new type of mechanism for ensuring that cities have the funds on hand, when they need them, to deploy a heat wave response.
To learn how finance can be pre-arranged for heat events, see page 9 of Arsht-Rock’s Uncovered: The Real Burden of Extreme Heat.
Quantifying the Benefits
Investment in heat resilience measures can result in reduced energy costs, healthcare expenditures, and infrastructure damage as well as improved labor productivity and other benefits. Estimating the full range of benefits can be an important part of making the case for investment, while quantifying some of these benefits on an ongoing basis or retrospectively can be a prerequisite for certain kinds of investment, such as impact bonds.
For a cost-benefit analysis tool that estimates health and economic benefits from green and blue infrastructure as well as cool surfaces, see the Heat Resilient Cities benefit tool, designed by C40 and Ramboll.
- United States
For a tool that estimates cost and benefits for US cities associated with various mixes of smart surface technologies, see the Smart Surfaces Cost-Benefit Analytic Engine, developed by the Smart Surfaces Coalition
For more information on potential cost reductions, economic co-benefits, and estimating green infrastructure costs, see pages 51-59 of Integrating Green and Gray: Creating Next Generation Infrastructure, prepared through a partnership of the World Bank Group and World Resources Institute.