Transformation Financial Mechanism for Communities of South Eastern Europe
Overview
SmartUp led a consortium, funded by EIT Climate-KIC, that designed a Transformation Financial Mechanism: a way for five cities in South East Europe, Skopje, Križevci, Maribor, Sarajevo, and Niš, to attract the investment they need to work towards climate neutrality by 2030. SmartUp led the project and the local work in the cities, together with Bankers without Boundaries, who designed the mechanism, and Material Economics, who built the economic case for Skopje.
The mechanism was designed as a blended-finance vehicle that starts with grants to prepare projects and could grow into a regional fund attracting public and private capital. It supports the wider mission of making these cities some of the best places in Europe to live, work, and visit.
The challenge
Investment on a new scale
Climate-neutral cities need far more investment than the region has mobilised so far, and funding is fragmented, risky, and hard to access.
Five very different cities
The cities sit in five countries, three outside the EU, and differ greatly in size, so the mechanism had to fit local needs.
Too few teams and too little governance
Cities lacked project teams and the governance track record that investors expect, so the design had to make projects investable.
Activities and methods
We combined financial design, economic analysis, and local work in the cities:
- Designing the mechanism – with Bankers without Boundaries, we designed a two-part structure: a grant to develop projects, and a larger tiered fund to finance them, with clear governance and an investment committee that approves projects.
- Making the economic case – Material Economics built a tool for Skopje that shows the city's emissions today and in 2030, and the costs, savings, and health benefits of different climate measures. It was handed to the City in a workshop.
- Local work in the cities – SmartUp led the work with partners in Križevci, Maribor, and Sarajevo to map project pipelines and analyse local markets, legislation, and governance, and worked with city teams to describe priority projects.
- Building local capacity – we organised workshops and events to help local stakeholders understand impact investing and how to design projects that meet a fund's criteria.
Impact and learning
The project produced a design that cities and partners can build on:
- A financing mechanism described in detail, from how it is structured to how projects are approved
- An economic case for Skopje that the City can use to set priorities and talk about investment
- A first set of priority projects in the cities that can be developed to attract funding
The design proposed starting with grants to prepare projects, then bringing in public and private investors, and eventually a regional fund. These steps depend on further funding and on the cities' commitment. The economic case for Skopje also fed into the Future Cities of South East Europe work.
Outputs
The Economic Case for Decarbonisation in Skopje
Analysis by Material Economics, November 2020, of the investment, emissions, and economic benefits of decarbonisation in Skopje. A preliminary, top-down study.
Download economic-case-decarbonisation-skopje-2020.pdfTransformative investment for thriving communities
A Medium article from the Thriving Communities of South Eastern Europe on the financial mechanism.
View ArticlePlanning similar work?
SmartUp can support research, co-creation, facilitation, digital tools, implementation, or learning documentation for related programmes.