Urbanisation is reshaping countries around the world. Over the last 40 years, the global population living in cities has more than doubled and is projected to reach 55% of total population by 2050. This rapid urbanisation is driving significant demand for infrastructure, not only to accommodate growing population but also to respond to pressing challenges such as climate change.
Financing sustainable urban development has never been more urgent. Yet, traditional funding and financing mechanisms are falling short of what is needed to meet surging demand. Moreover, while aggregate urban green finance data, such as green bond issuance by country and sector, are available, there is limited “place-based” data on where these investments are implemented, making it difficult to identify where funding gaps are particularly acute or not.
In 2023, the OECD published a report on Financing Cities of Tomorrow for the G20 Infrastructure Working Group. The report underscored the need to make cities more inclusive, resilient, and sustainable, echoing priorities raised by G20 Finance Ministers and Central Bank Governors under the Indian G20 Presidency. In line with the G20 Principles on Financing Cities of Tomorrow, the report laid out a framework to accelerate urban infrastructure investment through more effective urban planning, greater private investment, and expanded access to sustainable finance.
Building on this OECD/G20 work, this new report on Financing Sustainable Cities in Southeast Asia turns the spotlight on rapidly urbanising ASEAN-5 countries in Southeast Asia (Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam). Through an analysis of 129 sustainable urban development projects across four key groups – buildings; urban transport; water, wastewater and waste management; and integrated urban development – the report sheds light on how cities are funded and financed today. Each project is examined individually, with particular attention to the financial instruments used, while the analysis also draws on desk research on institutional and legal frameworks shaping urban development in the region. Key findings highlight the need for (i) improving public finance and other financial frameworks to enable private investment in sustainable urban development, (ii) removing barriers and providing incentives to broaden the range of funding sources and financing instruments for sustainable urban development, and (iii) strengthening urban planning and legal systems to leverage private investment for sustainable urban development.
While the report focuses on ASEAN-5 countries, many of the insights it offers resonate far beyond the region, offering guidance for all policymakers striving to build more sustainable and resilient cities fit for the future.