The proportion of the Brazilian population living in urban areas increased from 44,9% in 1965 to more than 85% in 2010. Today, around 164 million people live in urban areas. As a consequence of this strong urban expansion, the demand for adequate housing, public equipment (education, health, and security) and collective spaces (road systems or green areas) was intensified. The boundless speed with which the cities grew, expanding their urban areas, contributed immensely to the occurrence of great territorial imbalances and to an imminent budget deficit of the municipalities.

The climate crisis has exacerbated the financial stresses in cities as they face additional costs from adaptation and mitigation, having to share the burden equitably. Adaptation needs investments in resilient infrastructure and appropriate land use. Extreme weather events such as flooding or drought impact the construction, quality, and functioning of existing infrastructure, and require additional resources to rebuild or retrofit. Mitigation requires the reduction of greenhouse gas emissions to be achieved in urban areas, especially in the building, energy, mobility, and sanitation sectors, by reducing consumption of energy from fossil sources.

Due to their increasing budget constraints, Brazilian cities are seeking new financing strategies to meet growing infrastructure needs but lack the capacities to develop eligible projects that meet the standards of international financiers or the requirements of the private sector. Furthermore, many cities, especially small and medium ones, are not using the available land-based instruments for consolidating their own budget for taking up own investments or have the necessary credit rating for national and international funding. From the other perspective, national and international financial institutions have been offering green financing instruments, such as green bonds or climate funds, but lack the instruments to properly advise investment projects in cities during preparation and implementation.

The tasks called for with this tender shall aim to bridge this implementation gap and seek to improve the alignment between investment needs in cities and financing options offered by funding institutions and the private sector.

The technical and methodological advisory described in these Terms of Reference (ToR) is embedded in the technical cooperation project Sustainable Urban Development (DUS) that aims to improve the conditions for implementing integrated, inclusive, and climate resilient urban development in Brasil. The Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, in partnership with the Brazilian Federal Ministry for Cities (MCid), is implementing the DUS Project with funds from the German Federal Ministry for Economic Cooperation and Development (BMZ).

Underlying assumption of the DUS Project is that integrated urban development improves the ability for municipalities to mobilize investments in their cities and consolidate the municipal budget. Suitably developed projects can meet international sustainability standards and facilitate access to financing. Better integration between urban sectors and systems can create added value through synergies. Land value capture can generate additional revenues from intelligent planning. Cooperation between government levels for implementing national support programs at the local level can create efficiency, cooperation with the private sector and civil society can open additional funding options. The active participation of the local population in the development and implementation of infrastructure projects can mitigate financial risks, optimize maintenance and operation, thus ensuring their durability and profitability.

The objective of this assignment is to provide advisory services to improve the access of Brazilian cities to finance for integrated, inclusive and climate resilient projects. To this end, the two specific objectives are:

- Selected Brazilian cities must be enabled to prepare and implement fundable investment projects for integrated, inclusive and climate resilient urban development.

- Brazilian national government institutions (especially the MCid) must be enabled to support Brazilian cities in accessing finance for integrated, inclusive and climate resilient urban development.

The tasks called for with this tender shall aim to bridge this implementation gap and seek to improve the alignment between investment needs in cities and financing options offered by funding institutions and the private sector.

To this end, this tender entails the following specific tasks that are delivered in the context of the technical cooperation project Sustainable Urban Development (DUS):

Work package 1: Support for financing plans at the local level

- Assess the financial and economic viability of projects and recommend improvements during the project development phase.

- Support the preparation of financing plans and business models for urban projects.

- Support municipalities in structuring projects and business plan each for cooperation with the private sector or other actors involved in the urban project.

- Assist municipalities and communities in the procurement and contracting stage and with risk management.

- Provide expert advice on the application of urbanistic instruments and land-based financing associated to urban development and renewal projects.

- Support municipalities in the articulation with regional, national, or international development and financing institutions as well as fund management authorities.

- Identify the potential of innovative approaches of local economic development within the implementation of the demonstration projects.

- Provide technical and methodological assistance in structuring small investments funds for incentivizing local economic development.

Work package 2: Support for financing strategies at the national level

- Advise Brazilian national government institutions on national framework conditions necessary for international climate finance, especially on the design of programs for sustainable urban development.

- Support Brazilian national government institutions and operating agents (e.g., financial institutions) with regulatory frameworks and guidelines for implementation, standards for quality and risk management, selection criteria and application procedures, in programs, to hedge integrated, inclusive and climate resilient urban development.

-Support Brazilian national government institutions in setting up advisory services for municipal administrations that improves the structuring of bankable projects.

- Contribute to the local implementation of national strategies.

- Provide advisory for structuring for blended finance and/or business models for cooperation with the private sector in integrated urban development projects.

- Deliver punctual contributions from the financing perspective to indicator development for measuring, reporting and verification (MRV) with relevance for accessing international funding for sustainable urban development.

- Articulation with other stakeholders in the financial sector, national and international.

Work package 3: Knowledge management and capacity building

- Prepare training modules for leading professionals in national, state, and municipal governments, financial institutions and development agents.

- Provide expert advice for the selection of advisory products for upscaling in Brazil.

- Contribute to knowledge management and capacity building.

- Contribute to established sustainable urban development networks with finance inputs, good practices and lessons learnt.