UK aid for sustainable cities

1. Purpose, scope and rationale

The UK has long recognised the multiple challenges and opportunities posed by rapid urbanisation in developing countries. In 2015, the UK’s Department for International Development (DFID) produced its Sustainable cities for growth policy framework, which set out three objectives for its support to urban development: generating economic growth; ensuring that growth is inclusive; and promoting sustainability and resilience.

This review of UK aid in support of sustainable cities – one of the 17 Sustainable Development Goals (SDGs) – will examine the UK’s urban development portfolio from an economic, social and environmental perspective, in accordance with the UK government’s stated objectives, and will examine the extent to which the portfolio is contributing to the delivery of the UK’s climate and sustainability goals. This is an area that has not yet received detailed attention from the Independent Commission for Aid Impact (ICAI) or other scrutiny bodies.

The review provides an opportunity to build on previous ICAI work, including the 2018 review of DFID’s transport and urban infrastructure investments. It adds to a number of previous ICAI reviews exploring different aspects of the UK’s international climate finance. Sustainable cities is also the only SDG yet to be addressed under ICAI’s Third Commission.

The review covers both bilateral and multilateral programming over the 2015 to 2022 period. It covers aid-funded investments and research programmes, as well as grant-funded programmes, whether national or multi-country. It also covers the UK’s policy engagement and international advocacy on the theme of sustainable cities, and its efforts to mobilise other sources of finance, especially from the private sector. While the Foreign, Commonwealth and Development Office (FCDO) is the primary spending department, the review also covers the work of other departments and bodies.

2. Background

The UN’s most recent World Urbanization Prospects projects that more than two-thirds of the global population will reside in urban areas by 2050. Developing countries are expected to see the biggest increase, with Asia and Africa accounting for nearly 90% of urban growth.

Urban areas are recognised as catalysts for economic growth. The clustering of businesses, industries and services in cities generates economies of scale and positive spillovers such as innovation and entrepreneurship, resulting in higher productivity and job creation. This dynamic environment is a key driver of global economic prosperity, with cities generating more than 80% of global GDP.

However, many cities are also characterised by congestion and other developmental challenges, including serious social and environmental issues. The UN reported that, in 2020, approximately 1.1 billion urban residents lived in slums or informal settlements. Over the next 30 years, an additional two billion people are expected to reside in such conditions, primarily in developing countries.

Good governance is a key enabler of sustainable urban development. The capacity of national, regional and local authorities (in dialogue with private sector and civil society actors) to plan, coordinate and deliver urban services and infrastructure is one of the most important factors affecting successful city development. In many countries, weaknesses in urban governance systems are a barrier, requiring technical assistance, capacity building and reform.

Another area of concern is climate change. According to a World Bank report, Thriving: making cities green, resilient, and inclusive in a changing climate, cities are responsible for 70% of global carbon emissions. While urban areas in high- and upper-middle-income countries generate the most emissions, cities in low- and lower-middle-income countries face the challenge of continuing to grow sustainably in ways that do not harm the environment. The report also indicates that cities in developing countries are less resilient to climate change-related shocks and stresses, experiencing more severe economic impacts from extreme weather events.

Cities therefore occupy a central position in global sustainability efforts. They are at the heart of the 2030 Sustainable Development Agenda: the main objective of SDG 11 is to create “inclusive, safe, resilient, and sustainable” cities and communities, with a focus on ensuring access to basic services, energy, housing, transport and green public spaces. These principles align with the core tenets of the New Urban Agenda, agreed at the 2016 Habitat III conference, and the Paris climate agreement.

The UK has placed sustainable cities, particularly in rapidly urbanising countries in Africa and Asia, at the core of its global efforts to address climate change. In the March 2023 International climate finance strategy, ‘sustainable cities, infrastructure and transport’ is one of four priority areas for UK international climate finance.

The UK’s approach to sustainable cities has been operationalised through a range of delivery mechanisms, including bilateral programming, both centrally managed and country-led, and multilateral programmes, as well as development investment. On a preliminary assessment, the sustainable cities portfolio includes around 100 programmes, projects or investments in developing countries with a range of objectives, including climate change mitigation and adaptation, promoting economic growth, poverty reduction and the development of safe and inclusive cities. FCDO manages the majority of the programmes, while the Department for Energy Security and Net Zero (DESNZ) and the Department for Environment, Food and Rural Affairs (Defra) each manage smaller portfolios. Development investments are managed by the Private Infrastructure Development Group (PIDG) and British International Investment (BII).

Between 2015 and 2022, UK aid support for sustainable cities amounted to £861.3 million. This included £486.3 million spent via bilateral programmes (£266.2 million of which was spent through multilateral partners), in the form of grants. It also included £375 million in development investment via PIDG and BII​​, which was invested in private sector opportunities with a view to generating positive development impacts while at the same time making a financial return. It is likely that this total figure under-represents the actual UK spending on sustainable cities as it does not include the share of the UK’s core contributions to multilateral funds that also spend in this area. There is also a wider range of programming in related sectors such as infrastructure, sanitation, finance and governance not necessarily badged as ‘sustainable cities’, which has not been included in the above figures.

3. Review questions

This review will examine how well the UK is using official development assistance (ODA) to support sustainable cities, with a particular focus on how it is balancing three sets of objectives: economic (growth and prosperity), social (inequality and poverty) and environmental (climate change, sustainability and resilience). The review will also look at how well the UK is improving governance arrangements, to help cities achieve these objectives. The review questions are built around the evaluation criteria of relevance, effectiveness and coherence. Our review questions and sub-questions under each of these criteria are set out in Table 1.

Table 1: Our review questions

4. Methodology

The methodology for this review will involve six main components to address our review questions and ensure sufficient triangulation of the evidence (see Figure 1).

Figure 1: Methodology

Component 1 – Literature review: A review of the available peer-reviewed and grey literature, commenting where appropriate on the quality of evidence underlying the main conclusions. The literature review will assess the evidence base on the context and current debates around major themes related to sustainable cities, such as economic growth, inclusion, sustainability, municipal governance and finance.

Component 2 – Strategic review: A review of the strategies, policies and commitments relevant to the UK’s sustainable cities portfolio. We will supplement this desk-based research with key informant interviews with staff from UK government departments and other bodies, including PIDG and BII. This component will assess whether, and how well, the UK’s approach effectively balances economic, social and environmental objectives.

Component 3 – Programme reviews: Desk reviews of a sample of programmes and investments through different channels and instruments. We have selected a sample of programmes based on the criteria described in Section 5, which includes programmes operating in our case study countries.

Component 4 – Stakeholder consultations: A cross-cutting component of our methodology, key informant interviews will support our programme reviews, strategic review and country case studies. In addition to interviews with UK government officials, we will interview external stakeholders, including bilateral and multilateral development agencies, subject matter experts, and city officials.

Component 5 – Country case studies: Two country visits to Indonesia and South Africa. The case studies will assess the UK’s aid support for sustainable cities in each country, collecting and analysing evidence on the relevance, effectiveness and coherence of the UK’s programmes and contributions.

Component 6 – Citizen engagement: National research partners will hold consultations with people directly and indirectly affected by UK aid support for sustainable cities in Indonesia and South Africa. The consultations will aim to determine whether the UK’s aid support for sustainable cities is relevant to and addresses citizens’ needs and priorities, and whether aspects of their lives have changed as a result.

5. Sampling

Our methodology involves two sampling components: a selection of programmes for desk review and a selection of case study countries.

We have used several criteria to support the sampling of the portfolio of projects and programmes within this review – all of which are considered important factors in influencing the degree to which results claimed by departments have been met. For the programme reviews, our sample was selected from 98 programmes that the UK government identified as part of its sustainable cities portfolio. We used purposive sampling based on seven principal criteria, as shown in Table 2. Nine programmes were then selected as offering a representative sample across these criteria (listed in Table 3).

Table 2: Sampling criteria applied in this review

Table 3: Sample of programmes selected for desk review

Our country case study sampling process also took account of practical considerations, including the need to avoid overburdening FCDO staff in countries recently visited by ICAI. The countries were selected to ensure good coverage of the review’s themes (governance, infrastructure, poverty reduction, climate change and finance) and the range and depth of programming managed by different departments and arm’s-length bodies. We also considered the countries’ geographic, demographic, social and urban characteristics, such as the proportion of the population living in urban areas, number of megacities and levels of inequality. Based on these criteria, five potential case study countries were identified. Taking into account considerations such as national elections and safety concerns, Indonesia and South Africa emerged as the most suitable choices, covering both Asia and Africa.

Table 4: Case study countries

6. Limitations to the methodology

Geographical focus: Our choice of two upper-middle-income countries as case studies means that we will have less of a focus on programming in low-income settings. However, given the large inequalities of income and opportunity seen within the two case study countries, particularly in urban environments, we are able to look at programming aimed at poverty reduction. By visiting secondary cities in those countries, we will also gain insights into programming in lower-capacity environments. Our programme desk reviews will include programming in low-income countries. 

Breadth of sampling: We have selected a sample of nine programmes and investments from the sustainable cities portfolio to review in depth, out of 98 programmes and investments identified as active over the review period, which span globally and operate across multiple focus areas relevant to sustainable cities. This will limit the extent to which we will be able to report findings which can be generalised across the whole of the UK’s sustainable cities portfolio. However, the sample is reflective of the UK’s strategic focus areas, and different types of spending and funding channels. Furthermore, we will be able to triangulate findings from our programme desk reviews and our strategic review, which will consider the wider sustainable cities portfolio. In addition, a consideration for selecting our country case studies is because they offer a breadth of programming across the main spending areas, allowing us to assess programming beyond our sample.

7. Risk management

We have identified several risks associated with this review and propose a series of mitigating actions, where necessary, as presented below.

8. Quality assurance

The review will be carried out under the guidance of ICAI Lead Commissioner Sir Hugh Bayley, with support from the ICAI secretariat. Our approach paper and the final report will be peer-reviewed by Claudette Forbes, a leading expert on city regeneration and former executive director of the London Development Agency. Our outputs will be subject to quality assurance by the service provider consortium.

9. Timing and deliverables

The review will take place over a nine-month period, starting from October 2023.