Examining Opportunities and Challenges for Implementing Land-based Financing Instruments for Funding Climate Action

This case study delves into Copenhagen’s approach to addressing the complex interplay between flood and sea level rise risks, land and real estate markets, and the financing of adaptation measures. The study investigates how flood risks are priced in Copenhagen’s land and real estate markets, identifying key factors that influence the efficient integration of these risks into property valuations. It also explores the intricate interplay between risk factors and the dynamics of mortgage and insurance markets. It delves into the growing awareness of climate-related risks within the financial sector, discussing the potential for systemic risk in the event of a major flood and the steps lenders are taking to mitigate their exposure to flood risk. Furthermore, the case study examines the strategies employed by public and private entities in Copenhagen to manage climate-induced flood risks and the substantial benefit-cost ratios associated with proactive adaptation investment. It highlights the city’s proactive approach to leveraging land-based financing to fund critical investments in flood protection, stormwater management, and urban resilience, with a particular focus on the effectiveness of such mechanisms in supporting adaptation. By drawing on a comprehensive review of Copenhagen’s policies, the case study identifies transferable lessons and best practices that can inform the development of effective climate adaptation strategies in other urban contexts.

This paper is part of a series of working papers on land-based financing instruments for funding climate action.