Innovative Financial Instruments for Financing Municipal Investment Projects for Sustainable Urban Development

Moving towards a low-carbon, climate-resilient economy and society is a complex issue and its solution could be found in sustainable funding, which includes a strong ecological finance component with a combined impact on achieving economic growth and limiting pressure on the environment; and sustainable investment that provides economic, social and environmental benefits for society. In recent years, conceptual understandings and trends for sustainable urban development evoke discussions on a global, European and national level among different actors from private and public sectors, raising questions which largely concern the financing of municipal investment projects, the construction of modern infrastructure to contribute to the improvement of the quality of the living environment and to the solution of a complex set of economic, social, environmental, demographic and other problems of urban development. The strategic planning for the sustainable development of municipalities and the building of a sustainable urban environment imply not only the conventional increase of the share of capital investments of municipalities and the diversification of sources of financing, but also the allocation of the financial resources to projects that meet the criteria for sustainability. Bulgaria’s entry into the European Union has significantly increased municipalities’ capacity to finance municipal projects that can generate a set of benefits for society. Currently, they depend to a large extent on meeting the pan-European requirements to reach a certain percentage of absorption, higher quality of absorption (timeliness, legality, effectiveness) and achieving pan-European added value of inputs. Given the declining volume of the European budget, an important trend in project financing in the new programming period is the focus on innovative financial instruments to attract private equity to the public sector and the mobilization of funds from international financial institutions in the banking sector and those of capital markets for their input in all investment funds and their mechanisms.