Accelerating Climate Finance in Cities: A Global Snapshot of Opportunities and Needs
Sustainable, resilient, and equitable urban infrastructure is vital to tackling climate change. In this global snapshot, data disclosed through CDP-ICLEI Track sheds new light on how cities are rethinking their strategic plans, infrastructure and financing needs.
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Background
Reducing emissions in line with the 1.5°C target of the Paris Agreement and advancing climate resilient development requires unprecedented investments in sustainable and resilient urban infrastructure – up to US$5.4 trillion a year to 2030. This shift can ensure that local communities thrive despite the increasingly severe and frequent impacts of climate change.
Cities are indispensable to tackling climate change. Nearly 80% of global GDP and over half the world’s population (56%) are concentrated in urban areas, which are responsible for up to 70% of global emissions. Yet cities have also been identified as being among the most vulnerable to the effects of climate change by the IPCC’s (Intergovernmental Panel on Climate Change) latest Assessment Report, with nearly half lacking plans to keep their populations safe.
Even when plans are in place, most cities around the world struggle to implement their climate actions due to:
limited access to international climate finance;
constrained institutional and financial capacities; and
a lack of integration with their countries’ nationally determined contributions.
Financial institutions may have the necessary capital to invest in urban climate projects, but they lack standardized, comparable and action-oriented data to make informed investment decisions. Greater availability of data on cities’ pending infrastructure projects is key to accelerating local governments’ access to suitable funding, financing opportunities and project support.
CDP-ICLEI Track data provides actionable insights on the global pipeline of projects to key urban climate finance stakeholders.
These stakeholders include policymakers, public and private investors, and technical assistance facilities. This data demonstrates that the opportunity to invest in cities has never been greater.
1,000+
cities
disclosed through CDP-ICLEI Track in 2023
636
of these cities
disclosed a total of 2,346 climate-related projects worth US$146 billion
$65 bn
worth of investment (US dollars)
is being sought by cities
The findings presented in this global snapshot demonstrate the urgent demand for financing that unlocks the implementation of diverse projects at the subnational level. At the same time, this total investment figure is a significant underestimate of global needs.
Key takeaways
Demand for climate finance in cities is increasing year-on-year. The 2,346 climate infrastructure projects reported through CDP-ICLEI Track in 2023 represent a 52% increase from 2021.
Buildings & energy efficiency is the leading reported sector with a total of 482 reported projects valued at US$34 billion. Transport is the second largest sector (359 projects valued at US$31 billion), followed by waste management (300 projects valued at US$8 billion). The top sectors for the Global North are building & energy efficiency and transport, and waste management and water management for the Global South.
Urban climate planning is critical to the development of actionable projects. The majority of cities that disclosed projects also have a climate action plan (80%). Most of these cities are in the Global North, highlighting the need to accelerate climate action planning in low and middle-income countries in the Global South.
Nearly half of these reported projects are at the early stages of development, underscoring the importance of technical assistance and capacity building for project preparation, financing and implementation.
Around 40% of reported project costs are small-scale, at less than US$500,000. These are largely disclosed by small and medium-size cities, with less than 500,000 inhabitants. This demonstrates the need to mainstream financial aggregation strategies and instruments that have the support and backing of national governments.
Almost 40% of projects are partially funded but still need additional financial resources. Cities not only face challenges in securing financing and funding more broadly, but also in raising sufficient resources to advance projects to full implementation.
This snapshot is based on self-disclosed responses to CDP-ICLEI Trackin 2023, where local governments reported pending climate-related projects that are currently seeking funding or financing. Disclosed projects cover a wide range of sectors from renewable energy and low carbon transportation to building retrofits and stormwater retention.
Project disclosure can help address the widespread standardized data gap on urban sustainable infrastructure needs. This can better position local governments for robust technical assistance and financing opportunities.
In 2023, 636 cities across 86 countries publicly disclosed 2,346 climate-related infrastructure projects. With a combined population of over 636 million people, these cities account for approximately 14% of the world’s total urban population.
Project disclosure increased across nearly all global regions.
Europe (including UK & Turkey): 145 cities; 674 projects
Latin America: 175 cities; 590 projects
North America: 156 cities; 569 projects
Asia Pacific: 99 cities; 267 projects
Africa: 57 cities; 230 projects
Middle East: 4 cities; 16 projects
At the country-level, the United States disclosed the highest number of projects (434 projects), followed by the United Kingdom (244projects), Brazil (165) and Portugal (164 projects).
Project costs and investment needs
76% of all projects included cost estimates, collectively amounting to US$146billion and seeking US$65billion in investment. Understandably, these figures represent significant underestimates of global needs.
Reported projects feature a wide range of cost estimates due to variations in project size, stage of development and sector. Many projects are relatively small-scale, with 40% of projects reporting cost estimates below US$500,000. Some 74% of these projects were disclosed by small and medium-sized cities with less than 500,000 inhabitants.
In light of high transaction costs and perceived investment risks among small-scale projects, this underscores the potential for financial aggregation strategies and instruments to bundle projects and/or investors, particularly in small and medium-sized cities. In developing-country cities, the effective implementation of these instruments and strategies hinges on robust support and backing from national governments and authorities.
Spotlight on the Global South
Project costs are significantly lower in the Global South than in the Global North. Despite accounting for nearly 45% of reported projects, overall costs of Global South projects (US$31 billion) represent just 21% of total global project costs and 28% (US$18.5 billion) of total global investment needed.
Self-reported investment costs by Global South cities represent only a small portion of actual needs. According to a United Nations-backed report, by 2030, Global South countries (excluding China) will require investment far beyond US$2 trillion annually to meet their sustainable development goals and tackle the climate crisis. A rapid acceleration of private sector participation, supported by national governments, Multilateral Development Banks (MDBs) and other providers of concessional finance, will be key to scaling investment.
Reported projects span a wide range of sectors
Cities are reporting varied projects across buildings & energy efficiency, waste management, transport, water management, renewable energy, nature-based solutions, and public & green spaces. Buildings & energy efficiency stands out as the leading global sector, particularly in Global North cities.
With a total of 482 projects valued at US$34 billion, projects in this sector include initiatives such as:
Energy-efficient building retrofits;
Green building certifications;
Climate-smart neighborhoods;
Rooftop solar panel installation; and
Energy-efficient street-lighting systems.
Transport is the second largest sector (359 projects worth US$31 billion) followed by waste management (300 projects worth US$8 billion), renewable energy (277 projects worth US$12 billion) and water management (273 projects worth US$30 billion).
Sectoral distribution differs slightly in the Global South with waste management being the leading sector (210 projects worth nearly US$6 billion)1.
Notably, water management has fewer projects than most other key sectors (only 273 projects in total), but the highest average cost per project (US$142 million) reflecting the capital-intensive nature of water infrastructure. Following closely behind are transport and buildings & energy efficiency, with average project costs of approximately US$100 million2.
2. Local climate finance pathways and technical assistance opportunities
Status of financing: most projects are seeking funding or financing
Of the 2,255 projects that include the status of financing, 87% (1,958 projects) are seeking financing or funding.
Of these projects:
34% are not funded and are seeking full funding;
21% are not funded and are seeking partial funding; and
45% are partially funded and are seeking additional funding.
The large proportion of projects seeking partial or additional funding suggests that cities face challenges not only in securing financing more broadly, but particularly in raising the funds needed for full implementation. This not only underscores the importance of improving cities' access to climate finance, but also the importance of developing mechanisms and frameworks (eg local climate funds conducive to longer-term financing options).
Despite accounting for just 28% (US$18.5 billion) of total global investment needed, Global South cities – especially those located in Africa and Latin America – reported a higher percentage of projects that are currently not funded and seeking full or partial funding (58%, compared to 36% for Global North cities).
Identified financing models: innovation is key to scaling finance
Cities across the globe continue to rely heavily on domestic public finance and funding sources. Of the 1,782 projects that included a financing model, 41% reported that they are seeking or have secured public finance from municipal sources and national governments. Only a small proportion of projects with an identified financing model are seeking finance exclusively from private sources such as commercial banks and investors (3%).
Over one third of projects (38%) are considering using more than one source of finance and/or more than one type of financial instrument, such as:
Loans from commercial banks/international financial institutions;
Leveraging private investment, equity and blended finance;
Bonds; and
Carbon markets.
To effectively tackle the climate crisis in cities, municipal finance alone cannot meet the necessary funding. The data confirms that there is both a need and interest for scaling up innovative financing approaches and instruments that can incentivize diversified sources of finance at scale. Among others, these include the creation of financial structures such as special purpose vehicles (SPVs) to facilitate the use of blended finance models, public-private partnerships, and land value capture.
Opportunities for upstream support
Out of the 636 cities that disclosed projects, 80% reported that they have a climate action strategy or plan.
The reported data highlights disparities between cities in the Global North and the Global South when it comes to climate change planning and readiness. 92% of Global North cities with projects have climate action plans in place compared to 66% of Global South cities. This supports calls to accelerate basic policymaking support for local communities in emerging markets and developing economies (EMDEs), particularly as cities consider how to develop in a sustainable, low-carbon fashion.
Opportunities for early-stage project support
Through CDP-ICLEI Track, cities can specify their project development stage, from scoping and pre-feasibility to implementation and post-implementation. Nearly halfof all reported projects are in the early stages of project development3, demonstrating the critical role of preparation assistance to help advance project ideas toward investment-readiness.
Some 63% of early-stage projects have been reported by small and medium-sized cities (ie those with less than 500,000 residents). Such cities are expected to drive substantial proportion of the world’s urban population growth in the coming decades, underscoring the need to promote project preparation support strategies that adequately target these cities’ needs and capacity constraints.
This also highlights the importance of expanding and replicating facilities, like the City Climate Finance Gap Fund that are keenly focused on supporting cities of the Organization for Economic Cooperation and Development's Development Assistance Committee (OECD-DAC) recipient countries with early-stage project preparation.Equally essential is the development of country-levelapproaches that provide city governments adequate support and tools for pre-feasibility and feasibility studies and risk assessments.
At the regional level, the demand for project preparation support is most evident in Africa, which has the highest proportion of projects in the scoping stage – the earliest stage of development – with 15 out of 230 projects, many of which are in the waste management sector. Nonetheless, Global North cities also face substantial challenges getting their projects to an investment-ready stage, highlighting the value of technical assistance alongside financing in all regions.
3. Climate objectives & case studies
Cities have reported more mitigation projects than adaptation projects
Nearly two-thirds (1,480) of all reported projects are focused on climate mitigation and reducing city-wide carbon emissions. These are cumulatively worth US$95billion and seeking nearly US$41 billion in investment.
Mostly disclosed by cities in the Global North (60%), these projects span four key sectors:
Buildings & energy efficiency
456 projects
Buildings are responsible for close to 40% of global, energy-related carbon emissions, making building decarbonization one of the most impactful climate mitigation actions. Cities’ projects are typically focused on building retrofits such as LED lighting and building-level renewable energy and heating.
Transport infrastructure and urban mobility
357 projects
Another leading source of global emissions is the transportation and mobility sector. In this area, cities are disclosing projects that prioritize fleet electrification, electric vehicle infrastructure, public transit and cycling infrastructure.
Waste management
294 projects
This is the largest project category in the Global South, demonstrating the synergy between development goals and sustainable infrastructure. Many projects focus on waste-to-energy, which has strong co-benefits for energy poverty and energy dependence.
Renewable energy
272 projects
Renewable projects vary widely in scale, ranging from initiatives to implement hundreds of gigawatts of solar capacity to plans to reduce the likelihood of power outages during extreme weather events using microgrids.
Cities are pivotal in advancing climate adaptation and resilience
One third (727) of all reported projects focus on increasing urban adaptation and resilience to climate change, with 55% reported by cities in the Global South. These projects are collectively valued at US$47 billion and seeking approximately US$21 billion in investment.
Top sectors include water management (262 projects), nature-based solutions and public & green spaces (206 projects), and the other/cross sectoral category (127 projects). Out of these 727 adaptation projects, 113 have the potential to also facilitate mitigation (secondary objective).
Adaptation projects span three main areas:
Water security
The global demand for water has increased by nearly six times in the last decade and is expected to increase 80% by 2050. Reported predominantly by cities in the Global South, projects in this sub-sector include interventions that aim to increase efficient water use, enhance access to drinking water and sanitation services, facilitate wastewater treatment and reuse, and reduce water pollution.
Climate risks management
Projects seeking to build climate resilience encompass a variety of activities mainly aimed at reducing risks and exposure to floods and extreme heat, the top climate hazards faced by cities according to CDP data. Reported projects include sustainable drainage systems, built and natural flood defense systems, tree planting and pavement upgrades.
Emergency preparedness
With extreme weather events already increasing in intensity and frequency, cities across all regions are stepping up efforts to enhance their preparedness and response capabilities. Projects include resilience hubs/shelters and early warning systems.
CDP's calls to action
CDP data shows that cities across the globe are stepping up to tackle the climate emergency. As a platform for standardized, comparable, and science-based localized climate data, CDP plays a central role in informing and connecting the right stakeholders, and in accelerating the implementation of urban climate action.
Urgent and robust action is required from all actors given the scope of investment needed to reach climate and development goals:
Municipal accountability and transparency are paramount. Robust, accurate and timely disclosure of climate-related projects – alongside essential climate metrics – will bolster subnational ambitions, help identify replicable solutions, and point out target areas for investment.
National governments need to recognize the opportunity to invest in cities to reach nationally determined contributions (NDCs), achieve development goals and protect at-risk populations.They should ensure greater participation of subnational governments in the design and implementation of national climate commitments, integrate subnational projects in NDC investment plans, andestablishmechanisms and tools that enhance cities’ access to robust preparation support and financing opportunities.
The private sector and financial innovation are key to closing the sustainable infrastructure finance gap. Despite being the source of nearly 70% of global emissions, cities control less than 10% of their city-wide emissions. The private sector should more actively support cities in developing conditions that enable private investment as well as collaborate with public financial institutions to catalyze finance at scale.
More fit-for-purpose international and national financing mechanismsneed to be establishedto de-risk and incentivizecapital mobilization for climate actions, both in cities of low-income countries and in key priority areas of water security, risk-disaster management, waste management and energy poverty. As part of this transformation, developed countries should meet or exceed their US$100-billion-a-year commitment to support developing countries. Public financial institutions and development finance institutions – including multilateral development banks – should be reformed tofacilitate more direct access to climate finance at the subnational level.
1. A total of 287 projects worth US$18 billion fall under the “Other” category. These projects range from climate planning and policy development, urban resilience, and education & public awareness initiatives. Many projects in this category are also applicable to multiple sectors.
2. Average project cost estimates per sector are based on projects that included cost estimates.
3. Projects under development prior to structuring and/or procurement stage. These projects are typically in the project scoping, pre-feasibility, and feasibility analysis phases.
In partnership with
This data was collected in partnership by CDP and ICLEI – Local Governments for Sustainability
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