Report finds huge gap in needed urban climate finance, especially in rapidly urbanizing cities in developing countries. Provides recommendations on how city, country, and international development officials can mobilize urban climate finance at scale.
London, 30 June 2021 – A new report launched today by the Cities Climate Finance Leadership Alliance (the Alliance) and the World Bank calls for the global community to step up climate action in cities, which account for 70% of global emissions and will be home to 7 out of 10 people by 2050.
The report estimates that an average of $384 billion was invested annually in urban climate finance in 2017-2018. This falls far short of the total need, which is estimated to be in the trillions per year. The report also provides innovative frameworks and strategies for strengthening the enabling environment in countries and cities to mobilize urban climate finance at scale.
The 2021 State of Cities Climate Finance report examines the current state of urban climate investment, what is preventing the levels of investment needed, and solutions to overcome these challenges. It is divided into two parts:
- The Landscape of Urban Climate Finance (Part 1). Authored by the Alliance Secretariat (Climate Policy Initiative) in partnership with the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center, Part 1 presents the most comprehensive estimate of global urban climate finance. The Landscape is based on an effort to track existing flows of urban climate finance and to estimate urban climate investments in the buildings and transport sector.
- The Enabling Conditions for Urban Climate Finance (Part 2). Authored by the World Bank, Part 2 analyzes enabling frameworks and presents solutions to mobilize climate finance for low-carbon, climate-resilient urban development pathways. It seeks to provide a common understanding of the terminologies, knowledge, and themes used by climate policy and climate finance practitioners and that of city-level urban planning and municipal finance officials.
Key findings include:
- Most urban climate finance was mobilized in and for China and in developed economies, while vastly insufficient levels of urban climate finance were invested in many developing economy regions, such as South Asia and Sub-Saharan Africa, which saw annual average investments of just $4 billion and $3 billion, respectively.
- Private finance, and in particular household expenditure, played a large role in urban climate finance, averaging $136 billion in 2017-2018. That corresponds to 35% of the total and was mainly driven by domestic actors, and household expenditure in the purchase of private electric vehicles as well as measures in residential building energy efficiency.
- Investment in urban mitigation far outweighed that in urban adaptation and resilience, though availability of data is uneven at the urban level. Only looking at project level tracked data, investment for urban climate change mitigation averaged $68 billion, including that for building energy efficiency, sustainable transport, and renewable energy, while annual investment in urban adaptation and resilience measures, primarily in water and wastewater projects, averaged $7 billion in 2017-2018, representing just 9% of urban climate finance tracked.
- Strengthening the enabling environment and mainstreaming climate considerations at the city, country, and global levels will be critical to allow more cities, especially in developing and emerging markets, to mobilize urban climate finance for impact. In countries with weak intergovernmental and fiscal systems, cities often have low capacity and lack autonomy to regulate the built environment, plan investments, and manage municipal finances.
- Despite wide differences in enabling environments within countries and across the world, cities are leveraging their roles as providers of infrastructure and services (what they pay for directly) and stewards through what they regulate, plan, and champion (what they influence), to mobilize investment toward reducing GHG emissions, enhancing climate resilience, and improving the quality of urban life.
The report identifies enabling frameworks and strategies to mobilize greater levels of urban climate finance and to inform how nations and cities can best:
- Green and align vertically the existing urban finance systems and intergovernmental architectures at the local and national level (increase the green share)
- Mobilize new urban climate finance at the city level, including through conditional intergovernmental transfers, own source revenues, and private markets and urban households (increase the pie)
- Increase the climate-smart impact by strengthening urban spatial and capital investment planning systems with green regulations and design standards, by promoting compact spatial form, and by integrating dynamic GHG measurement and carbon pricing into investment planning decisions (increase the impact)
To mobilize urban climate finance at scale and in time to address the climate crisis, the 2021 State of Cities Climate Finance Report calls for a systems-level and whole-of-economy approach, whereby countries and cities climate policies, data, and activities are aligned, well-funded, and executed at the local level.
Dr. Barbara Buchner, Global Managing Director of CPI (Alliance Secretariat), said: “The numbers are clear, we are failing to provide cities with adequate finance to address the climate emergency. It is critical that the entire financial system—public, private, and philanthropic—urgently work together to mobilize city-level climate finance at scale.”
Mr. Sameh Wahba, Global Director, Urban, Disaster Risk Management, Resilience and Land Global Practice, World Bank, said: “Climate change affects rich and poor regions alike, but cities start from widely different starting points when it comes to accessing climate finance. The good news is that a lot can be done to help cities in developing countries strengthen their fiscal systems and improve their capacity to regulate, plan and invest resources for climate action.”
Dr. Jürgen Zattler, General Director for International Development Policy, 2030 Agenda and Climate, of the German Federal Ministry for Economic Cooperation and Development (BMZ), underlined: “It is only through joining forces across our organisations and through building and sharing knowledge amongst us, that we can close the investment gap and start tackling the challenges that cities face around the world today, and in the future. Thus, the State of Cities Climate Finance Report 2021 is an important milestone that will guide our joint efforts to systematically mobilise urban climate finance.”
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Caroline Dreyer, Senior Communications Associate
About the Cities Climate Finance Leadership Alliance
The Cities Climate Finance Leadership Alliance is a coalition of leaders committed to deploying finance for city-level climate action at scale by 2030. Trillions of dollars will be required to help cities build the low-emissions, resilient infrastructure necessary to combat and react to climate change. The Cities Climate Finance Leadership Alliance is the only multi-level and multi-stakeholder coalition aimed at closing the investment gap for urban subnational climate projects and infrastructure worldwide.
About the World Bank
With 189 member countries, staff from more than 170 countries, and offices in over 130 locations, the World Bank Group (WBG) is a unique global partnership: five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries. Since the start of the COVID-19 pandemic, the WBG has committed over $125 billion to fight the health, economic, and social impacts of the pandemic, the fastest and largest crisis response in its history. The financing is helping more than 100 countries strengthen pandemic preparedness, protect the poor and jobs, and jump start a climate-friendly recovery. The Bank is also providing $12 billion to help low- and middle-income countries purchase and distribute COVID-19 vaccines, tests, and treatments. On climate change, the WBG is the largest multilateral financier of climate action in developing countries, having provided $83 billion in finance for climate from 2016-2020.
The City Climate Finance Gap Fund aims to help cities in low and middle-income countries strategize, plan and prepare climate mitigation and adaptation projects in their urban environment. It is financed by the German and Luxembourg governments and implemented by the World Bank and the European Investment Bank, the latter in partnership with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and supported by GCoM, C40, ICLEI and the CCFLA. For more information, see here.