Overcoming climate finance barriers in cities through financial aggregation

Financing remains one of the major challenges for climate implementation in cities. More than 6000 cities have developed climate action plans, but there’s a significant gap in how to finance the projects and actions that are needed to build or retrofit low carbon, resilient infrastructure. There’s a strong case for financing climate action in cities, with the potential to create 87 million jobs by 2030 and a global economic dividend of USD 24 trillion. However, climate finance flows for cities amounted to USD 384 billion according to the most recent estimates, far short of urban climate finance needs. Whereas securing finance remains a challenge for cities in general, larger cities and those in developed economies have a wider range of financing options, from using their own budgets to large infrastructure projects that may attract private interest. Small and intermediate cities, especially in developing economies, often do not have projects that are sizeable enough to attract private investment. Financial aggregation can be a solution to these cities, as it proposes to bundle financial instruments or enterprises that combine multiple investments, participants, projects, or sectors to scale up financing for urban climate mitigation or adaptation needs. The Cities Climate Finance Leadership Alliance (the Alliance) will launch a report in April 2022 that looks specifically into supply and demand aggregation mechanisms, challenges and opportunities. This event will present the main findings of the report, discussing how cities can best access finance for climate projects through pooling projects together and tapping into economies of scale. The event will also bring together city officials, project developers, and financiers, bringing different perspectives from all relevant parts involved in this type of transaction. Finally, given that aggregating projects creates space for learning and partnerships in cities with similar national contexts, the event will discuss the role of national governments in facilitating aggregation solutions.