The rapid urbanisation of the world's population has placed a significant strain on urban infrastructure, which is further compounded by climate change. This has resulted in the need for significant investments in mitigation and adaptation efforts, which will require substantial financing. However, the financing of climate change initiatives in urban areas faces several challenges, including limited taxation and borrowing powers for local governments and a lack of bankable projects. To overcome these challenges, it will be necessary to tailor climate finance approaches to the specific needs and characteristics of each city, while also addressing broader issues such as governance, institutional set-up, and policy environment.
A city climate finance roadmap constitutes a centrepiece of a city’s efforts to finance their climate goals. The development of a climate finance roadmap for cities requires a robust city climate action plan, which should include an inventory of urban emissions and an urban risk and vulnerability assessment. The climate action plan should also identify short, medium, and long-term climate investment themes, needs, and opportunities. The city climate finance roadmap should lay out how the city plans to implement and meet its climate investment goals and should contain a pipeline of bankable projects that align with the city’s investment priorities and long-term climate goals. Identified projects need to be clearly described, including in terms of expected costs and financial/ development/ climate benefits. The roadmap should also contain an identification of potential funding sources and strategies on how to leverage those. To ease access to funding, early involvement of potential funders in the project preparation phase and early alignment with national climate goals can increase chances that projects will be fully funded. Involvement of a wide range of potential funders, from public and private sectors, and tailored financing instruments and arrangements, depending on the local context and policy environment, will be needed to make sure that climate projects will get financed. Regular exchange with stakeholders, including the private sector, can help create trust and reduce perceived project risks. If needed, international technical assistance and advisory services should be approached early on to help with pipeline development and project preparation.