Description
These funds allow cities to establish dedicated funds to finance climate-related projects, often leveraging private sector investment. These funds can support climate projects in multiple ways, such as grants, loans, equities or guarantees. Some of these funds are revolving, meaning that they are repayable over an agreed period and can, if the city wishes, be reinvested in other climate change-related projects in the future, maximizing the value of the fund. The funds can also be divided into sub-types such as mezzanine loans or city funds acting as a guarantor or underwriter to a project.
Instrument category
National, regional and municipal funds
Implementation status
Moderate - tried and tested
Enabling conditions and success factors
- Funders need to agree on specific funding criteria.
- Strong monitoring of uses of funding is required.
- A pipeline of bankable projects is needed.
Instrument benefits
- Allows cities to access funding at scale.
- Depending on how they are structured, they avoid governmental budget ceiling constraints.
Challenges and risks to implementation
- Risk of default if inadequate projects are funded.
- High capitalisation might not be sustained.
