Urban climate finance must increase by more than fivefold to keep cities on track for mitigation targets, as reported in the 2024 State of Cities Climate Finance report. Cities are crucial to reaching Paris Agreement goals as they are on the front lines of the climate crisis, accounting for 56% of the total population and contributing to 70% of global CO₂ emissions.

Yet, cities remain under-resourced when it comes to financing climate action, especially in emerging markets and developing economies. Scaling urban climate finance requires more than just an influx of capital—it demands transformative thinking on how to empower cities to overcome the systemic challenges that hinder their ability to fund climate action and build a sustainable urban future.

Cities Climate Finance Leadership Alliance (CCFLA) has introduced the 4C Agenda to guide a systemic approach to close the urban financing gap. Its four key pillars are:

1. Commitment to raising urban issues on global and national climate finance agenda.
2. Collaboration between actors to improve climate finance flows for cities.
3. Capacity-building for public and private actors to respond to climate change in cities and achieve urban climate finance goals.
4. Capital mobilization at the city level.

The 4C Agenda can be used as a guide to increase both the quantity and quality of urban climate finance.

Why focus on quality of finance?

While it is crucial to scale the quantity of finance it is just as important to enhance its quality. Quantity involves increasing the amount of funding, both public and private, available for local governments to achieve their climate goals. The challenge of quality refers to ensuring that this finance is allocated to sectors that are vital for fairer urban mitigation and adaptation outcomes, and that these resources address underlying inequities and strengthen enabling environments, especially in developing economies.

Amid a landscape of general insufficiency, urban climate finance is unevenly and inequitably distributed. For example, East Asia and the Pacific—which has over 1.5 billion urban residents—received USD 387 billion in urban climate finance in 2021/22. In contrast, South Asia—which has about half the amount of urban residents, at 703 million—received only USD 17 billion in climate finance, around 4% of East Asia and the Pacific’s share. Sub-Saharan Africa, with 533 million urban residents, received just USD 5 billion—representing about 1% of the amount of East Asia and the Pacific, despite having about one-third its urban population. [1]

Urban climate finance inequities extend beyond regional disparities. Across sectors, the tracked urban mitigation finance vastly outweighs urban adaptation finance, particularly in regions with the highest vulnerability to climate impacts. Sub-Saharan Africa and South Asia, despite being highly vulnerable to extreme events like heat and flooding, received the least urban adaptation finance. This imbalance leaves millions in vulnerable cities without the resources to build resilience against climate change.

In addition to these disparities, cities, particularly in developing economies, face systemic challenges to accessing climate finance. Weak enabling environments, limited capacity within local governments, and inadequate data tracking systems all contribute to impeding the progress on both the quantity and quality of finance.

Implementing the 4Cs

To overcome these systemic challenges and address the disparities in both access to and quality of finance, various actors must adopt a structured approach through the 4C agenda. Here’s how each “C” contributes to addressing the urban climate finance challenges:

1. Increasing commitment to urban climate finance on the national and international climate agenda.

To improve the quantity and quality of finance, cities need to be prioritized in national and international agendas. National governments are well suited to do this by increasing and prioritizing city-level action in their Nationally Determined Contributions so that national goals align with local needs. Local governments, for their part, can develop and implement Climate Action Plans for their cities and ensure that these are tied to their capital investment plans and budgets.

Additionally, local governments, along with national governments, development finance institutions (DFIs), and private finance institutions should sharpen their focus on climate-just decarbonization and resilience in key sectors, aligned with a just and inclusive transition. Examples of such actions include investing in green buildings in informal settlements and prioritizing community-based renewable energy projects that create local green jobs and give access to affordable energy.

2. Increasing collaboration between levels of government to help improve the enabling environment for cities.

National and local governments should consolidate cities’ needs and opportunities for climate investments and increase multi-sectoral coordination, particularly for urban adaptation finance and to build a local project pipeline. These actions should take advantage of available project pipeline opportunities, e.g., those offered by city networks such as ICLEI and C40.

Moreover, national and local governments should align on climate finance priorities with private finance entities to support mutually beneficial investments and engage in public-private partnerships, based on sound and sustainable public procurement frameworks.

3. Enhancing capacity–building efforts for city and local governments to undertake ambitious climate action.

Local governments need to allocate capacity to lead analytical and planning work to define priorities and sequence ambitious climate and development projects, potentially working with city networks to this end. However, this effort requires technical assistance and project preparation support from development banks, financial institutions, and national governments.

Further, national governments can promote national project preparation capacity for urban climate finance by strengthening inclusive, integrated, and multi-sectoral national project pipelines that address the specific needs of the cities.

4. Improving capital mobilization at the city level and strengthening local governments’ ability to access domestic and international capital markets.

Local governments need to prepare and implement a climate investment strategy, identifying and aggregating projects to increase the volume and attract finance and investment.

To further enhance capital mobilization, all levels of government can implement sustainable procurement and other demand-side aggregation mechanisms. Public and private actors can also work together to de-risk climate investments through blended finance instruments, such as guarantees. DFIs can provide technical assistance to derisk investments and promote risk-mitigation instruments. This will also help to encourage greater private-sector investment in urban climate action.

The persistent gap in urban climate finance should serve as a call to action. The 4C Agenda represents a pathway for the entire ecosystem—including cities, all levels of government, financial institutions, and other actors—to work together to scale and enhance the effectiveness of climate finance.

[1] Data taken from World Bank Urban Population data for each region, updated in 2018. https://data.worldbank.org/indicator/SP.URB.TOTL?locations=8S