Authors: Robert Kehew, Manoel Carlos Pereira Neto, Alastair Mayes, Hamza Abdullah, and Kristiina
Yang

The impacts of climate change are accelerating rapidly, with urban populations already
facing severe climate hazards. To build urban resilience and ensure the safety of all
residents, there is an urgent need to scale up financing flows for cities’ adaptation and
resilience (A&R) infrastructure. Of the global total of USD 831 billion in tracked urban climate
finance flows in 2021/22, only 1%—approximately USD 10 billion per year—was allocated to
A&R, with an additional USD 7 billion supporting projects that aim to deliver both adaptation
and mitigation benefits (CCFLA 2024).

In response to the severe lack of financing for urban A&R, members of the Cities Climate
Finance Leadership Alliance (CCFLA) agreed during their 2023 Assembly to launch a
workstream aimed at developing knowledge, coordinating efforts, and empowering
advocacy for action on this topic. This scoping paper aims to help shape CCFLA’s new
Urban A&R Finance Workstream by (1) identifying key challenges in urban A&R finance, (2)
mapping CCFLA members’ current priorities and activities for addressing these obstacles,
(3) identifying any remaining gaps in action to address these challenges, and (4) providing
recommendations for how the workstream and the broader CCFLA community can
effectively address them.

We took as our starting point a list of challenges to mobilizing climate adaptation
finance that had been identified by previous CCFLA research on the topic (CCFLA &
Atlantic Council 2021). We then surveyed and interviewed CCFLA members to prioritize
these challenges and gather information on their programs that support urban A&R finance.
After mapping these 37 programs, we conducted a gap analysis to identify areas for future
focus and developed a set of recommendations and actions for the CCFLA Secretariat and
members to address these gaps.

CHALLENGES

There are significant challenges to scaling up urban A&R finance to protect cities from
the increasing hazards associated with climate change. In 2021, CCFLA and the Atlantic
Council identified 14 key challenges in mobilizing financing for urban climate A&R. For
the current scoping work, we conducted a survey of members to validate these findings.
Despite the increasing visibility of urban A&R finance between 2021 and our survey in 2024,
the challenges identified remain critical. Of the 14 challenges, CCFLA members identified
12 priorities to address across the demand-side, supply-side, and enabling environment for
urban climate finance, as shown in Table 1.

Table 1: CCFLA members’ 12 prioritized challenges to scaling urban A&R finance

CCFLA MEMBERS’ PRIORITIES AND ACTIVITIES

CCFLA’s 85 members represent leading organizations from across the urban climate
finance value chain and are actively addressing many of the key challenges to accelerating
urban A&R finance. Our survey identified 37 programs led by members aimed at fostering
urban A&R finance. Of these programs, 30 address demand-side challenges, 16 support the
supply of finance, and 28 aim to improve the enabling environment.
Programs are geographically dispersed, with most supporting cities in EMDEs and
particularly in LDCs, with a focus on sub-Saharan Africa. They primarily target large and
medium-sized cities; settlements with fewer than 500,000 people receive significantly less
support.

Members’ support is concentrated in a few sectors that are highly vulnerable to climate
hazards, including the water and wastewater sector, as well as ecosystems and biodiversity.
Most members encourage the inclusion of nature-based solutions in their supported urban
A&R projects, largely for stormwater management as well as green and blue corridors.
The examined programs provide strong demand-side support to enhance cities’
preparedness, including capacity development and the development of climate action
plans and adaptation plans. Project preparation support is also prevalent, particularly during
the initial project stages, with significantly less support available for the structuring and
transaction phases. Programs also primarily assist cities in accessing climate finance from
international sources, while fewer programs support mechanisms to make projects more
attractive to financiers (e.g., project aggregation and securing revenue from ecosystem
services).

Supply-side programs include financial institutions and support organizations, with most
focusing on international climate finance. Significantly fewer programs support cities
on the supply side through equity finance or risk mitigation. Additionally, funding from
these programs was unevenly distributed, with most investments focused on flood and
heat protection, while risks such as wildfires, extreme cold, and storm events received
fewer resources. These programs also make limited use of taxonomies and investment
frameworks, creating challenges for the tracking and tagging of urban adaptation project
finance.

Finally, most of the 28 programs aimed at improving enabling environments focus on
supporting city and municipal governments, as well as other levels of government, to
address issues such as horizontal fragmentation and the devolution of powers. However,
two key areas lack support: First, there is insufficient support for enabling policies and
regulations that improve subnational borrowing, an important facilitator to scaling up private
investment in urban A&R finance. Second, there is a lack of coordinated action to address
city needs for the development and implementation of national adaptation plans.

GAP ANALYSIS

Despite the efforts of members to date, key gaps remain in addressing urban A&R financing
challenges. To identify these, we mapped members’ activities against the challenges and
validated the gaps during a CCFLA member workshop. The remaining gaps are shown in
Table ES2.

Table ES2: Gaps identified in addressing urban A&R financing challenges

RECOMMENDATIONS

To address these gaps and increase financial flows to urban A&R solutions, CCFLA and its
members should:

Demand-side
• Provide opportunities for matchmaking between project preparation facilities and
financiers on A&R projects.
• Document successful business models and associated case studies for A&R investments
and collate these as blueprints in a knowledge product to help make successful
business cases.
• Connect members that are working on financing similar A&R solutions (e.g., naturebased
solutions).

Supply-side
• Develop a practical knowledge product to convey to financiers the range of financing
mechanisms available for urban adaptation projects and in what circumstances they may
be available and appropriate to use.
• Engage supply-side CCFLA members to identify their investment criteria and risk
appetite for urban adaptation projects and develop a policy brief to promote alignment
of cities’ priorities with investors’ expectations.
• Convene CCFLA members to align on urban A&R finance definitions and taxonomies
while exploring strategies for their greater uptake.
Enabling environment
• Facilitate ecosystem-wide engagement on scaling urban A&R finance through events,
workshops, and policy recommendations.

CCFLA is uniquely positioned to convene actors from across the urban climate finance
value chain to address the above challenges and work to close the urban A&R finance gap.
The recommendations presented in this report aim to enhance the knowledge base for
urban A&R finance, facilitate collaboration between diverse actors working on this issue,
and empower CCFLA members to advocate for improved quality and quantity of finance for
urban adaptation projects.