Multilateral Development Banks (MDBs) are ramping up their efforts to address the urgent need for urban climate finance, with a focus on bridging the annual $4.5 trillion gap required to meet climate goals by 2030. The effort comes as cities around the world demand more direct funding and strategic integration of their climate priorities into MDB strategies. Despite growing commitment from MDBs, urban climate finance is still far from reaching its target.
During a roundtable titled “Scaling Sustainable Investment in Cities: The Role of MDBs,” convened by C40 Cities, the Global Covenant of Mayors for Climate and Energy (GCoM), and Bloomberg Philanthropies, MDBs reinforced their commitment to enhancing urban climate finance and addressing the needs of cities, particularly in the Global South. “This is a compelling demonstration of the strong commitment MDBs have made towards financing urban climate initiatives,” said Andy Deacon, Co-Managing Director of GCoM.
The discussions followed a March 2024 open letter from over 40 mayors worldwide, urging MDBs to integrate city-level climate needs into their corporate and country strategies. These mayors emphasized the need for direct financing for local climate projects, tailored urban climate programs, and technical support. “This isn’t just about money. It’s about making a real impact… Now is the time to shift from talk to tangible implementation,” said Dr. Nasiphi Moya, Executive Mayor of Tshwane, South Africa.
In response, MDBs announced a commitment to significantly expand concessional finance, subnational lending, and derisking mechanisms to attract private capital into urban climate projects. The discussions, co-led by Governor Anyang’ Nyong’o of Kisumu, Kenya, emphasized the importance of scaling urban climate investment in adaptation and resilience, especially for cities in developing regions. “Local governments can no longer be treated as secondary actors in the fight against the climate crisis,” said Governor Nyong’o.
Despite these advancements, urban climate finance remains critically underfunded. Public investments currently cover only 23% of the $800 billion target needed annually, exposing a substantial gap in financing. The global community, including national governments, MDBs, and private investors, must urgently fill this gap to ensure cities can lead climate action.
Looking Ahead
MDBs are aligned with global climate initiatives, such as the CHAMP coalition, a 75-nation alliance focused on fostering subnational partnerships for effective climate policy and implementation. Andrea Fernández, C40’s Managing Director of Climate Finance, highlighted the importance of MDBs’ catalytic role in financing urban infrastructure: “Massive investments are needed in clean energy, sustainable transport and waste, and strengthening resilience.”
With COP30 approaching, the pressure is on for MDBs, cities, and national governments to turn pledges into measurable action. The next steps in scaling urban climate finance will be critical in determining whether cities can secure the funding they need to drive climate solutions and safeguard their future.
