Urban Climate Finance in the Wake of COVID-19

More Info

In order to alleviate the economic and social consequences of COVID-19, several public and private entities have announced economic stimulus packages: national governments have proposed fiscal and monetary stimulus; multilateral development banks (MDBs) and climate funds have announced recovery funds to assist developing countries and emerging economies; and a number of private institutions have launched initiatives promoting green infrastructure investment opportunities. These COVID-19 recovery packages under development are an opportunity, especially for cities, to relaunch their economies and promote a green transition to carbon neutrality. Yet, it is still unclear how cities might benefit from these recovery funds and how related to urban climate finance these funds will be. This policy brief aims to respond to this problem.

In examining COVID-19 recovery assistance for cities from key funders – national governments, Development Finance Institutions (DFIs), and the private sector – some key trends have emerged.

From the USD 20.5 trillion pledged to COVID-19 recovery globally, only USD 1.1 trillion has been committed to cities. From this, USD 916 billion went to short-term liquidity and USD 194 billion to remaining funds.

Of the more than USD 1.1 trillion pledged to cities to-date:

• Funding is starting to evolve from short-term, immediate liquidity assistance to longer term, recovery-focused approaches.
• Significant funding has yet to be programed, either by geography or sector.
• Common themes and areas of intervention are emerging across city-specific instruments that can guide programing for current and future initiatives.

These trends point to opportunities and strategies for funders and cities to jointly promote a green urban recovery; however, barriers exist in terms of directly providing funding to cities, and finding approaches to addressing the diverse economic, regulatory, and sectoral needs in a comprehensive way.

To address these challenges, this report recommends:

• Structuring financial instruments to enable cities to access them directly.
• Working with local and/or climate-specific institutions to develop appropriate mechanisms and project portfolios.
• Working with project preparation facilities (PPFs) to support the investment readiness of projects chosen by cities.
• Working through existing networks—such as the Cities Climate Finance Leadership Alliance—to facilitate effective knowledge and experience exchange.