World Bank, others launch city climate finance gap fund
After an initial effort that eventually turned out to be a ‘false start’, a fresh initiative has been unfolded to support city and local governments facing barriers to financing climate-smart projects.
Ministers and directors of governments of Germany and Luxembourg together with the World Bank, European Investment Bank, and Global Covenant of Mayors launched the initiative known as the City Climate Finance Gap Fund through a webnair last week.
It paves the way for low-carbon, resilient, and livable cities in developing and emerging economies by unlocking infrastructure investment at scale.
The world’s developed countries have committed to mobilise $100 billion a year by 2020, from public and private sources, to help developing countries adapt to the impacts of climate change and reduce their emissions.
The latest accounting of climate finance shows there is a gap of about $70 billion. Closing that gap is critical to building the trust necessary to reach a robust deal at the international climate summit next year.
The fund will be filling a gap in available project support, and offers technical and advisory services to assist local leaders in prioritising and preparing climate-smart investments and programmes at an early stage, with the goal of accelerating preparation, enhancing quality, and ensuring they are bankable.
It comes as an initiative of the governments of Germany and Luxembourg together with the Global Covenant of Mayors for Climate and Energy (GCOM), in partnership with several other key players in the climate finance arena (including C40, ICLEI – Local Governments for Sustainability, and Cities Climate Finance Leadership Alliance).
Expected to be implemented by the World Bank and the European Investment Bank, the fund was announced at the UN Climate Action Summit 2019 as a key initiative of the Leadership for Urban Climate Investment (LUCI), which promotes financing for ambitious urban climate action until 2025.
With a target capitalisation of at least €100 million, the fund will accelerate investments supporting cities in developing and emerging economies, as they determine goals and objectives for low-carbon and well-planned urbanization.
The fund investment is aiming to unlock at least €4 billion of final investment in climate-smart projects and urban climate innovation.
Core donors to the fund are Germany (€45 million – including €25 million from the Ministry for the Environment, Nature Conservation and Nuclear Safety, and €20 million from the Ministry for Economic Cooperation and Development) and Luxembourg (€10 million).
“What cities do today will forever shape our climate tomorrow,” said Mari Pangestu, World Bank Managing Director for Development Policy and Partnerships.
“Cities in developing countries urgently need resources to realize their climate ambitions. Through the Gap Fund, the World Bank is supporting low-carbon, resilient, inclusive, healthy, creative, and sustainable communities for all.”
Cities are on the frontlines of the climate emergency and currently account for around 70 per cent of global CO2 emissions. Urban centers’ share of emissions is expected to grow as 2.5 billion people migrate from rural to urban areas by 2050.
Before the COVID-19 pandemic struck, it was estimated that more than $93 trillion in sustainable infrastructure investment was needed by 2030 to meet climate goals.
As cities strive to recover from the economic impacts of COVID-19, investments in clean energy, climate-resilient water and sanitation, and urban regeneration projects will play an important role in eliminating pollution, improving local food systems, and creating green jobs.
They will also lead to cleaner, healthier, and more equitable communities – conditions that can help prevent future pandemics.
Climate investment projects are an indispensable opportunity to improve lives of the millions who live in cities around the world. However, cities frequently lack the capacity, finance, and support needed for the early stages of project preparation – especially in developing and emerging economies.
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