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City Climate Finance Gap Fund I - Wold Bank

As of: July 2020

Objective and activities

The challenges cities and local government face in developing and implementing climate action projects are multiple and range from increasing debt burdens, budgetary constraints, limited indebtedness capacity and insufficient credit ratings that hinder their ability to access traditional debt financing from commercial banks or bond markets. The ability of cities to finance climate action projects also depends on the extent to which local authorities can tax residents, property owners and businesses. In developing countries this capacity varies widely. In addition to financial constraints, municipal authorities often have insufficient planning, design and preparation capacity to develop a solid pipeline of technically robust and financially sound projects. Moreover, investment in infrastructure generally requires long-term investment decisions whose costs are significant and whose climate action benefits are uncertain and may occur several years after the original investment.

State of implementation/results

The Global Covenant of Mayors for Climate, together with the Governments of Germany and Luxembourg, announced at the UN Climate Summit in September 2019 the launch of the City Climate Finance Gap Fund. Both governments together intend to provide up to EUR 50 million in grants. The Fund aims for a capitalization of at least EUR 100 million which will unlock EUR 4 billion in high-quality low-carbon and climate resilient infrastructure projects in cities.

  • Accounting for 75 percent of global greenhouse gas emissions, cities play a key role in successfully combating climate change. Thus, climate action of cities as part of the development and implementation of Nationally Determined Contributions (NDCs) is explicitly recognized in the Paris Agreement on Climate Change. An increasing number of cities are developing climate action plans and tracking their own "Locally Determined Contributions" through initiatives such as the Global Covenant of Mayors for Climate & Energy. However, they often lack critical resources and capacity to advance concrete infrastructure projects from an idea to a robust business case. As a result, a multi-billion Euro pipeline of high-quality infrastructure project ideas that can contribute to climate change mitigation and adaptation never reach the stage of investment readiness and implementation. The newly announced City Climate Finance Gap Fund will address the critical lack of grant funding necessary to mature pipelines of projects from concept to a stage where they can be advanced towards full feasibility analysis and ultimately investment. This will significantly increase the pipeline of high quality bankable climate friendly urban infrastructure projects that must be progressed to meet the urgency of the climate crisis.
  • The Gap Fund aims to raise more than EUR 100 million in grants in order to unlock at least investments worth of EUR 4 billion in urban infrastructure projects. Germany intends to provide up to EUR 40 million and Luxembourg up to EUR 10 million. The Gap Fund will support project preparation activities for low-carbon and resilient urban infrastructure projects in a minimum of some dozen cities per year by pursuing the following three principle objectives:
  • Capacity building: Enhance cities and local authorities’ capacity to mature high-quality project ideas to later–stage project preparation;
  • Pipeline-building for later-stage technical assistance: Build a solid portfolio of project business cases for initiatives and institutions that focus on providing technical assistance for late-stage project preparation; and
  • Pipeline-building for investors: Increase at scale pipelines of bankable projects.
  • BMU collaborate with the Word Bank Group as well as the European Investment Bank in implementing investments under a common Gap Fund umbrella structure.

Project data

Country:
worldwide

Implementing organisation:
The World Bank Group

BMU grant:
10.000.000,00 €

Duration:
11/2019  till  06/2025




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