IKI co-finances new City Climate Finance Gap Fund

With the new City Climate Finance Gap Fund, Germany and other donors set out to spark investments in low-carbon and climate resilient infrastructure projects in urban areas.

Cities are responsible for about three-quarter of global greenhouse gas (GHG) emissions and thus play an essential role for successful Climate Action. Therefore, the Paris Agreement explicitly recognizes the combat against climate change in and by cities as part of the Nationally Determined Contributions (NDCs). More and more cities are formulating climate action plans and set up initiatives, such as the Global Covenant of Mayors for Climate & Energy in order to implement their “Locally Determined Contributions” (LDCs). However, cities often need more resources and capacity to be able to translate available and often sophisticated project ideas into concrete implementation. This means that numerous top-quality project outlines addressing the improvement of urban infrastructure and climate change and adaptation, do not reach the stage of investment readiness and realisation.

Against this background and on the occasion of the UN Climate Action Summit 2019 in New York, Germany, together with the Global Covenant of Mayors for Climate and the Government of Luxembourg announced the launch of the City Climate Finance Gap Fund. The Fund will address the serious lack of grant funding necessary to develop pipelines of projects from concept to a level where they become tangible, realizable and thus attractive for investment. This will considerably increase the pipeline of high-quality bankable eco-friendly urban infrastructure projects that are urgently needed to successfully combat climate change. 

The Gap Fund sets out to gather more than EUR 100 million in grants – an amount that has the potential to unlock investments worth of at least EUR 4 billion in urban infrastructure projects. The German Government, through the Ministry for Economic Cooperation and Development (BMZ) and the Environment Ministry’s (BMU) International Climate Initiative (IKI), intends to support the Fund with up to EUR 40 million.

“The Gap Fund has the innovation, the impact and the scale to dramatically increase financing for climate friendly urban infrastructure,” said Environment Minister Svenja Schulze. “We wanted to ensure that it is exactly the type of support that cities need for their local climate action and therefore have co-designed the Gap Fund with GCOM from the start”.

The Gap Fund will primarily support the preparation of projects that have the potential to advance low-carbon and resilient infrastructure in cities. Support focuses on capacity-building of local authorities and cities, pipeline-building for technical assistance during the later-stage project preparation, and increasing the pool of bankable projects.