Leadership for Urban Climate Finance (LUCI)

Taking the initiative in urban climate investment

In less than 30 years, two thirds of the population will be living in cities. Even today, cities are responsible for 70 percent of carbon emissions worldwide. Cities and their infrastructure are therefore decisively important when it comes to managing the challenges presented by climate change. While cities now also face additional challenges due to the COVID-19 pandemic, this again highlights the key role they have to play in sustainable and climate-friendly reconstruction—a ‘Green Recovery’

At the national level, cities, sponsors and politicians are well aware of the urgent need to redesign buildings, public transport and energy infrastructure within our cities to make them fit for the future. All too often, however, these measures lack effective networking—and a coordinated approach to solutions is often absent in developing and emerging countries.

LUCI helps cities to expand their infrastructure while keeping it sustainable

In light of this situation, the BMU worked with a coalition of governments, financial institutions, climate funds, city networks and think tanks to develop the LUCI (Leadership for Urban Climate Investment) framework initiative. The aim of this initiative is to make it easier for cities to access the finance they need. LUCI therefore supports the sustainable expansion of urban infrastructure, bringing together over ten separate initiatives that will be deployed in the various phases of a single project—from project development and financing to implementation. The idea is to remove existing obstacles for cities while closing gaps in subnational climate finance architecture.

LUCI’s targets are binding and ambitious

LUCI was formed in 2019 during the United Nations Climate Action Summit and concentrates its efforts in particular on the least-developed countries (LDCs), low-income countries (LICs) and middle-income countries (MICs). 

LUCI has formulated a set of clear and ambitious targets that should be met by 2025: 

  • 2,000 cities should be more capable of independent project development and planning
  • 1,000 projects should reach a point at which investors are interested in providing project finance 
  • 100 projects should be utilising the financial instruments that LUCI is providing

How LUCI works 

LUCI consists of four components. Each of these components comprises several initiatives, all of which are transformational in outlook. When combined together, however, they offer the potential for a more fundamental and systemic transformation of climate finance at the subnational level. These four components are as follows:

  1. Creating a strong global architecture to facilitate and track subnational climate finance
  2. Increasing the number and quality of finance-ready projects and pipelines
  3. Mobilisation of the national and international capital markets for urban climate investment
  4. Strengthening the expertise and engagement of national and subnational development banks, and improving general conditions at the national level

LUCI’s strong partners

The ‘Cities Climate Finance Leadership Alliance’ (CCFLA) is the central clearing-house for the initiatives. Serving as a platform to encourage greater consultation and cooperation, CCFLA helps to ensure a more coordinated approach. The various initiatives—implemented by governments, global funds, development banks, city networks and international organisations—both support and benefit from one another. Overall, this makes the projects more ambitious while also being able to lay the groundwork for a sustainable urban future.

The City Climate Finance Gap Fund (‘The Gap Fund’) is a good example of an initiative launched under the aegis of LUCI: the Gap Fund offers cities in developing and emerging countries technical support grants at an early stage in project development. This enables projects to progress far enough that they can receive support from other institutions for further project preparation work—up to and including full financing and implementation. Available support is provided by project preparation credit facilities such as ‘FELICITY’ and ‘FELICITY II - Eastern Partnership and Central Asia Program’, which also run under LUCI and are supported by BMU.