Authors: Jessie Press-Williams, Priscilla Negreiros, Pedro de Aragão Fernandes, Chavi Meattle, Hamza Abdullah, Arthur Vieira, Jose Diaz, Ben Melling.

The 2024 State of Cities Climate Finance report (SCCFR) provides the most comprehensive assessment of urban climate flows and needs globally. It aims to inform action on mobilizing finance for city-level climate action at scale by 2030.

Cities are indispensable actors in the climate transition. Currently, 56% of the world’s population live in cities and 70% of people are expected to live in urban areas by 2050 (World Bank 2023a). Many urban areas, particularly in emerging markets and developing economies (EMDEs), are already facing frequent and intense extreme weather events such as floods, drought, and heat.

Where are we now?

The majority of urban climate finance (69%) was sourced and provided domestically, and this trend is likely to grow. This is particularly true for private flows, where domestic sources accounted for 96%.

Sub-Saharan Africa was the only region where most financing came from international sources (69%).

Urban climate finance from developed economies to developing economies summed just USD 12 billion (<2% of the total).

Explore urban climate finance flows further:

What do cities need?

For mitigation alone, cities require an estimated USD 4.3 trillion annually from now until 2030, and over USD 6 trillion per year from 2031 to 2050. This report provides the first granular assessment of urban mitigation finance needs, disaggregated by sector and region. Underlying data gaps prevent a similarly comprehensive estimate of urban adaptation needs, though we present initial estimates for some EMDEs.

Transport, energy, and buildings dominate cities’ mitigation investment needs. Through 2030, cities require annual investment of USD 1.7 trillion for transport solutions (e.g., EVs and urban rail systems), USD 1.2 trillion for energy (particularly for renewable power and heat generation), and USD 1 trillion for buildings for retrofits and new construction. The regions with the highest annual urban mitigation investment needs by 2030 are East Asia and the Pacific (USD 1 trillion), Western Europe (USD 978 billion), and the US and Canada (USD 618 billion).

Adaptation needs are more difficult to project. The 2024 SCCFR only estimates adaptation needs for cities in EMDEs, which will require USD 147 billion per year until 2030, and USD 165 billion from then until 2050. These estimates are likely gross underestimations due to multiple uncertainties over climate impacts and risks, as well as limitations with the underlying scenario-based models, data, and methodology.

The high cost of climate inaction in cities globally highlights the urgency to close the adaptation financing gap. The economic impacts of climate-related events are massive, with some cities already experiencing billions of dollars in losses due to water shortages, flooding, and infrastructure damage.2

Closing cities’ climate finance gap

As the above highlights, it is crucial that cities receive adequate finance to achieve climate targets, adapt to climate change impacts, and undergo an equitable transition to a low-emissions, sustainable economy. Closing this gap will also produce great investment opportunities, if key challenges can be overcome.

Building on our analysis, CCFLA proposes four key recommendations to scale urban climate finance:

1. Improve the quantity and quality of urban climate finance. Urban climate finance flows must scale more quickly to meet cities’ needs. The quality of finance—how it is distributed among sectors, addresses underlying inequities, and strengthens enabling environments—is also key. The limited available public finance must be used strategically to crowd in private investment to fill these gaps. Cities’ climate action is typically financed by regular market instruments such as balance sheet equity and market-rate debt financing. While grant financing will remain limited, this can be used strategically to mitigate risk and increase flows. Finally, addressing inequities both between regions and within cities has huge potential to enhance the effectiveness of urban climate finance as it scales.
2. Strengthen domestic markets with the strategic use of public finance. Urban climate finance ecosystem will need to 1) bolster domestic markets so cities can better access both public and private finance, 2) strategically use available public climate finance, and concessional finance, to fill key gaps and align private sector priorities with key urban climate finance sectors, and 3) strengthen cities’ capacity to access domestic markets by enhancing project preparation, capacity building and improving fiscal, financial, and data management. More robust domestic markets may help offset persistent regional inequalities, especially acknowledging the role of households and individuals in current climate spending.
3. Rapidly scale adaptation finance, particularly in EMDEs. The urgency of investing in urban adaptation cannot be overstated as adaptation finance flows are far from where they need to be. Increasing adaptation finance may require widening the definition of activities when defining and financing urban adaptation. A narrow definition of adaptation finance risks missing broader resilience-building efforts. Cities urgently need to build the resilience of essential utilities, such as water and energy services. Standardized metrics and methodologies that can be widely adopted to track and report adaptation finance will also help to increase coordination and alignment.
4. Improve data and tracking of urban climate finance flows and needs. There is a significant need to enhance the tracking and availability of urban climate finance data across all public and private institutions. Urban adaptation flows and all urban needs estimates are hampered by a lack of available data. In addition, inefficiencies and reporting inconsistencies persist due to a lack of harmonized taxonomies between actors. Tracking urban climate finance generates crucial data to support policy and investment decisions by both national and subnational policymakers, as well as impact-oriented investors. This data is essential for identifying progress, gaps, and opportunities in the green transition of cities.

Addressing systemic barriers—such as insufficient commitment to urban climate action, weak enabling environments, city-level capacity gaps, and inadequate capital mobilization—and implementing the above four key recommendations will require coordinated action across sectors, levels of government, and actors.

Therefore, CCFLA proposes that all actors adopt the 4C Urban Climate Finance Agenda: Commitment, Collaboration, Capacity, and Capital Mobilization.

Through such coordinated, strategic action, urban climate finance has the potential to scale quickly.

The SCCFR 2024 report work builds on the framework of the SCCFR 2021, ensuring data comparability and revealing trends in urban climate flows over time. This information can be used to monitor, benchmark, and inform progress. The current report also makes methodological improvements for assessing urban climate finance and, for the first time, presents a granular estimate of what cities need to reach crucial climate benchmarks.