The Project Preparation Challenge

Despite being responsible for 70% of GHG emissions and home to almost 60% of the world’s population, cities face a financing gap of USD 4.1 to 5.0 trillion annually for urban climate-related infrastructure. One of the barriers to scaling urban climate finance is the lack of a pipeline of bankable, or investment ready infrastructure projects.

This lack of bankable projects is influenced by several factors, including macroeconomic conditions, cities’ creditworthiness, and siloes between project financiers and sponsors, impacting investments and project development.

Cities, particularly in low- and middle-income countries, encounter various barriers to meeting the requirements of international financiers. These include:[1]

• Difficulties in aggregating small-scale due to diverse local contexts and differential development levels
• High development costs for large infrastructure projects
• Reliance on foreign currency financing leading to exposure to exchange rate fluctuations
• Unfavorable regulatory environments and licensing barriers that deter investors and complicate multi-sectoral solutions

To address these barriers, development finance institutions, city networks, and NGOs have established Project Preparation Facilities (PPFs). These PPFs provide grants and technical assistance to cities, helping them prepare projects that can attract investment. CCFLA members operate 32 PPFs, 16 of which have committed to greater ambition, partnership, and impact through the Leadership for Urban Climate Investment (LUCI) platform. This enhanced collaboration and support aim to overcome the challenges local governments face, ultimately making their projects more attractive to private and international financiers.

While providing crucial support to cities, PPFs face twin challenges of limited information and a lack of coordination that has led to fragmentation and inefficiencies, limiting the collective impact of the project preparation ecosystem in addressing the urban climate finance gap. Many PPFs concentrate on either early-stage or later-stage preparation support, meaning projects must rely on multiple PPFs for support to move from project identification through to financial close.

PPFs lack information and partnerships with other PPFs needed to coordinate preparation support efficiently and effectively for urban climate infrastructure projects. Collaboration is slow and resource intensive, limiting the current collaboration and leading to projects failing to move all the way through the preparation value chain. Cities also face barriers in accessing preparation support due to the lack of information and fragmentation of the project preparation ecosystem.

The PPF Connector: A One-stop-shop for Collaboration and Information

To address these challenges, CCFLA launched the PPF Connector program in 2023, funded by Bloomberg Philanthropies and in collaboration with C40 Cities and the Global Covenant of Mayors. The PPF Connector aims to support CCFLA member PPFs with:

• A dedicated focal point to support developing partnerships and project matchmaking to move projects along the project preparation value chain
• Improved information resources for matchmaking and partnerships
• Helping city networks connect urban climate projects with PPF support
• Identifying gaps in the existing preparation support offer

The PPF Connector builds on past activities from CCFLA’s Project Preparation Action Group and LUCI. In 2020, PPAG members developed a Harmonized PPF Application Form that standardized a minimum set of questions to enable sharing of project applications between PPFs. In 2022, CCFLA organized a LUCI workshop in Bonn, Germany, that identified project origination and handover support as a priority need. This meeting led to the launch of the LUCI Local-level Data & Project Pipeline Sharing Tool, enabling LUCI initiatives to share project information and local data resources in a centralized space.

The Support Offer

The PPF Connector offers project matchmaking services and partnership development support to PPFs and information resources for PPFs, city networks, and other stakeholders.

Project Matchmaking and Partnership Development Support

The PPF Connector helps match projects in early-stage preparation, including at the concept note and pre-feasibility stages, to later-stage support, such as feasibility studies, other technical studies, business case development, structuring, and matchmaking with investors. The matchmaking activities include:

• Project sourcing for later-stage PPFs: The PPF Connector identifies high-quality projects at the right level of maturity for later-stage preparation and organizes matchmaking meetings between PPFs for the validated projects.
• Project offtake for early-stage PPFs: PPF Connector screens projects receiving early preparation support to shortlist eligible off-taker PPFs and validate their interest and capacity to provide follow-up preparation support.

The PPF Connector supports PPFs in establishing partnerships proactively and demand-driven. For proactive partnerships, the Connector will leverage the PPF Project Database to identify PPFs working on similar projects in the same city and ensure they are connected. For demand-driven partnerships, the Connector will follow a structured process: identify potential partners, gauge their interest, set up meetings, assist in developing agreements, and publicize the partnership to the CCFLA membership.

Information Resources

PPF Project Database: A database of projects receiving preparation technical assistance (TA) from PPFs with information on local data and studies generated and additional TA needs. PPFs can use the database to find projects by city, sector, and stage, as well as studies and data produced by previous TAs, to identify handoff opportunities.

PPF Connector Workspace: A secure platform containing crucial information about PPFs, application windows, calls for proposals, focal point contacts, and projects. Continuously updated by CCFLA and the participating PPFs, it serves as a dynamic, collaborative resource, ensuring that the shared information is relevant and useful for facilitating project handoffs and identifying potential PPF partnerships.

Project Preparation Resource Directory:  A public directory of PPFs and capacity development programs that support cities with the capacity to prepare bankable projects. It helps city networks and project sponsors find preparation support for their projects. The Directory allows users to search and filter PPFs by country, sector, project stage, supported activities, and application tempo to create a shortlist of PPFs for which their projects may be eligible.

Progress in the PPF Connectors First Year

Since launching in June 2023, the PPF Connector program has laid the foundation for enhanced collaboration through matchmaking and relationship building by facilitating bilateral meetings, presentations, and matchmaking sessions. The program’s inaugural workshop provided an important opportunity to gather participants’ feedback, underscoring their positive perception of the PPF Connector’s matchmaking support.

Most participants viewed PPF Connector’s consolidation of information positively, recognizing its value in facilitating smoother interactions. Notably, PPF Connector has established the groundwork for three potential partnerships and conducted matchmaking for five projects, indicating promising prospects for catalyzing future collaborations.

Contact

For more information about the PPF Connector Program, contact John Michael LaSalle.

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[1] Nassiry and Pickard, “Demand for PPF Support for Climate Infrastructure in Cities: High-Level Findings from Expert Interviews.”