Financing Options Guidance Document

C40 Cities Good Practice Guide: City Climate Funds

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C40 Cities Good Practice Guide - City Climate Funds

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Cities need to find new sources of finance and convince the private sector of the benefits and opportunities stemming from clean, renewable, and low carbon investments. Several C40 cities have successfully accessed such new finance through establishing city climate funds.

A city climate fund is an institution set up to finance projects in a city that reduce emissions or improve climate resiliency. The design and operation of these funds vary by city, but some common themes include a degree of independence from political decision-makers in making investment decisions, speciality finance projects and terms, and investment decision criteria linked to a city’s broader environmental, social or economic policy objectives.

This Good Practice Guide from the C40 Sustainable Infrastructure Finance Network summarises key strategies highlighted by city representatives to share with other cities that may be planning to implement or that currently operate similar funds. Thanks to the successful deployment of strategies identified in the guide, these funds have collectively supported more than USD $325 million in sustainable projects.




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The Good Practice Guide includes key recommendations for cities, namely to:

  • Convene key stakeholders: Create a fund that progresses the city’s sustainability strategic goals and acts as a facilitator between the property industry, financiers and local governments. Convene key stakeholders to ensure continuous collaboration. Discover market gaps and create innovative, sustainable products.
  • Mobilise private investment: Use a revolving fund structure and mobilise private investment at both fund and project level to ensure financial sustainability and achieve leveraging effects. Understand financing obstacles and market shortcomings from day one to develop a clear investment strategy flexible enough to adapt to future market changes.
  • Become a specialty lender: Provide loans and alternative financing solutions for building-scale energy efficiency and clean energy projects. Become a specialty lender using creative financing tools to scale up climate action in sectors with greatest opportunities and barriers through lending partnerships with like-minded partners.
  • Set up project-specific funds: Employ different strategies and criteria for commercial projects with a higher financial return vs. smaller scale projects that have no commercial targets and lower risk. Provide funding for sustainable projects that traditional financiers would not normally support.
  • Finance innovative solutions: Structure money creatively and allocate a part of the fund to innovation, incubation and capital mobilisation. Finance innovative solutions to de-risk green technologies, incubate climate solutions, and demonstrate low-carbon investment opportunities.

The Good Practice includes examples from London, Toronto, Melbourne, New York City, and Amsterdam.