Accelerating Urban Climate Finance in Low- and Middle-Income Countries: An Important Strategic Dimension of MDB Reform

This report by the Climate Policy Initiative assesses the role of ten Multilateral Development Banks (MDBs) in providing climate finance to cities in low- and middle-income countries (L&MICs). It argues that while MDBs have increased overall climate finance, urban-specific funding has plateaued and remains insufficient to meet the projected USD 29.4 trillion in climate-related opportunities in L&MIC urban areas by 2030. The document provides five key areas for MDB reform to better support urban climate action, including shifting from project-based to programmatic approaches, increasing direct financing to cities, and scaling risk-mitigation instruments to mobilize private capital.

• Between 2015 and 2022, 21% of tracked MDB climate-related finance to low- and middle-income countries (L&MICs) was directed toward urban projects, a share that has remained relatively stable despite increasing urbanization. This is particularly evident in the Middle East and North Africa (MENA) and Sub-Saharan Africa, which have received less urban climate-related finance than other regions.
• MDB urban climate-related finance shows a higher preference for adaptation than general MDB climate finance; 32% of urban-related finance is dedicated to adaptation, compared to 18% for climate-related finance as a whole.
• There is a significant gap in how MDBs deliver urban climate finance, with 49% of tracked funds channeled through national governments. Direct financing to cities via non-sovereign operations accounts for only 2%, and financing through public or private intermediaries accounts for only 4%. Additionally, only 6% of tracked urban climate-related finance was provided in currencies other than US dollars or euros.
• Private sector engagement in urban climate projects is hindered by a lack of risk-sharing tools. Guarantees and grants represent less than 0.1% of all MDB urban climate-related flows, compared to 2.7% of all tracked MDB climate-related finance (both urban and non-urban).

APA

Climate Policy Initiative (2023). Accelerating Urban Climate Finance in Low- and Middle-Income Countries: An Important Strategic Dimension of MDB Reform. https://www.climatepolicyinitiative.org/publication/accelerating-urban-climate-finance-in-low-and-middle-income-countries-an-important-strategic-dimension-of-mdb-reform/

Chicago

Climate Policy Initiative. Accelerating Urban Climate Finance in Low- and Middle-Income Countries: An Important Strategic Dimension of MDB Reform. 2023. https://www.climatepolicyinitiative.org/publication/accelerating-urban-climate-finance-in-low-and-middle-income-countries-an-important-strategic-dimension-of-mdb-reform/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Accelerating Urban Climate Finance in Low- and Middle-Income Countries: An Important Strategic Dimension of MDB Reform |date=23 November 2023 |url=https://www.climatepolicyinitiative.org/publication/accelerating-urban-climate-finance-in-low-and-middle-income-countries-an-important-strategic-dimension-of-mdb-reform/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2023accelerating, author = {{Climate Policy Initiative}}, title = {{Accelerating Urban Climate Finance in Low- and Middle-Income Countries: An Important Strategic Dimension of MDB Reform}}, institution = {Climate Policy Initiative}, year = {2023}, month = nov, url = {https://www.climatepolicyinitiative.org/publication/accelerating-urban-climate-finance-in-low-and-middle-income-countries-an-important-strategic-dimension-of-mdb-reform/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }