Financial Aggregation for Cities

This report by the Climate Policy Initiative explores financial aggregation as a strategy to overcome barriers to urban climate finance. It defines financial aggregation as the use of instruments or enterprises to combine multiple investments, participants, projects, or sectors to scale up financing for urban climate mitigation and adaptation. The document details supply-side and demand-side aggregation models, provides case studies from various global regions, and outlines the necessary enabling environments and stakeholder recommendations to implement these strategies.

• Cities face significant barriers to accessing climate finance, including poor municipal creditworthiness, weak regulatory and governance systems, foreign exchange and interest rate risks, high upfront costs, and jurisdictional limitations on financing major projects.
• Financial aggregation can alleviate urban investment barriers by reducing transaction costs, meeting minimum institutional ticket sizes, attracting a broader range of investors, providing affordable early-stage finance, and mobilizing private finance through blended finance instruments.
• Supply-side aggregation combines smaller financial commitments from multiple investors or lenders to meet a funding need, often utilizing structured finance elements like tranches, guarantees, and blended finance to attract diverse investor classes.
• Demand-side aggregation combines the financing or service needs of multiple projects, businesses, or borrowers to achieve economies of scale, pool risks, and improve bankability for large financial institutions.
• Green bonds are highlighted as a particularly effective tool because they can function as both supply-side aggregators (pooling funds from multiple institutions) and demand-side aggregators (funding multiple climate projects).
• The report identifies several successful aggregation examples: the Emerging Africa Infrastructure Fund (supply-side), the Water and Sanitation Pooled Fund in India (demand-side), the Philippines City Disaster Insurance Pool (demand-side), and the Cape Town Green Bond (joint).
• The Sub-National Climate Finance Initiative is designed as a blended finance equity fund using USD 150 million in first-loss funding from the Green Climate Fund to mobilize an estimated USD 600 million in commercial investment.
• The Green Receivables Fund in Brazil is a USD 36 million securitization instrument (FIDC) that bundles future cash flows from community solar arrays to attract risk-averse institutional capital through a tranche structure.
• Successful financial aggregation requires a supportive enabling environment, which includes fiscal and financial autonomy for cities, the ability to levy local taxes, and a regulatory framework that allows for public-private partnerships and the creation of special purpose vehicles.
• The report recommends that national governments decentralize fiscal authority, city governments reform revenue collection to increase creditworthiness, and Development Finance Institutions (DFIs) provide technical assistance and concessional finance to de-risk projects.

APA

Pinko, N., Negreiros, P., Wetherbee, C., & Tonkonogy, B. (2022). Financial Aggregation for Cities. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/06/Financial-Aggregation-for-Cities.pdf

Chicago

Pinko, Nicole, Priscilla Negreiros, Cooper Wetherbee, and Bella Tonkonogy. Financial Aggregation for Cities. Climate Policy Initiative, 2022. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/06/Financial-Aggregation-for-Cities.pdf.

Wikipedia

{{cite report |last1=Pinko |first1=Nicole |last2=Negreiros |first2=Priscilla |last3=Wetherbee |first3=Cooper |last4=Tonkonogy |first4=Bella |title=Financial Aggregation for Cities |publisher=Climate Policy Initiative |date=June 2022 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2022/06/Financial-Aggregation-for-Cities.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pinko2022financial, author = {Pinko, Nicole and Negreiros, Priscilla and Wetherbee, Cooper and Tonkonogy, Bella}, title = {{Financial Aggregation for Cities}}, institution = {Climate Policy Initiative}, year = {2022}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2022/06/Financial-Aggregation-for-Cities.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }