Supporting Access to Climate Finance for Small and Intermediary Cities

This guide provides strategies for Project Preparation Facilities (PPFs) to help small and intermediary cities—defined as those with 10,000 to 200,000 residents—access climate finance. It addresses critical barriers such as limited municipal capacity, small project sizes that deter investors, and poor creditworthiness, which prevents borrowing on commercial terms. The document recommends tailored PPF interventions, including specific calls for proposals, project aggregation models, blended finance, and community-based funding instruments to unlock investment for low-carbon and resilient infrastructure.

• Small and intermediary cities are critical for future urban growth, particularly in low- and middle-income countries (LMICs). In 2020, cities with fewer than 1 million inhabitants represented 58% of the urban population in LMICs. In Africa, it is estimated that two-thirds of urban growth between now and 2040 will occur in small and intermediary cities.
• Poor creditworthiness is a systemic barrier to climate finance in LMICs. Fewer than 20% of the 500 largest cities in LMICs are considered creditworthy by national ratings, and only 4% have access to international markets. This restricts the ability of municipal governments to borrow on commercial terms.
• PPFs can address municipal capacity and skills gaps by creating targeted calls for proposals for small and intermediary cities, providing early-stage support to prioritize high-impact projects, and leveraging existing contextual knowledge from previous projects in the same country to create economies of scale.
• To overcome project size constraints and high transaction costs, PPFs should design aggregation models. This includes thematic calls for proposals to identify common projects across multiple cities and facilitating partnerships for pooled procurement or pooled financing.
• PPFs can mitigate poor creditworthiness by supporting blended finance models that use concessional international climate finance to mobilize private investment. This includes the use of risk mitigation instruments such as partial credit guarantees, subordinated debt, or first-loss equity.
• Alternative financing strategies that do not require municipal borrowing include Public-Private Partnerships (PPPs), borrowing from national or regional development banks, and implementing land value capture (LVC) mechanisms like betterment levies.
• Community-Based Finance (CBF) is recommended as a decentralized approach to fund grassroots interventions. This model involves funding from community members, diaspora, and civil society organizations, often matched by public grants or asset transfers from national governments.

APA

Beavor, A., Jungman, L., Chiappe, F., Khan, S., & LaSalle, J. M. (2023). Supporting Access to Climate Finance for Small and Intermediary Cities. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/PPAG-Small-Cities-Bankability-Guide.pdf

Chicago

Beavor, Andreas, Laura Jungman, Federica Chiappe, Samia Khan, and John Michael LaSalle. Supporting Access to Climate Finance for Small and Intermediary Cities. Climate Policy Initiative, 2023. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/PPAG-Small-Cities-Bankability-Guide.pdf.

Wikipedia

{{cite report |last1=Beavor |first1=Andreas |last2=Jungman |first2=Laura |last3=Chiappe |first3=Federica |last4=Khan |first4=Samia |last5=LaSalle |first5=John Michael |title=Supporting Access to Climate Finance for Small and Intermediary Cities |publisher=Climate Policy Initiative |date=March 2023 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/PPAG-Small-Cities-Bankability-Guide.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{beavor2023supporting, author = {Beavor, Andreas and Jungman, Laura and Chiappe, Federica and Khan, Samia and LaSalle, John Michael}, title = {{Supporting Access to Climate Finance for Small and Intermediary Cities}}, institution = {Climate Policy Initiative}, year = {2023}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/PPAG-Small-Cities-Bankability-Guide.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }