Multilateral Development Banks (MDBs) are intensifying efforts to address the staggering $4.5 trillion annual urban climate finance gap projected through 2030, as cities emerge as critical battlegrounds in the fight against climate change. At the roundtable “Scaling Sustainable Investment in Cities: The Role of MDBs,” convened by C40 Cities, the Global Covenant of Mayors for Climate and Energy (GCoM), and Bloomberg Philanthropies, MDBs signaled a robust commitment to scaling up urban climate finance. The discussion, held on April 28, 2025, emphasized concessional funds, subnational lending, and risk mitigation tools to unlock public and private capital. Despite progress, current urban climate finance—estimated at $830 billion annually—covers only 23% of the $800 billion yearly target set by city leaders, underscoring an urgent need for accelerated action.

The roundtable, the third in a series since 2023, built on a March 2024 open letter from over 40 mayors across 30 countries, urging MDBs to prioritize urban climate needs in their corporate and country strategies. Mayors demanded direct financing for local projects, tailored urban climate programs, and enhanced technical support to execute initiatives effectively. The dialogue, co-led by Dr. Nasiphi Moya, Executive Mayor of Tshwane, South Africa, and Anyang’ Nyong’o, Governor of Kisumu, Kenya, focused on scaling investments and strengthening adaptation measures, particularly in Global South cities facing acute climate risks.

Urgent need for urban climate finance

Cities account for nearly 70% of global greenhouse gas emissions, making urban climate action essential to meeting 2030 emissions reduction targets. However, the financial resources available to cities remain critically insufficient. The 2024 State of Cities Climate Finance report indicates that urban climate finance reached $830 billion annually between 2021 and 2022, far short of the $4.5 trillion needed yearly by 2030 to implement robust mitigation and adaptation strategies. This gap is particularly pronounced in the Global South, where funding shortfalls exceed 90% of estimated needs in most regions.

“This is a compelling demonstration of the strong commitment MDBs have made towards financing urban climate initiatives,” said Andy Deacon, Co-Managing Director of GCoM. “These discussions represent a significant step forward to accelerate and mobilise public investment… and catalyse private investment.” MDBs, including the World Bank, European Investment Bank (EIB), and Asian Development Bank (ADB), have pledged to increase their climate finance to $120 billion annually by 2030 for low- and middle-income countries, with $42 billion earmarked for adaptation. These commitments aim to leverage an additional $65 billion from the private sector, using derisking instruments to make urban projects more attractive to investors.

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Mayors’ call for direct funding and collaboration

City leaders are advocating for a paradigm shift in how climate finance is allocated. The March 2024 open letter, signed by mayors from cities like Freetown, Paris, and Rio de Janeiro, called for MDBs to integrate urban climate priorities into their strategies and provide direct financing to subnational governments. At the 2024 U20 Summit in Rio de Janeiro, mayors reiterated their demand for at least $800 billion in annual public investment by 2030, emphasizing the need for concessional funding to support vulnerable communities.

“We deeply appreciate the bank’s positive response to our call for funding,” said Dr. Nasiphi Moya. “This isn’t just about money. It’s about making a real impact… Now is the time to shift from talk to tangible implementation.” The roundtable highlighted the importance of multilevel governance, with mayors urging national governments to incorporate urban climate solutions into Nationally Determined Contributions (NDCs) ahead of COP30 in Brazil in 2025. Initiatives like the Coalition for High Ambition Multilevel Partnerships (CHAMP), launched in 2023 by the COP28 Presidency and Bloomberg Philanthropies, are facilitating this collaboration by uniting 75 national governments with subnational leaders.

MDBs are responding with tailored approaches. The C40 Cities Finance Facility (CFF), launched in 2015, supports Global South cities in developing finance-ready projects, transforming sustainability priorities into bankable proposals. For example, Chișinău, Moldova, secured €20 million to address flooding and pollution, demonstrating the potential of project preparation facilities.

Bridging the finance gap

The $4.5 trillion annual urban climate finance gap poses a formidable challenge, but MDBs are leveraging their balance sheets and technical expertise to catalyze investment. In 2023, MDBs delivered a record $125 billion in climate finance, with 60% allocated to low- and middle-income countries. However, adaptation finance lags, with only $5 billion allocated in India alone, despite a need for $5.5 billion annually across six states. Concessional financing, critical for climate-vulnerable nations, has also declined, dropping from 10% of MDB climate finance in 2022 to 6.7% in 2023.

To address these shortfalls, MDBs are expanding subnational lending and deploying derisking tools, such as guarantees and blended finance, to attract private capital. The EIB, for instance, is committed to working with cities to develop urban climate strategies, while the ADB aims to allocate 50% of its financing to climate projects by 2030. Private sector mobilization is improving, with every dollar of public climate finance now leveraging $0.38 in private investment, up from previous years.

Bloomberg Philanthropies is also playing a pivotal role. Through initiatives like Breathe Cities, which supports 14 cities in reducing air pollution by 30% by 2030, and the Youth Climate Action Fund, which engages young people in climate solutions, the organization is amplifying urban climate action. These efforts complement MDB commitments, creating a multi-faceted approach to scaling finance.

Challenges and opportunities in the Global South

Global South cities face unique challenges, including extreme weather events and limited fiscal capacity. In India, where urban areas contribute 70% of GDP, climate finance needs total $2.5 trillion by 2030, far exceeding domestic resources. In Africa, cities like Tshwane and Kisumu are prioritizing adaptation to cope with flooding and heatwaves, but funding remains scarce. The C40 and GCoM report, launched at the 2025 Urbanshift Africa Forum, provides national governments with financial techniques and coordination frameworks to increase subnational climate finance, emphasizing the CHAMP framework.

Despite these challenges, opportunities abound. The CFF’s Call for City Applications, announced at the 2024 U20 Summit, invites Global South cities to apply for support in developing projects in renewable energy, sustainable mobility, and waste management. Programs like the Green Resilient Model Cities, aligned with Brazil’s national strategy, are fostering innovative urban solutions. By prioritizing vulnerable communities, these initiatives aim to drive inclusive growth and improve urban living standards.

A roadmap for the future

The roundtable underscored the need for systemic reform in urban climate finance. MDBs must overhaul their operational models to prioritize cities, streamline access to funds, and enhance technical assistance. The 2023 C40, GCoM, and Cities Climate Finance Leadership Alliance report called for such reforms, highlighting MDBs’ role in unlocking $10 billion for methane reduction projects alone. Mayors are also advocating for 40% of concessional funding to target low-income and marginalized communities, ensuring a just transition.

Looking ahead, the integration of urban climate goals into NDCs will be critical. The U20 Summit’s call for $800 billion annually by 2030 sets a clear benchmark, but achieving it will require unprecedented collaboration between MDBs, national governments, and private investors. Bloomberg Philanthropies’ partnership with U20, announced in October 2024, aims to elevate these ambitions at the G20 and COP30, ensuring cities remain central to global climate strategies.

“This is about creating cities that aren’t just resilient to climate change, but are vibrant, inclusive places where people thrive,” said Anne Hidalgo, Mayor of Paris and C40 Vice Chair. As MDBs and city leaders continue to align, the path to closing the $4.5 trillion gap lies in bold financing, strategic partnerships, and a relentless focus on implementation.

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