The governments of Germany and Luxembourg announced new funding of €50 million for the City Climate Finance Gap Fund (the Gap Fund), a multi-donor fund implemented by the World Bank and the European Investment Bank (EIB) together with partners. These resources will go to develop low-carbon and climate-resilient urban investments, and will nearly double the Gap Fund’s capitalisation — bringing it to €105 million for one of the largest early-stage technical assistance funds for cities and climate.

“We are proud to see that the Gap Fund has been up and running successfully for three years now, and is impressively meeting the growing demand. This shows just how crucial technical assistance is in the early phases of climate action planning and project preparation,” said a representative of the German federal government. “With its unique and innovative approach, the Gap Fund helps unlock the urban investment needed to meet our global climate targets.”

“Three years on, the growing interest in the Gap Fund on the part of local players and authorities shows that we are moving in the right direction. We have now exceeded our €100 million target, which is further proof of our commitment and joint efforts,” said Joëlle Welfring, Luxembourg Minister for the Environment, Climate and Sustainable Development. “The Gap Fund is gradually becoming a key partner for local climate action.”

The Gap Fund is a multi-donor initiative implemented by the World Bank and EIB in partnership with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. It provides much-needed funding for early-stage technical assistance and capacity building so that cities from low- and middle-income countries can operationalise their climate action plans, develop robust project concepts and access climate finance resources. Since its establishment in 2020, it has supported 183 cities in 67 countries.

“Action is needed now to end poverty on a liveable planet.  Cities are key to boosting climate resilience while delivering steady economic growth and job creation. The Gap Fund will translate cities’ climate ambitions into real investments, giving millions of people a chance to improve their lives,” said Axel van Trotsenburg, Senior Managing Director for Development Policy and Partnerships at the World Bank.

The Gap Fund is currently supporting the cities of Mombasa (Kenya) and Porto Alegre (Brazil) in the development of their climate action plans. It assisted the city of Pristina (Kosovo*) in assessing its spatial development plan and developing recommendations for compact urban growth consistent with its climate targets. To support adaptation to increased climate risks, the Gap Fund is helping to implement a stormwater management plan in Mbombela (South Africa), and to identify and prioritise investments in nature-based solutions for climate resilience in Kinshasa (Democratic Republic of the Congo). The Gap Fund also supports climate mitigation in cities — including, among others, the development of climate-smart waste management strategies in Mangalore and Kolar (India), and energy efficiency measures for public and private buildings in Palembang (Indonesia). It is also supporting sustainable mobility by developing a strategy for e-mobility in Buenos Aires (Argentina) and a pre-feasibility study for the deployment of electric school buses in Bogota (Colombia).

“Cities are in a race against time to become carbon neutral, and more resilient to the effects of climate change. They also face major social and economic challenges, which place demands on their budgets,” said Ambroise Fayolle, EIB Vice-President in charge of climate action and development policy. “The Gap Fund is helping cities make the best use of scarce resources. This means connecting promising project ideas to preparatory support and funding, as well as enhancing local capacity to manage investment. I would like to thank our donors who are helping us scale up this successful initiative, which is already providing support in over 180 cities worldwide.”

The fund helps cities identify, prioritise and develop impactful investments, while reducing the perceived risks of potential follow-on providers of finance. The linkage with downstream resources for detailed project preparation and financing is built into the Gap Fund’s design, which includes the priority of matchmaking between supported projects and potential sources of additional support. With its €105 million in technical assistance grant funding, the fund aims to leverage more than €4 billion in climate investments for cities.

The Gap Fund maintains strong partnerships with city networks and global initiatives, including the Global Covenant of Mayors for Climate and Energy (GCOM), the City Climate Finance Leadership Alliance (CCFLA), C40 Cities and ICLEI – Local Government for Sustainability.

This new infusion of capital to the Gap Fund will help cities move forward with their ambitious projects, and help us move faster in the fight against climate change,” said Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions, Global Covenant of Mayors for Climate and Energy Co-Chair and Founder of Bloomberg Philanthropies and Bloomberg LP.

The Gap Fund partners collaborate closely to share knowledge, empower cities in addressing climate challenges, and find ways to connect them with follow-on support and funding.

Background information

Cities are key to creating a climate-smart future. Over half the global population lives in cities, generating 80% of total economic output and accounting for 70% of global CO₂ emissions. While urbanisation is a key driver of growth, unplanned, rapid urbanisation and urban sprawl threaten to increase greenhouse gas emissions and vulnerability to climate change and other shocks. As many cities and local governments take steps to become low-carbon and climate-resilient, they face barriers in accessing finance as well as difficulties in planning and project preparation, due to insufficient capacity or resources — particularly in the early stages of the project cycle. The Gap Fund supports cities in addressing these specific challenges.

* This designation is without prejudice to positions on status and it is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.

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