Written by Maryke van Staden, edited by Matteo Bizzotto, ICLEI World Secretariat

Cities and their local governments do not lack climate ambition. Across the world, mayors and city councils are setting climate neutrality targets, strengthening climate adaptation plans, and committing to a more just, inclusive and resilient development pathway.

They also do not lack financial instruments. Green bonds, sustainability-linked loans, blended finance structures, guarantees, and transition instruments are well established in global markets.

Yet many local governments still struggle to access affordable, long-term capital at scale. The real constraints are directly related to governance, internal and multilevel government coordination, and institutional capacity. Is a local government allowed to access finance, and if not, how can we fix this? These are the critical questions we should be asking.

Green finance can help, but it only succeeds when it is embedded in systems and treated as an institutional responsibility, not an occasional project.

Capital is available but confidence is conditional

Investors are actively seeking climate-aligned opportunities. Pension funds, insurers, development banks, and asset managers are under pressure to align portfolios with sustainability goals. Capital is available.

But investors look for clear project definitions, transparent monitoring, credible governance structures, professional financial and operations management, and predictable pipelines of investable projects. Without these signals, even strong climate plans struggle to translate into financed infrastructure.

A single successful green bond does not guarantee long-term access to capital. What builds confidence is consistency. When local governments demonstrate that they can originate, structure, and report on local infrastructure projects reliably, green finance becomes routine rather than exceptional.

What do successful cities have in common?

Experiences from different regions show that green finance is shaped less by geography and more by institutional design and governance.

In Kyoto, Japan, a green bond was issued with proceeds clearly earmarked for specific projects, including energy-efficient retrofits, district heating upgrades, and flood protection measures. Each project was costed, scheduled, and linked to measurable outcomes. Investors responded because both the use of funds and expected impacts were transparent. Clarity reduced perceived risk.

In Hyogo Prefecture, Japan, 14 municipalities issued a joint bond. Individually, each municipality was too small to efficiently attract large institutional investors. Together, they reached a meaningful scale. Partnership and aggregation ensured a compelling case is made, borrowing costs reduced, with strengthened reporting standards, and improved access to long-term investors.

In Sweden, Kommuninvest – the local government funding agency- has integrated green lending into its standard operations. Green bonds are not occasional announcements but part of a structured financing system supported by standardized reporting and clear eligibility criteria. Institutional discipline has turned climate ambition into predictable financing practice.

In Cape Town, South Africa, blended finance supported upgrades to water infrastructure and energy efficiency in public buildings. Concessional capital helped close early viability gaps. As projects demonstrated stable performance and measurable savings, commercial capital became more accessible. Layered finance allowed different actors to take on different levels of risk.

These cities were successful because they built clarity, scale, and credibility into their municipal and project financial architecture. They reduced fragmentation and presented investors with structured opportunities rather than isolated proposals. Importantly, these local governments may have still operated in a tight fiscal space with evolving regulatory environments, limited in-house technical capacity, or high transaction costs. However, they have been able to address their constraints through deliberate institutional strengthening.

From ambition to an investible pipeline

Translating a city’s climate priorities into an investible pipeline begins internally. ICLEI experts provide technical assistance in developing a robust Climate Action Plan. That is the starting point. The next step is defining an investable plan and its numerous climate priority projects. 

Investors need to know who represents the city. Bringing together treasury, sustainability, legal, and procurement functions into a coordinated counterparty team reduces fragmentation and aligns climate objectives with financial planning. Clear internal structures not only ensure internal coordination and clarity on responsibilities, but are especially helpful to build external confidence.

Next comes preparation. Before approaching capital markets, local governments benefit from concise project briefs that define scope, costs, timelines, expected savings or revenue streams, impact metrics, and monitoring approaches. Even a clear one-page brief can significantly reduce due diligence time and uncertainty.

The shift from single projects to pipelines is equally important. One project signals experimentation. A pipeline signals commitment. As such, the climate action plan helps present the project portfolio requiring investment. One could start with sectors that offer measurable savings or stable revenue streams, such as energy efficiency in public buildings, water and wastewater infrastructure, district heating, resilient drainage, or public transport upgrades. A small but credible portfolio builds confidence over time. Such projects can for example be submitted to the annual call of ICLEI’s Transformative Actions Program (TAP) – open to projects seeking project preparation support and investment. 

Where scale remains a barrier, aggregation becomes strategic. Joint issuance with neighboring municipalities, regional pooled vehicles, municipal development banks, or credit enhancement mechanisms can strengthen credit profiles and reduce transaction costs. Guarantees can attract new classes of investors and lower perceived risk.

Finally, consistent reporting matters. Transparent and standardized impact reporting lowers friction, reduces reputational risk for investors, and signals long-term commitment. 

Bridging ambition and capacity

Recognizing these realities, the ICLEI carbonn Climate Center Academy’s Green Finance Training program is designed to help cities of all sizes strengthen the foundations of green finance.

The five-week hybrid program begins with an in-person launch in Malmö, Sweden, followed by interactive virtual modules. Participants explore governance frameworks, pooled financing models, blended finance structures, project development tools, and future trends. Through expert input, peer exchange, and applied capstone presentations, the program focuses on practical skills that translate directly into municipal practice. The objective is to equip city leaders and finance practitioners with the tools needed to make green finance routine.

Cities that embed green finance within governance and strategy are better positioned to attract long-term capital. Cities that rely on ad hoc initiatives may achieve isolated successes but struggle to scale. If your city is ready to move from isolated projects to structured investment pathways, the ICLEI carbonn Climate Center Academy’s Green Finance Training program offers the tools, peer exchange, and expert guidance to help you get there.

Discover more about the Green Finance Training program and take the next step toward financing your city’s climate future.