The World Bank's 2025 flagship report, "Banking on Cities: Investing in Resilient and Low-Carbon Urbanization," paints a stark picture: cities, particularly in low- and middle-income countries (L&MICs), are on the frontlines of the climate crisis. These urban centers, home to over half the world's population and responsible for 70% of global greenhouse gas emissions, are already experiencing the devastating consequences of rising seas, extreme heat, and intense rainfall.
The report highlights a critical window of opportunity. With much of the future urban infrastructure yet to be built, L&MICs can avoid past mistakes. However, this requires substantial investment and strategic planning.
The financial challenge is immense. The report estimates that achieving resilient and low-carbon urban development in key sectors – transport, buildings, flood control, water, wastewater, solid waste, and heat resilience – will demand $7.9 trillion to $25.5 trillion in public capital spending by 2050. This translates to annual needs of $256–821 billion, or 0.8 to 2.6 percent of combined L&MIC GDP. This figure excludes operational and maintenance costs, estimated at an additional $525–$548 billion per year.
Current funding falls drastically short. In 2021–22, climate finance flows to cities in L&MICs totaled a mere $92 billion – only 7–12 percent of the annual requirement. A significant portion of this, $73 billion, went to upper-middle-income countries, leaving a paltry $1 billion for low-income nations.
The report reframes climate investments as essential components of smart urban development. Initiatives like green public transport, energy-efficient buildings, improved waste management, and urban greening deliver significant co-benefits: cleaner air, improved public health, reduced congestion, and job creation. Many of these interventions, such as tree planting and waste collection, provide accessible employment opportunities.
The report urges policymakers to move beyond the narrow focus of "climate finance" and leverage various funding sources: general urban budgets, national fiscal transfers, development banks, and even commercial funding streams.
The report emphasizes that cities cannot tackle this challenge alone. Many L&MIC cities lack the resources and capacity to access global climate funds. National governments must provide predictable financial transfers, technical support, and supportive legal frameworks. Development banks and climate finance institutions need to offer more flexible and concessional support. The use of green bonds, sustainability-linked loans, and blended finance models requires further assistance for effective implementation.
Alexandria, Egypt, serves as a compelling case study. Facing significant climate risks, Alexandria has made adaptation investments primarily funded by national ministries. However, substantial mitigation needs remain. Recent decentralization efforts could empower Alexandria to access financing more directly.
The report concludes with a powerful message: strategic investments, smart planning, and bold leadership are vital for transforming cities into engines of low-carbon development, resilience, and inclusive growth. The future is urban, and the world is quite literally banking on cities.
