Cities Forum 2025 - Funding sustainable urban development

The session addressed the intricate funding landscape for SUD, exploring instruments, institutional roles, and emerging models to mobilize investments at the urban level.

• The Deputy Director-General of DG REGIO, European Commission, Hugo Sobral, emphasized the importance of a place-based approach of Cohesion policy anchored in local knowledge, participatory governance, and co-creation. He underlined that €24 billion are directly managed by cities and highlighted the increasing relevance of instruments beyond traditional Cohesion policy programmes, such as the European Urban Initiative (EUI). He pointed to the mid-term review of Cohesion policy as an opportunity to reallocate resources to priority areas and highlighted proposals such as the Seal of Excellence to extend support for high-quality un-funded EUI projects. The Public Sector Loan Facility under the Just Transition Mechanism was also noted as a blended finance tool combining EU grants with EIB loans for urban green transition projects in eligible regions.
• The Managerial Advisor, Housing, Cities and Regions Department, European Investment Bank, Gerry Muscat, presented findings from the 2024–2025 EIB Municipality Survey, covering approximately 1000 cities. The top four constraints identified were: (1) funding constraints for public service and desk-level capacity; (2) regulatory permitting procedures; (3) and administrative capacity. He stressed that while technological needs are stabilizing, regulatory and procedural complexities are intensifying. The EIB supports cities notably via loans and advisory platforms such as JASPERS and ELENA, and through structuring financial instruments in key sectors like energy efficiency and affordable housing.
• In his capacity as Project Manager of Prato municipality, Italy, Paolo Guarnieri shared Prato’s experience with the Urban Jungle initiative, a EUR 1 million greening investment that includes pilots like the Social Housing Green Walls and the Market Regreening Hub to promote sustainable behaviours. The project involved diverse delivery partners and created a multi-level engagement platform, exemplifying how midsized cities can combine physical transformation with civic innovation.
• The Chair of the Board of Stadmakersfonds, Netherlands, Hans Karssenberg, outlined the rise of social enterprises, i.e. non-profit entities focused on impact rather than profit, in urban development. These actors often blend public and crowd-sourced funding and can deliver high social value (e.g., creation of 200 affordable housing units). He emphasized that while local initiatives abound, scaling them requires sustained top-down investment and better recognition mechanisms, possibly through an EU umbrella framework aggregating local funding efforts. 
• The Director of the Department for Urban Development Funds in the Sustainable Cities Fund from Bulgaria, Iva Petkova, introduced a blended public-private fund established post-JESSICA, supporting projects across 40 cities. The fund leverages 59% public (including ERDF) and 41% private capital, offering long-term, flexible financing to both large and small-scale urban projects. Its design showcases how public-private partnerships can be shaped to serve sustainable urban goals.
• In his capacity as Financial Architect for climate transition of Leuven municipality, Belgium, Filip Coenen, presented his city’s commitment to achieving climate neutrality by 2033 through a Climate city contract. He stressed that such missions are only feasible through broad stakeholder involvement. Moreover, many projects essential to this transition lack clear business models. Private actors must be shown tangible co-benefits (environmental, economic, and social) to participate, even in the context of low direct financial returns.

• Audience interaction (via Slido) raised questions around the viability of green investments, private sector motivations and ways to circumvent bureaucratic delays in accessing EU funds. Paolo Guarnieri stressed that transparency, trust, and reputational value increasingly drive private involvement. Hugo Sobral acknowledged ongoing debates on direct EU-city funding mechanisms. While the EUI provides a pathway, he emphasized that robust multi-level governance remains a cornerstone of effective urban action.

  EIB and REGIO representatives closed the session by highlighting two key concepts: diversity of approaches and the leverage potential of city- and EU-level funding, urging cities to be bold, test ideas through pilot actions and build cases for future upscaling.

  The importance of blending public guarantees with innovative financing models to support projects with low commercial viability (such as Prato’s citizen-driven crowdfunding) was mentioned as well as the EU readiness to stand by cities willing to innovate.

• Tailored and leveraged funding is essential: cities need tailored solutions and should mobilise public funding as a catalyst for additional investment.
• Capacity-building remains critical as well: administrative and technical capacity gaps remain a bottleneck to accessing and deploying funds.
• There is growing demand for adapted EU technical assistance tools (e.g., JASPERS, ELENA) that are better aligned with the on-the-ground realities and project cycles of local authorities.
• Blended financial instruments are increasingly necessary to attract diverse capital sources, combining EU, national, private, and citizen contributions.
• Non-financial incentives, such as transparency, trust, and social impact, are critical for private sector engagement in urban sustainability projects.
• The EU is progressively increasing direct city-level support (e.g., through EUI), but systemic governance reforms are still required to streamline multi-level collaboration.

• The upcoming EUI Policy lab on funding will act as a platform to deepen dialogue on these issues and explore practical approaches, shaping future funding frameworks.
• The session was marked by strong engagement and demonstrated a growing maturity in city-level financial innovation.
• Calls for clearer EU guidance on blended finance and project eligibility criteria were recurrent among city representatives.