Strengthening urban financing across Europe
Improved access to funding is a cornerstone of the Urban Agenda for the EU (UAEU), enabling cities to become more inclusive, green, resilient, and innovative. But key questions remain:
- How can local authorities better combine traditional funding sources and financing mechanisms (e.g., national government subsidies, bank loans) with innovative ones (e.g., green and biodiversity bonds, carbon trading schemes)?
- How can the use of existing EU funds be optimised?
- And what steps are needed to make funding more accessible and effective for cities?
This article explores these questions through the lens of the Urban Agenda Partnerships, highlighting concrete proposals, ongoing initiatives, and opportunities to strengthen urban financing across Europe.
Advancing change: key initiatives and proposals from the Urban Agenda Partnerships
Several Urban Agenda Partnerships have already elaborated concrete recommendations to improve both current and future EU funding frameworks. Notably, the Greening Cities Partnership has released a position paper calling for bold reforms to EU and national funding systems to unlock large-scale investment in Urban Green Infrastructure (GI).
As the European Union prepares its next Multiannual Financial Framework (MFF) and aligns future spending with legislative initiatives such as the European Green Deal, the Nature Restoration Regulation, and the Biodiversity Strategy 2030, the paper presents a timely and concrete roadmap to ensure cities are financially equipped to lead the green transition.
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Urban green infrastructure is essential for climate adaptation, biodiversity restoration, and improving public health and well-being. Yet, cities across Europe continue to face fragmented, complex, and insufficient funding mechanisms, particularly for long-term maintenance. The position paper draws on insights from a survey of 85 European cities, revealing both the persistent barriers to implementation and a strong willingness among local governments to significantly scale up investment in GI.
To tackle these systemic challenges, the paper presents nine strategic recommendations. These include, for example:
- Earmarking 10–15% of ERDF allocations for urban GI, with binding targets;
- Embedding city-level GI strategies within national operational programmes;
- Mainstreaming GI priorities across major EU funding instruments, such as LIFE, Horizon Europe, and the European Urban Initiative
See the full set of recommendations here.
Regarding traditional financing mechanisms, the Greening Cities paper proposes, for example, the establishment of an EU pre-financing instrument to help cities with limited budgets cover the upfront costs of green infrastructure projects, particularly the initial capital needed to launch large-scale initiatives.
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When it comes to innovative financing schemes, the Greening Cities Position Paper proposes, for example, establishing an Urban Nature Credit Market. An analysis of city responses shows that 41% of cities support systemic national financing sources for green infrastructure (GI). To make this possible, regulatory frameworks must formally recognise and monetise the ecosystem services provided by urban GI, such as carbon sequestration, air purification, and stormwater management. Achieving this will require stronger collaboration between municipalities, environmental agencies, private companies, and investors to increase financial engagement in urban greening initiatives.
The proposed Urban Nature Credit Market would enable cities to generate tradable credits for carbon sequestration, biodiversity conservation, and other ecosystem services. This market would help integrate GI into existing carbon markets and climate finance mechanisms, allowing cities to monetise the multiple benefits of their green infrastructure.
The Greening Cities Partnership’s initiatives are not an isolated case; other Urban Agenda Partnerships are also actively addressing funding challenges as part of their strategic work.
Supporting cities through strategic public procurement
The Partnership on Public Procurement, since its first Action Plan, tackled the challenge of supporting cities in adopting innovative and responsible procurement. Many cities require financial backing to build internal capacities, adapt organisational processes, and learn from proven approaches, such as circular, social, and cross-border procurement, as well as procurement of innovation.
To address this gap, the Partnership published a paper offering a concise overview and quick assessment of key EU funding opportunities relevant to strategic procurement. It also provides practical recommendations on how revised EU funds can better support cities in implementing innovative procurement practices by responding to the core needs and challenges of urban practitioners.
Integrating equality into performance-based funding
The Cities of Equality Partnership launched in early 2024, is undertaking a specific action aimed at improving the integration of equality principles in EU funding frameworks. Titled “Mainstreaming Equality in Result-Based Funding Instruments”, this action seeks to identify existing gaps and limitations in current funding systems and to provide clear recommendations for embedding gender, equality, and non-discrimination criteria into the design, implementation, and evaluation of performance-based funding. The initiative will also deliver practical tools to help systematically incorporate equality considerations across the funding cycle.
Ensuring sustainable financing for urban food systems
Similarly, the Food Partnership has highlighted funding as a major barrier to the development of sustainable and resilient urban food systems. Achieving systemic change in this area requires the active involvement of a wide range of stakeholders and support for local innovation and inclusive food models.
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Cities often depend on short-term project-based funding, which undermines the long-term sustainability of their food policy initiatives. To address these gaps, the Partnership’s Action 4: “Local Food Policies Training” calls for the establishment of a coordinated food funding agenda, developed in collaboration with local, regional, and national authorities as well as umbrella organisations. This action sets a foundation for more coherent and inclusive support mechanisms, with the goal of ensuring that local food policies are not only impactful but also sustainably financed. As part of this work, a Handbook on Resourcing Local Food Policies and Strategies will be produced to provide practical guidance and support for cities.
As this ongoing work demonstrates, recommendations from one thematic partnership often have relevance across other areas. Therefore, the Urban Agenda places particular emphasis on fostering synergies between the concrete recommendations and initiatives of the various partnerships, ensuring they are complementary rather than contradictory.
A pivotal moment for the next multiannual financial framework
With the MFF currently under discussion and the expected proposal for a new MFF 2028+, this year is a pivotal moment to provide valuable recommendations on how to improve EU funding beyond 2027. The ongoing dialogue presents a unique opportunity to shape the next programming period in a way that aligns more closely with urban and local needs.
Several UAEU Partnerships have participated in the public consultation on the new EU policy agenda for cities, emphasising the need for a funding system that is more responsive to the realities of local authorities. Their calls focus on the need for place-based, accessible funding that reflects local needs, particularly for smaller municipalities, through simplified procedures, reduced administrative burden, lower co-financing rates, and dedicated resources for both planning and infrastructure.
In line with this, the recent Joint Declaration of EU Ministers responsible for cohesion policy, territorial cohesion, and urban policy stressed the importance of consolidating and better coordinating the various EU instruments targeting cities and their functional areas. The goal: to make EU funding more accessible, efficient, effective, transparent, and ultimately more useful for regional and local authorities.
However, achieving social balance is crucial and often overlooked in discussions about urban form. Therefore, the Compact Cities partnership should focus on how the diversity of EU cities experience these issues and explore varied solutions looking at the critical topics such as affordable housing, energy and mobility poverty. This approach builds on previous successful Urban Agenda for the EU partnerships, such as those on Sustainable Use of Land and Nature-Based Solutions (SUL-NBS), and Housing, as well as existing literature, and, most importantly, on the co-creation of knowledge to implement effective policies within a realistic timeframe.
Also, the Urban Agenda for the EU provides an excellent framework to start the long-term activation process. This is evident from previous partnerships—such as the Partnership on Sustainable Land Use and Nature Based Solurtions mentioned above —and the impact they have had on legislation and funding schemes at various levels.
