Equity and Inclusion in financing climate action

Significant amounts of capital needs to be mobilised to enable national and sub-national governments to be able to meet their nationally determined contributions or Climate Action Plans. So far, sub-national govenments appear to be taking bolder action than national governments and account for 64 per cent of climate-related spending and investment. However, climate financing and funding policies could disproportionately affect vulnerable and underserved groups by either increasing their relative burden or reducing access to services and opportunities. This could trigger new inequalities and/or intensify existing inequalities in cities. For example, a carbon tax could be regressive if low-income households spend a greater share of their income on the commodity taxed. By applying an equity and inclusion lens to climate finance instruments and funding mechanisms, cities can understand how climate financing impacts, costs and benefits may be distributed across groups and distribute the costs and benefits more equitably.

This toolkit aims to provide concise, easy-toread guidance to cities to integrate equity and inclusion considerations in municipal climate finance instruments and funding mechanisms. It is intended to enable cities to identify and evaluate the equity and inclusion issues in financing and funding mechanisms and draw up a strategy for addressing these challenges. It suggests 3 pillars and 5 steps for cities to integrate equity and inclusion in financing climate actions.

This toolkit focuses on the equity and inclusion implications resulting from the choice of climate financing options or funding mechanism, rather than equity and inclusion implications of climate action itself. To understand how to design and implement equitable and inclusive climate actions, refer to C40’s Inclusive Planning Roadmap.