Smart Cities, Safe Future: A Blueprint for Low-Carbon Urban Investment by 2050

In its 2025 flagship report Banking on Cities: Investing in Resilient and Low-Carbon Urbanization, the World Bank, drawing on research from the International Finance Corporation (IFC), the International Transport Forum, and the Global Program on Nature-Based Solutions, argues that cities, especially in low- and middle-income countries (L&MICs), are now at the frontline of the climate crisis. These cities already house over half of the world’s population and generate 70 percent of global greenhouse gas (GHG) emissions. They are also where the human and economic toll of climate impacts, rising seas, intensifying heat, and extreme rainfall, is being felt most acutely. The report warns that urban centers in L&MICs, which often lack strong institutional and fiscal capacity, face a narrow window of opportunity. Decisions made now about infrastructure, planning, and financing will lock in urban trajectories for generations to come. Yet, this is also a moment of opportunity: because much of the infrastructure that these cities will need by 2050 has not yet been built, they can still avoid the costly mistakes of the past.

A Trillion-Dollar Investment Challenge with a Massive Gap

The scale of investment required is staggering. According to the World Bank, resilient and low-carbon urban development in key sectors, transport, buildings, flood control, water, wastewater, solid waste, and heat resilience, will require between $7.9 trillion and $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 excludes operations and maintenance, which would cost an additional $525–$ 548 billion per year. Despite these demands, current funding levels fall far short. In 2021–22, climate finance flows to cities in L&MICs totaled just $92 billion, only 7–12 percent of the annual requirement. Of that amount, $73 billion went to upper-middle-income countries, while only $1 billion reached low-income nations. The report emphasizes that while the funding gap is wide, it is not unbridgeable, especially if efficiency and innovation are brought into play.

These Aren’t Just Climate Projects, They’re Smart Urban Investments

A major contribution of the report is its framing of climate investments not as a separate expense, but as core urban development done right. Green public transport, energy-efficient buildings, improved waste systems, and urban greening all deliver significant co-benefits, cleaner air, better public health, reduced congestion, and more jobs. Many of these interventions, like tree planting or waste collection, offer accessible employment for residents with limited formal education. The report urges policymakers to look beyond the label of "climate finance" and tap into general urban budgets, national fiscal transfers, development banks, and even commercial funding streams, where feasible. It also stresses the importance of cost-saving through better urban planning. Efficient land use, compact growth, and zoning reforms can reduce the need for new infrastructure and make existing systems more sustainable. For instance, cities that combine dense development with smart transport can reduce emissions and infrastructure costs simultaneously.

Who Pays and How? Tailoring Finance to Investment Type

The World Bank dissects funding needs sector by sector. Building upgrades and rooftop solar, which will cost up to $6.6 trillion, often generate long-term energy savings that can repay the investment, but they need upfront financing, policy support, and in many cases, public subsidies. Flood defenses, particularly in coastal areas, are estimated to cost up to $9.5 trillion, yet their wide societal benefits make it difficult to recoup costs through user fees. Land value capture and zoning incentives may help fund part of these investments. Heat resilience investments are inexpensive in comparison, just $38–60 billion through 2050, but require sustained budget allocations. Solid waste infrastructure comes with an estimated capital cost of $681 billion, but operations are far more expensive. Still, with improved recycling and energy recovery, cities can offset up to 20 percent of operating costs by 2050.

Public transport, with a projected cost of $2.2–2.4 trillion, is another major area that demands consistent public funding. Fares usually don’t even cover operational expenses, and public subsidies will be necessary for decades to come. However, carbon credits, electrification grants, and land development policies can improve financial sustainability. The report also notes that water and wastewater investments, though smaller in monetary terms, are critically important for resilience and public health. These will need ongoing national and local government support, especially since tariff reform, while necessary for cost recovery, cannot always guarantee affordability for the urban poor.

Cities Can’t Do It Alone, National and Global Support Is Essential

The report makes clear that while cities are on the frontlines, they cannot win this battle without help. Many L&MIC cities lack the creditworthiness, legal authority, or administrative bandwidth to issue bonds, form public-private partnerships, or access global climate funds. National governments must step up to offer predictable transfers, technical support, and legal frameworks that enable local investment. Development banks and climate finance institutions, too, need to offer more concessional and flexible support tailored to the urban scale. Green bonds, sustainability-linked loans, and blended finance models are promising, but cities need assistance to use them effectively.

Alexandria, Egypt, serves as a compelling case study. With its high exposure to sea level rise, heatwaves, and flash flooding, Alexandria has made notable adaptation investments, mostly funded by national ministries due to its limited local fiscal autonomy. Projects include coastal defenses and a metro rail system. However, the city still faces massive unmet mitigation needs. Recent steps toward decentralization in Egypt could empower Alexandria and other cities to access financing more directly and build the institutional capacity they need.

Ultimately, the report offers both a warning and a roadmap. If investments are delayed or misdirected, L&MICs risk locking into unsustainable, high-emission urban systems. But with smart planning, targeted finance, and bold leadership at every level, cities can become engines of low-carbon development, resilience, and inclusive growth. The future, the report concludes, is urban, and the world is quite literally banking on cities.