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Financial schemes have long been a cornerstone of the private sector, driving innovation, growth, and sustainability. As cities face resource constraints and traditional funding sources become insufficient, urban policymakers, practitioners and stakeholders are increasingly seeking to adapt and implement financial schemes within the public sector to do more with less in tackling urban development challenges. Recognising the growing need for financing bold and innovative solutions in cities to tackle multi-faceted and complex challenges, and the increasing importance of innovative funding solution in this process, the objective of this report is to shed light on the need for innovation in finance to address new urban challenges; to further understand the concept of innovation in public finance and their application at local level; to better grasp the opportunities and challenges associated with their use; and to determine the factors that may contribute to their success in different sectors of sustainable urban development. This inception report, developed on the basis of a literature review, is part of a comprehensive study examining innovative financing schemes (hereafter referred as IFSs) used by projects funded through the Urban Innovation Action (UIA) initiative. The goal of this study is to identify and analyse key IFSs that are easily accessible and effective in promoting urban resilience, sustainable development, and social cohesion. By focusing on the most significant and practical IFSs, the study seeks to offer valuable insights into financial mechanisms that can shape more robust, environmentally conscious, and equitable urban environments. In line with the need for innovation in financing EU projects, the study aims to collect, learn from and share the experiences of UIA cities which have successfully developed and used IFSs, in order to inspire urban authorities of EU to seek alternative avenues of funding for their urban challenges.

This inception report and study target urban practitioners, including professionals in urban planning, and related fields working for local administrations and local authority stakeholders involved in urban development policymaking. By examining the IFSs employed in UIA projects, this study aims to provide practical insights, making these innovative financing approaches more tangible for urban practitioners across Europe. As such, the study seeks to indicate how IFS can be adapted in cities of various sizes and to contribute to sustainable urban development strategies by informing future initiatives within the EU regional and cohesion policy framework.

As the biggest users of energy and the majority contributors to greenhouse gas emissions, cities are at the forefront of Europe’s climate neutral ambitions. They will, at the same time, feel the impacts of climate change. Being the places where people and enterprises accumulate, they are also the most likely sources of innovation and behavioural changes to help achieve our net zero goals.

As the biggest users of energy and the majority contributors to greenhouse gas emissions, cities are at the forefront of Europe’s climate neutral ambitions. They will, at the same time, feel the impacts of climate change. Being the places where people and enterprises accumulate, they are also the most likely sources of innovation and behavioural changes to help achieve our net zero goals.