As cities worldwide grapple with rapid urbanisation, ageing infrastructure, and the escalating impacts of climate change, the demand for sustainable urban infrastructure has never been greater. Traditional financing mechanisms often fail to address the scale and complexity of the investment required. Though urban infrastructure development is financed by a combination of public funds and private investments, city administrators are reliant on public funds for both greenfield and brownfield projects. As all major economies are facing economic constraints leading to budget tightening, the participation of the private sector is necessary to bridge the financing gap for sustainable urban infrastructure development. This chapter explores innovative financial instruments designed to bridge the financing gap and drive sustainable urban development through attracting private investments. It critically examines evolving financing mechanisms such as green bonds, environmental impact bonds, real estate investment trusts (InvITs), blended finance models, public-private partnerships (PPPs), and crowdfunding with sustainability criteria. Through case studies from leading cities, the study highlights best practices and assesses the effectiveness, scalability, and risks associated with these instruments. The chapter also highlights the policy changes to facilitate the transition to blended/private investment. The success of these innovative mechanisms hinges on robust governance frameworks, transparent reporting standards, and the alignment of financial incentives with environmental and social outcomes.