From floods and droughts to economic shocks and displacement, the costs of climate change are rising rapidly.
Climate-related disasters caused an estimated $417 billion in economic losses in 2024 alone. Without urgent investment in resilience, global GDP could shrink by up to 10% by 2050. Many developing countries will face even steeper drops.
Yet finance to adapt to these threats remains scarce, fragmented and difficult to access — particularly for the poorest and most vulnerable. Developing countries (excluding China) need $400 billion annually by 2035 to address adaptation and resilience finance requirements. Present flows remain far from that level: According to CPI, adaptation investments in emerging markets and developing economies totaled $46 billion in 2023.
Part of the reason for this shortfall is that climate adaptation hasn’t historically been understood as an attractive investment. But a growing body of research tells a different story. We now know that every $1 spent on adaptation can yield up to $10 in economic, social and environmental benefits over 10 years — from avoided damage to homes and infrastructure, to new jobs, better health and increased productivity. For example, early warning systems save lives and assets worth at least 10 times their cost. The need for things like climate information solutions and flood defense systems will grow in the coming years, creating investment opportunities for private investors.
The challenge now is how to get finance flowing in the right direction at scale. This is a major focus at the 2025 UN climate summit (COP30).
Two recent reports, the Baku-to-Belém Roadmap and the COP30 Circle of Ministers Report, have laid out pathways to greatly increase climate finance writ large for developing countries. But, compared to mitigation, adaptation faces unique hurdles that will need to be overcome to deliver finance at required levels.
A new paper published by WRI and the Climate and Society Institute (ICS) helps fill this gap by focusing specifically on how to increase investments in resilience. We find that, despite persistent barriers, there are five priority actions countries, financial institutions and others can take — many starting right away and building on present successes — to finally get funds flowing to adaptation.
1) Increase Concessional Finance for Adaptation
Concessional finance is provided on more lenient terms — for example, with lower interest rates or longer repayment periods — than would be found on the market. Concessionality is often a key issue for climate finance, with the goal of matching limited concessional funds to the most efficient and effective uses. This type of finance is especially attractive to countries facing high debt levels and other fiscal constraints. Many low-income countries currently spend more on debt repayment than they receive in incoming climate finance, hampering their ability to invest in adaptation.
While concessional finance grew steadily between 2019 and 2022 (the latest data available), it remains relatively scarce. And the amount directed at climate resilience continues to lag: Only 36% of concessional climate finance in 2022 supported adaptation, compared to 42% for mitigation. (The rest went to cross-cutting activities.)
How can we grow this important pot?
Most concessional finance for adaptation currently comes from developed countries. The first step is for these countries to recommit to development assistance for resilience — pushing back against the tide of cuts to overseas development assistance, which fell by 9% in 2024 and is expected to decrease by another 9%-17% in 2025.
To further reduce debt burdens while freeing up funds for resilience, creditor institutions (including development banks, bilateral donors and private sector investors) could increase the use of tools like “debt-for-resilience swaps.” These are a variation on “debt-for-nature swaps,” where a creditor agrees to forgive or discount part of a country’s debt in exchange for the country taking specific climate-related actions. Barbados, for example, recently used this strategy to free up $125 million in the government budget that will be used “to enhance water resource management and increase water and food security.”
Other tools could help increase the amount of money available to be distributed as concessional finance. For example, Barbados, France and Kenya have have proposed using solidarity levies to generate dedicated revenue through taxes on high-emitting activities like aviation or fossil fuel extraction. Money can also be freed up by phasing out harmful and expensive subsidies, including those for fossil fuels. Globally, governments provided roughly $1 trillion in direct fossil fuel subsidies in 2022 alone.
2) Ramp Up MDBs’ Support for Adaptation
As cornerstones of global development, multilateral development banks (MDBs) play a leading role in climate finance. MDBs were the largest providers of adaptation finance between 2018 and 2022, with a 52% increase from 2021 to 2022.
To step this up even further, MDBs will need to expand their total lending capacity. The Sevilla Commitment concluding the 2024 Financing for Development Conference called for MDBs to triple their total financing — including finance related to climate and sustainable development goals — by 2035. This could include further leveraging capital adequacy reforms, a series of actions MDBs can take to increase their lending capacity. It would also require countries to increase their financial contributions to the MDBs, known as “capital increases.”
Simultaneously, MDBs should work to mainstream, or integrate, climate resilience across their operations — embedding it within their strategic frameworks, financing and operational processes. For example, they can integrate climate risk and resilience assessments into the Country Partnership Frameworks that structure relationships with client countries, as the World Bank already does. They can also make their budget support contingent on specific policy actions that align national development trajectories with climate resilience objectives; an approach known as “policy-based financing.”
3) Boost Countries’ Ability to Access and Attract Adaptation Finance
It’s not just about increasing the supply of adaptation finance. Countries also need to be able to attract this finance.
One appealing approach is through “country platforms.” These take different forms by country, but, in general, their goal is to more effectively scale climate action by getting diverse sources of finance better aligned behind country-led investment pipelines and policy reforms. While early efforts focused on reducing emissions, platforms are now expanding to include nature and adaptation, enabling countries take a more integrated approach to planning and reducing climate risks. Bangladesh, Egypt, Barbados and, most recently, Rwanda, are already using these platforms to support climate resilience and sector transitions.
Another tactic related to country platforms is project preparation support, in which investors provide clients with financial and technical support to help generate more attractive proposals. This can help ensure that project pipelines for adaptation are sound and investment ready.
Development partners such as MDBs and private financiers can provide support to country platforms and project preparation through direct investment but also technical expertise, dialogue and other resources. Different stakeholders will play different roles in financing country platforms, with national institutions, like national development banks, playing a guiding and coordinating role.
4) Increase Private Sector Finance
Currently, over 90% of adaptation finance that is tracked and counted originates from public sources, signaling a need for significantly more private funding. The lack of private finance flows is driven by several factors — including the fact that risks and returns on adaptation investments are often unclear, deterring private investors.
However, there are powerful incentives for this to change. Corporations want to shield their assets from climate impacts, and 34% of companies in the FTSE All World Index (targeting 90% of the world’s market capitalization) now disclose taking action to that end. For example, PwC reports a large retailer changing store location strategy based on its assessment of climate risk. Positive signs suggest small- and medium-sized enterprises in developing countries are taking like-minded measures.
Policymakers and development partners can help shift private finance toward climate resilience on an even larger scale. First, they can use public funds to support instruments such as first-loss capital and guarantees, which incentivize resilience investments by lowering risks for private investors who take safer (more “senior”) capital. They can also create shared taxonomies or methodologies for identifying adaptation actions and measuring benefits — and then build financial instruments around these benefits, such as resilience bonds.
Improving how credit agencies address resilience could also encourage private investment in climate adaptation: More accurately pricing the risk of physical climate impacts should nudge investment towards more resilient ends. This is just one of the steps needed to change a vicious cycle, as the world continues to invest only $1 in resilient infrastructure for every $87 invested with no regard for climate risks.
Finally, governments, development partners and investors must fully engage the insurance industry. Insurance is an essential part of the equation, particularly for managing disaster risk, at the level of government, corporation and household. Industry partners can improve their offerings and make them more transparent, while governments should identify ways to ensure the poorest are not excluded, closing the insurance gap. Fiji’s government, for example, forged a partnership between the Fiji Development Bank and private insurers that provides insurance payouts for certain extreme weather events to small businesses and smallholder farmers.
5) Make Economies More Resilient through Financial Regulation
In most countries, government regulations still do not reflect known climate risks. This includes laws affecting the real economy, like zoning regulations, building codes, or regulations regarding the use of resources like water. It also includes financial regulations, such as financial disclosures as well as macroprudential frameworks for managing systemic risks and financial stability.
Governments could better incorporate adaptation into all these levels of regulation. An impactful domestic regulatory system would integrate resilience throughout zoning and planning laws to ensure that climate impacts are taken into account when building and renovating. For example, Canada has set national building standards meant to reduce flood risks in new residential areas, protect buildings from worsening wildfires and extreme weather, and more.
Such laws must be backed with meaningful enforcement and support. National and international financial regulations can encourage resilience by requiring firms to disclose their physical risks; making central banks and financial regulators incorporate climate impacts into their scenario planning; and upgrading international frameworks like Basel III (which sets international standards for banks’ capital requirements) to interpret rules with an eye on increasing climate resilience.
Adaptation Is an Opportunity
Rapidly scaling up adaptation finance is central not just to building resilience, but to achieving global development goals and a more equal world. This is no small task. It will require coordinated action across governments, MDBs, private investors and civil society. But with the right tools, it is possible.
The strategic priorities outlined here provide a foundation for scaling adaptation finance in a way that addresses implementation barriers, reduces fragmentation, and ensures equitable and impactful outcomes for developing countries. The Belem COP should advance adaptation finance, thereby cutting the cost of impacts and boosting development.
There is something to be won by actors at every level: Firms that create resilience solutions will win part of a growing market. Two-hundred and eighty million jobs could be created by 2035. Adaptation will save 23% of global GDP that would be lost to climate impacts by 2050 without action.
Throughout human history, success has come to those who anticipate changing circumstances and act accordingly. The 21st century will be no different. The world must seize the adaptation opportunity, working together as a system to create the policy environment, incentives and financial flows to unlock and channel investments toward a more resilient future.