As climate impacts accelerate globally, developing countries, particularly those vulnerable to the adverse effects of climate change, face compounding risks. Yet a stark disparity remains: while developing countries will require an estimated US$310–365 billion annually by 2035 for adaptation, international public finance provided just $26 billion in 2023. Bridging this funding gap will require moving far beyond traditional public budgets. Increasingly, attention is turning to how public finance can be used strategically to reduce risk, strengthen enabling conditions, and unlock much larger flows of private capital.
How public resources can build this bridge took center stage at a global webinar co-organized by Adaptation Accelerator Hub (AAH), the NDC Partnership Support Unit, and the Center for Access to Climate Finance. The event – the third in an ongoing series – brought together more than 300 participants from over 200 organizations across nearly 90 countries, spanning government ministries, multilateral development banks, commercial financial institutions, the private sector, and civil society.
Moving from planning to bankable implementation
Setting the context for the discussion, Rohini Kohli, Senior Technical Advisor at UNDP, highlighted a key challenge in implementing countries’ National Adaptation Plans (NAPs): moving beyond policy to investment-ready implementation. Bridging the adaptation finance gap requires not only more public finance, but also different approaches to mobilizing and catalyzing investment, including from the private sector.
Climate risks alone will not stimulate private investments, said keynote speaker Alice de Moraes Amorim Vogas, Programme Director for the COP30 Presidency. Adaptation finance will scale only when countries create the right conditions for investment: “With the right conditions for investing, there will be no reason to treat mitigation and adaptation finance as a trade-off". She pointed to the role of the NAP Implementation Alliance as a mechanism to bridge this divide by coordinating initiatives and connecting country demands with technical assistance and finance.
Alessandro Negrin, Senior Advisor at Italy’s Ministry of Environment and Energy Security, stressed that private investments in adaptation need credible pipelines, reliable data, and instruments capable of sharing risk fairly. Illustrating how public finance can lay this groundwork, Negrin highlighted Italy’s bilateral partnership with Ethiopia under the AAH. Backed by the Italian Climate Fund, the initiative is establishing a National Adaptation Investment Framework to channel capital into climate-resilient agriculture, water management and infrastructure.
The economics of adaptation are increasingly clear
Kanmani Chockalingam, Senior Fellow and Associate Partner at the McKinsey Global Institute, noted that while current annual spending on adaptation sits at $190 billion, it is expected to reach $1.2 trillion annually by 2050. The case for adaptation investments is compelling: in today’s climate scenario, adaptation measures would yield $3 in avoided losses and benefits for every dollar invested, a return that is projected to rise to $7 for every dollar invested under a 2°C scenario. To overcome market barriers, she proposed innovative technology to lower cooling and irrigation costs, driving demand through beneficiary-pays models, and innovative finance for revenue-generating infrastructure.
While adaptation has historically struggled to attract commercial investment, growing evidence of its economic returns is beginning to translate into market momentum. Andrew Wainer, Director of Market Insights at Convergence, reported that private commercial commitments to adaptation rose 27 percent in 2025 to a record $11.2 billion, while adaptation-focused blended finance surged 133 percent to reach $5.6 billion. To sustain this momentum, Andrew explained that with traditional foreign aid declining, developing countries are taking charge of their climate futures through country-led investment platforms. Presenting case studies from Indonesia, Brazil, and Lesotho, Andrew Wainer explained that these platforms can successfully mobilize local and international private investment to back critical climate projects by using “increasingly scarce concessional capital more efficiently.” He stressed that creating an important enabling environment to facilitate investment is, “one of the important first steps that platforms need to take, and something that UNDP and other stakeholders can help facilitate to help more investment flow to climate through blended finance and other modalities.”
The public sector as a catalyst for private capital
A diverse panel moderated by Shovon Kibria, Regional Technical Advisor & Private Sector Engagement Specialist at UNDP, explored the structural, financial, and institutional interventions required to unlock private capital.
Addressing the mismatch between investor expectations and adaptation projects, Jamil Wyne, founder of Hazelwood Network, a global climate innovation company that supports climate entrepreneurship and investment, argued that adaptation faces a "categorization and vocabulary problem”. Because adaptation spans sectors ranging from water and infrastructure to insurance and healthcare, it is often too broad to function as a distinct investment thesis. At the same time, many businesses describe adaptation-related activities using terms such as supply chain management or business continuity rather than adaptation itself. He also noted that, unlike decarbonization, which enjoyed decades of subsidies, adaptation does not have the “luxury of time,” with “climate risks manifesting themselves in real time at a rapid pace now, particularly in the most vulnerable countries.” He urged “direct and intentional market building” by connecting climate-tech startups with public and private partners from day one.
These market-level challenges are particularly visible for local financial institutions. Haile Mekonnen, Manager of the Environmental, Social, and Governance (ESG) Division at Wegagen Bank in Ethiopia, explained why investments in adaptation remain constrained. On-the-ground lending faces steep hurdles, including mismatched repayment terms, foreign exchange risk, lack of collateral, and the administrative difficulty of assessing small-scale projects. To overcome these barriers, he proposed solutions such as establishing green taxonomies, long-term local currency loans, and credit guarantees to encourage banks to finance adaptation as a “revenue-generating activity, rather than as corporate social responsibility.”
Public and multilateral finance institutions can help address many of these constraints. Anderson Caputo, Head of Connectivity, Markets & Finance at the Inter-American Development Bank (IDB), explained how the IDB is creating fiscal space for countries facing high debt burdens through innovative mechanisms such as debt swaps and guarantees. He recommended a layered strategy: government budgets for small climate impacts, contingent loans for medium impacts, and insurance for disasters. He highlighted IDB’s work in Barbados as an example, where a combination of debt swaps and guarantees helped them mobilize $2 billion for climate-resilient water infrastructure. He emphasized that investing in resilience reduces risk, which is crucial for keeping private insurance affordable.
Beyond financing instruments, governments also play a critical role in creating supportive policy and regulatory environments. Anuma Bhattarai, Senior Agriculture Extension Officer at Nepal’s Ministry of Agriculture, Forestry and Environment, outlined the Government's strategy to scale up index-based agricultural insurance by creating a private-sector-friendly regulatory framework. She emphasized that reliable climate data systems, public-private partnerships, and multi-sector collaboration are critical to developing effective insurance products.
Speakers also emphasized that mobilizing investment is only part of the equation; adaptation finance must ultimately benefit the communities most exposed to climate risks. Tamanna Rahman, Climate Resilience Lead at the NGO Practical Action in Bangladesh, urged businesses to look beyond commercial profitability, arguing that investments in the most vulnerable and marginalized communities “must be assessed through the lens of distributional justice”. Rahman shared that by translating climate data from 66 informal settlements in the district of Narayanganj into bankable projects, Practical Action successfully informed a $115 million Asian Development Bank funded Narayanganj Green and Resilient Urban Development Project.
Building the market for adaptation
A central message emerging from the discussion was that adaptation finance is not simply a capital challenge, but a market-building challenge. Private investment is more likely to flow when governments, development partners and financial institutions work together to create clear policy signals, generate reliable climate and market data, develop bankable project pipelines and deploy targeted risk-sharing instruments.
Closing the webinar, Joaquim Leite, Head of Climate Finance at the NDC Partnership Support Unit, reinforced the importance of coordinated action: “Governments must set clear policy directions, development partners must deploy concessional capital to de-risk project pipelines, and financial institutions must engage early to co-create solutions”.
His remarks echoed a recurring theme throughout the discussion: no single actor can close the adaptation finance gap alone. As countries move from adaptation planning to implementation, public finance will remain a catalyst for mobilizing the partnerships and investment needed to scale resilience.
Led by the Government of Italy, with UNDP as the partner agency, the Adaptation Accelerator Hub (AAH) supports developing countries — particularly those most vulnerable to climate change — to accelerate climate adaptation, helping translate national priorities into bankable, finance-ready initiatives that can drive systemic, long-term resilience.
For further information please contact:
Prakash Bista, Adaptation Planning Specialist and Manager, G7 Adaptation Accelerator Hub prakash.bista@undp.org
Nisha Oswal, Knowledge Management Officer, G7 Adaptation Accelerator Hub, UNDP nisha.oswal@undp.org
Joaquim Leite, Head of Climate Finance, NDC Partnership Support Unit joaquim.leite@ndcpartnership.org
Eszter Mogyorosy, Climate Finance Associate, NDC Partnership Support Unit eszter.mogyorosy@ndcpartnership.org
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