Assessing the Quality of Adaptation Finance

This guide provides a decision-support tool for public finance providers to assess the quality of adaptation finance across project, market, and system levels. It defines high-quality adaptation finance as capital deployed efficiently to deliver resilience while moving solutions toward commercial viability or sustaining necessary public services. The tool uses a three-stage qualitative framework—Initial, Progressing, and Transformative—to diagnose strengths and gaps in interventions across grants, debt, equity, and risk transfer tools.

• The decision-support tool evaluates adaptation finance across three levels: the project level focuses on direct, measurable resilience outcomes; the market level assesses the shift in incentive landscapes and the catalysis of replication; and the system level examines structural shifts toward climate-resilient economies.
• A critical cross-cutting criterion for all levels of finance is the minimization of maladaptation, which involves avoiding outcomes that increase long-term vulnerability, entrench inequality, or lock in climate-vulnerable trajectories.
• Analysis of Official Development Assistance (ODA) from 2022–24 to emerging markets and developing economies (EMDEs) reveals uneven adaptation integration across sectors. The water supply and sanitation sector shows the strongest alignment, with 41% of ODA carrying adaptation or dual-benefit tags, while the health sector shows only 9% integration despite high climate exposure.
• There is a systemic misalignment between adaptation finance instruments and the debt sustainability of recipient countries, particularly for those at moderate risk of debt distress, where non-concessional debt accounts for 90% of adaptation finance flows.
• The guide identifies significant data gaps that hinder the assessment of adaptation quality, including a lack of disclosed information on how climate risk assessments shape project design and a scarcity of financial performance data (such as IRR) for blended finance vehicles.
• The Catalyst Climate Resilience Fund (CCRF) case study demonstrates the tool's application to a blended equity vehicle in Africa, finding it 'Progressing to Transformative' in adaptation solution diffusion and innovation due to its focus on pre-commercial adaptation startups.

APA

Sherikar, P., & Allisy, J. (2026). Assessing the Quality of Adaptation Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2026/06/Assessing-the-Quality-of-Adaptation-Finance.pdf

Chicago

Sherikar, Pallavi, and Juliette Allisy. Assessing the Quality of Adaptation Finance. Climate Policy Initiative, 2026. https://www.climatepolicyinitiative.org/wp-content/uploads/2026/06/Assessing-the-Quality-of-Adaptation-Finance.pdf.

Wikipedia

{{cite report |last1=Sherikar |first1=Pallavi |last2=Allisy |first2=Juliette |title=Assessing the Quality of Adaptation Finance |publisher=Climate Policy Initiative |date=June 2026 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2026/06/Assessing-the-Quality-of-Adaptation-Finance.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sherikar2026assessing, author = {Sherikar, Pallavi and Allisy, Juliette}, title = {{Assessing the Quality of Adaptation Finance}}, institution = {Climate Policy Initiative}, year = {2026}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2026/06/Assessing-the-Quality-of-Adaptation-Finance.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }