Understanding and Increasing Finance for Climate Adaptation in Developing Countries

The report highlights a significant gap between current adaptation finance—totaling USD 22 billion annually in 2015-16—and the estimated USD 140 billion to USD 300 billion needed per year by 2030 for developing countries. It identifies context, business model, and internal capacity barriers that hinder private and public investment. To address these, the report recommends improving climate risk disclosure, harmonizing tracking methodologies, and deploying innovative financial instruments such as resilient infrastructure bonds and index insurance.

• There is a severe shortfall in adaptation funding; while developing countries may require between USD 140 billion and USD 300 billion per year by 2030 to adapt to a 2°C future, tracked global investment for adaptation was only USD 22 billion in 2016.
• Public sector organizations are the sole providers of the tracked adaptation finance, with multilateral development finance institutions (DFIs) contributing an average of USD 8 billion (36%) in 2015-16.
• Water and wastewater management is the most funded sector, receiving 50% of international public adaptation finance in 2015-16, followed by agriculture, forestry, and land-use at 21%.
• Investment is hindered by three primary categories of barriers: context barriers (regulatory and policy gaps), business model barriers (uncertain value-add and high upfront costs), and internal capacity barriers (lack of operational scale for providers).
• Tracking adaptation finance is complicated by a lack of standardized definitions and the difficulty of distinguishing between standard development projects and those specifically contributing to climate adaptation.
• Climate vulnerability can increase the cost of government debt; countries with higher vulnerability bear an incremental cost on debt averaging 117 basis points above rates based on macroeconomic fundamentals.
• The report suggests that developing country governments can increase adaptation demand by mandating climate risk disclosure and incorporating risk assessments into public-private partnership (PPP) contracts.
• To de-risk investment, the report proposes the use of resilient infrastructure bonds, 'pay for success' instruments to share technology risk, and index insurance for smallholder farmers.

APA

Micale, V., Tonkonogy, B., & Mazza, F. (2018). Understanding and Increasing Finance for Climate Adaptation in Developing Countries. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/12/Understanding-and-Increasing-Finance-for-Climate-Adaptation-in-Developing-Countries-1.pdf

Chicago

Micale, Valerio, Bella Tonkonogy, and Federico Mazza. Understanding and Increasing Finance for Climate Adaptation in Developing Countries. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/12/Understanding-and-Increasing-Finance-for-Climate-Adaptation-in-Developing-Countries-1.pdf.

Wikipedia

{{cite report |last1=Micale |first1=Valerio |last2=Tonkonogy |first2=Bella |last3=Mazza |first3=Federico |title=Understanding and Increasing Finance for Climate Adaptation in Developing Countries |publisher=Climate Policy Initiative |date=December 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/12/Understanding-and-Increasing-Finance-for-Climate-Adaptation-in-Developing-Countries-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{micale2018understanding, author = {Micale, Valerio and Tonkonogy, Bella and Mazza, Federico}, title = {{Understanding and Increasing Finance for Climate Adaptation in Developing Countries}}, institution = {Climate Policy Initiative}, year = {2018}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/12/Understanding-and-Increasing-Finance-for-Climate-Adaptation-in-Developing-Countries-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }