Filling the Gap: A review of Multilateral Development Banks’ efforts to scale up financing for climate adaptation

The report examines the 'adaptation gap,' noting that annual costs for adaptation in developing countries could reach USD 500 billion by 2050, while current flows remain insufficient and skewed toward mitigation. It analyzes how MDBs are transitioning from stand-alone climate projects to a 'Paris alignment' paradigm where all development finance is climate-resilient. Key barriers identified include a lack of technical expertise in developing countries, the high upfront costs of climate-proofing (10-20% of finance), and the difficulty of attracting private sector investment due to a lack of immediate revenue streams. The document recommends increased technical assistance for National Adaptation Plans (NAPs) and the use of innovative blended finance instruments to catalyze private capital.

• There is a significant gap in adaptation finance, with annual costs in developing countries estimated to range from USD 140 billion to USD 300 billion by 2030 and from USD 280 billion to USD 500 billion by 2050.
• Climate finance is asymmetrically allocated, with mitigation receiving significantly more funding than adaptation; in 2017 and 2018, adaptation flows were estimated at only 5% of the total USD 537 billion in international public and private climate finance.
• MDBs are shifting toward a 'Paris alignment' paradigm, which requires that entire investment portfolios—not just dedicated climate funds—are consistent with low-emission and climate-resilient development.
• Integrating climate resilience into project design increases costs, with estimates suggesting an additional 10% to 20% of total finance is required for climate-resilient design and implementation.
• MDBs face internal and external barriers to mainstreaming adaptation, including limited data in many countries and a lack of expertise among project teams and developing country governments on how to apply climate risk assessment results.
• A 'siloed' approach to climate action often disconnects adaptation planning from national budgeting, as environment ministries typically lead adaptation planning but lack finance expertise, while finance ministries lead MDB engagement but lack adaptation knowledge.
• While MDBs have a joint methodology for tracking adaptation finance, there is a lack of transparency regarding project-level data and the calculation of incremental costs, leading to calls for independent verification.
• Private sector investment in adaptation is limited because many actions are cost-avoidance measures that do not generate immediate revenue streams, making them unattractive to for-profit investors.
• Blended finance and innovative instruments can catalyze private investment by improving risk-return profiles, but these tools are underutilized in Least Developed Countries (LDCs), where only 6% of ODA-mobilized private finance benefited LDCs between 2012 and 2017.
• The COVID-19 pandemic may temporarily divert government and MDB attention from adaptation, but it presents an opportunity to 'build back better' by integrating climate resilience into economic recovery programs.

APA

Murphy, D., & Parry, J.-E. (2020). Filling the Gap: A review of Multilateral Development Banks’ efforts to scale up financing for climate adaptation. International Institute for Sustainable Development. https://www.iisd.org/system/files/2020-12/filling-gap-financing-climate-adaptation.pdf

Chicago

Murphy, Deborah, and Jo-Ellen Parry. Filling the Gap: A review of Multilateral Development Banks’ efforts to scale up financing for climate adaptation. International Institute for Sustainable Development, 2020. https://www.iisd.org/system/files/2020-12/filling-gap-financing-climate-adaptation.pdf.

Wikipedia

{{cite report |last1=Murphy |first1=Deborah |last2=Parry |first2=Jo-Ellen |title=Filling the Gap: A review of Multilateral Development Banks’ efforts to scale up financing for climate adaptation |publisher=International Institute for Sustainable Development |date=November 2020 |url=https://www.iisd.org/system/files/2020-12/filling-gap-financing-climate-adaptation.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{murphy2020filling, author = {Murphy, Deborah and Parry, Jo-Ellen}, title = {{Filling the Gap: A review of Multilateral Development Banks’ efforts to scale up financing for climate adaptation}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = nov, url = {https://www.iisd.org/system/files/2020-12/filling-gap-financing-climate-adaptation.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }