Green bonds: a mechanism for bridging the adaptation gap?

This research paper examines the capacity of green bonds to bridge the global adaptation finance gap, specifically focusing on private sector involvement. The author concludes that while green bonds can finance adaptation, they currently do so to a very limited extent and are unlikely to significantly close the finance gap due to geographic mismatches, project scale issues, and a general lack of corporate climate risk awareness.

• There is a massive disparity between the funding needed for climate adaptation and current green bond allocations, with mitigation receiving approximately 95% of current green bond funding.
• Global adaptation costs are estimated to be significantly higher than previous projections; annual costs in developing countries alone could reach $140–300 billion by 2030 and $280-500 billion by 2050.
• Between March 2010 and April 2019, only 5% of all green bonds issued (162 out of 3,266) were categorized as adaptation.
• Among corporate green bonds categorized as adaptation, the real estate sector was the largest issuer (40% or 8 issuances), followed by forestry, pulp, and paper (20% or 4 issuances).
• There were no corporate green bond issuances in the health or agriculture sectors, despite these being identified as high-priority areas for adaptation investment.
• Green bonds are often unsuitable for many adaptation projects because high transaction costs make them inefficient for small-scale initiatives, such as those involving smallholder farmers or MSMEs; most issuances are over $100 million to remain cost-efficient.
• There is a significant geographic mismatch in green bond availability: while regions like Sub-Saharan Africa, South Asia, and the Middle East have high adaptation needs, their green bond markets are undeveloped, with very few issuances originating from these areas.
• The scaling of adaptation finance is hindered by a low level of corporate understanding of climate risk, with many asset managers prioritizing transition risks (mitigation) over physical climate risks.
• Adaptation is frequently an integrated or cross-cutting component of other project categories (such as sustainable water management or green buildings) rather than a standalone category, which leads to an underestimation of adaptation funding.
• The author recommends using green bond review processes, such as Second Opinions, as awareness-raising tools to help issuers identify and manage climate risks institution-wide.

APA

Tuhkanen, H. (2020). Green bonds: a mechanism for bridging the adaptation gap? Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2020/02/sei-working-paper-green-bonds-tuhkanen.pdf

Chicago

Tuhkanen, Heidi. Green bonds: a mechanism for bridging the adaptation gap? Stockholm Environment Institute, 2020. https://www.sei.org/wp-content/uploads/2020/02/sei-working-paper-green-bonds-tuhkanen.pdf.

Wikipedia

{{cite report |last1=Tuhkanen |first1=Heidi |title=Green bonds: a mechanism for bridging the adaptation gap? |publisher=Stockholm Environment Institute |date=February 2020 |url=https://www.sei.org/wp-content/uploads/2020/02/sei-working-paper-green-bonds-tuhkanen.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{tuhkanen2020green, author = {Tuhkanen, Heidi}, title = {{Green bonds: a mechanism for bridging the adaptation gap?}}, institution = {Stockholm Environment Institute}, year = {2020}, month = feb, url = {https://www.sei.org/wp-content/uploads/2020/02/sei-working-paper-green-bonds-tuhkanen.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }