The hosts of this year’s UN Climate Change Conference are banging the drum on adaptation.
Brazil, the world’s ninth-largest economy, has been rocked by climate shock after climate shock. Biblical floods last year punctuated a crippling drought that walloped the country’s vast agricultural sector and laid bare the nation’s vulnerability to a post-1.5°C world.
Ahead of COP30, the country is pushing for adaptation and climate resilience to be a priority. In COP-speak, making something a priority is code for ensuring it gets more money. Last week, the Instituto Talanoa, a local climate policy think tank, sought to chart a path to a more resilient future at a conference in Brasilia.
Climate diplomats were unanimous that more adaptation finance is needed. What they’re not sure of is where the money will come from – particularly under the shadow of a Trump presidency that has already yanked billions in climate funding pledges, and a private sector that has yet to demonstrate a real appetite for adaptation projects.
Ana Toni, Brazil’s Climate Change Secretary and COP30 Executive Director, put her finger on the core problem: while each country benefits from every other country cutting greenhouse gases, the same is not true for adaptation, making it much harder to build international cooperation.
“If I don’t mitigate [emissions] in Brazil, every person sitting in Norway or the UK or China or the US, they will be impacted,” she said. “But if I don’t adapt in Brazil, you’re not directly suffering.”
That helps explain the current climate cash imbalance. Of the $116 billion of international climate finance delivered by rich nations in 2022, barely 28% was for adaptation, according to OECD figures. Last year’s COP in Baku yielded a new $1.3 trillion finance agreement, but did not earmark a portion for adaptation.
Even if developed countries make good on their pledge to double adaptation finance from 2019 levels to around $40 billion by this year, that would barely put a dent in the $187-$359 billion finance gap identified by the UN. Moreover, the bulk of public finance has taken the forms of loans, rather than grants, saddling climate risk-prone countries with additional debt.
Down with the system
In Brasilia, speakers raged against the status quo. “The old system of climate finance is not fit-for-purpose,” said Patricia Espinosa, COP16 President and Former UNFCCC Executive Secretary, and has failed to “address the very basic needs of the different countries.”
Fellow diplomat Richard Muyungi, Chair of the African Group of Negotiators at COP30 and Special Climate Envoy for Tanzania, declared that global climate finance had “failed to support countries to deal with adaptation,” and that poor nations are “getting locked more and more in debt.” While there is no lack of money that could be offered for adaptation, he said, there is a “lack of political will” to deliver it.
This doesn’t look likely to change anytime soon. Given fiscal pressures in Europe and the UK, and the abrupt withdrawal of US climate finance under Trump, it looks doubtful rich nations will do much, if anything, to go beyond their existing commitments.
Most of the speakers in Brasilia are seasoned climate diplomats and chose their words carefully when pressed on the Trump effect. Espinosa of Mexico, which Trump has threatened to slap 25% tariffs on, admitted geopolitical tensions “makes it more difficult” to raise adaptation finance. A pivot to regional, sub-national government donors could help make up shortfalls, he said.
Harsher words were saved for multilateral development banks, or MDBs, which supplied $28 billion of adaptation finance in 2023. That’s not nothing. But poor countries gripe that they have to clear multiple hurdles in order to access cash, and that the banks’ bureaucratic processes are ill-suited to a fast-changing world.
Ali Shareef, the Maldives’ Climate Envoy, said the current MDB system is “not relevant” and “not the most favorable” for small economies. One bugbear are the myriad definitions used to classify MDB financing, many of which don’t align with facts on the ground in climate-vulnerables states.
For example, Shareef said his country’s efforts to build coastal resiliency have been complicated by international lenders tagging the project as “high-risk” and as “infrastructure” rather than “adaptation”, which makes it harder to acquire cut-rate financing. “For this finance to be effective, we have to be on the same page,” he said.
Another gripe concerns lenders’ data and reporting demands, which often have to be met in full before financing is released. International banks “ask for very complex, detailed information – sometimes which we don’t even have,” said Shareef. “These things [data requests] could be relaxed,” he added.
Private sector problem
If the old financing model is failing adaptation, what new one could take its place? Most speakers want to find ways to ‘crowd in’ private finance and forge new public-private partnerships that can scale adaptation finance at the required pace. The Mirova Sustainable Land Use Fund is one example. The fund combines capital from development finance institutions and private institutions, including Allianz France, and BNP Paribas Cardif, to invest in the transition and decarbonization of agricultural and forestry value chains and restore degraded land.
Shareef said MDBs can get private investors “in a more comfortable zone” by pledging to absorb potential losses from adaptation projects through these kinds of blended finance transactions, which have surged in recent years. For her part, Brazil’s Toni hopes that COP30 will serve as an information clearing house for public-private finance solutions, where countries can “learn from each other.”
Engaging the private sector directly on adaptation, though, continues to be a knotty problem. When it comes to renewables, business models are well-established and returns on investments are decent enough to attract big money managers. The same can’t be said of most adaptation projects – yet.
One way forward could be improving the quantification of losses avoided thanks to adaptation investments, and showing investors how they can safeguard the profitability of their broader portfolios. Rubem Hofliger, Head of Public Sector Solutions Americas at Swiss Re, said financial institutions like his are building out data tools and frameworks to systematize this kind of analysis. He highlighted Swiss Re’s benefit-to-cost ratio, a “universal measure” for identifying the financial uplift of adaptation projects, as one enabling tool.
Data can’t unlock private finance on its own. Adaptation projects may reduce losses, but they typically don’t throw off cashflows of their own. “What we’ve learned is that we can, we should, we must mobilize private money for things the private sector has proven to invest in in developed countries – which is a lot of mitigation, a lot of renewable energy, [and] sustainable agriculture,” said Avinash Persaud, Special Advisor on Climate Change to the President of the Inter-American Development Bank.
“But adaptations are your classic public goods: public infrastructure, sea walls, flood defenses. And the point of something being called a public good is that they don’t have capturable private revenues.”
Instead of waiting, perhaps forlornly, for the private sector to step up, Persaud — who as an advisor to Mia Mottley of Barbados helped architect the Bridgetown Initiative — supports a drastic overhaul of how MDBs offer adaptation finance. “We need to use loans to fund adaptation – but we need these loans to be low-cost, AAA-rated, guaranteed. We need them to be extra-long term – 40 years, not 15 years. We need them to be super flexible with disaster causes.”
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