What Could a New Adaptation Finance Goal Look Like?

Despite using different approaches, scenarios 1 and 5 yield very similar goals in both 2030 ($75–$77 billion) and 2035 ($150–$157 billion). Scenarios 3 and 7 also reach a similar goal in 2035 ($112–$120 billion), though quite different levels in 2030 ($75.2 billion and $91.7 billion). 

Scenarios 2 and 3 are both tripling goals, but scenario 2 uses 2022 as the baseline year while scenario 3 uses 2025, resulting in scenario 2 having a lower tripled value but achieved sooner than scenario 3, which has a higher tripled value that is achieved later. Scenarios 1 and 3 follow an identical trajectory between 2025 and 2030, then diverge significantly in 2035. 

Scenario 7 yields the highest goal in in 2030 but only the third-highest goal in 2035; this is because a share goal is determined by overall climate finance growth, which has generally grown at a slower rate than adaptation finance, while growth rate targets compound and can become exponential, and multiplication targets are based on the multiplier. 

Scenarios 1, 3, and 5 use 2025 as the baseline and assume that the Glasgow doubling goal will be achieved, but if countries fail to reach the goal, or overachieve, the baseline amount and, therefore, the goal would be different. This uncertainty could be addressed by either explicitly stating that the new goal will use the doubling of 2019 levels by 2025 as the baseline (regardless of whether it is met on time), or by choosing an earlier baseline year where the amount provided is known. 

The UN Environment Programme’s Adaptation Gap Report includes estimates of developing countries’ climate finance requirements based on top-down modeled costs ($215 billion per year this decade) and bottom-up self-reporting of needs ($387 billion per year up to 2030) as shown in figure 2 below. Most of the discrepancy between the two figures comes from middle-income countries, which have reported far greater needs ($359.3 billion) than the modeled costs ($183.6 billion); low-income countries have similar estimates from modeled costs ($14.4 billion) and reported needs ($15.2 billion), while high-income developing countries actually under-reported their needs ($12.7 billion) compared to modeled costs ($17.3 billion). 

None of the goal scenarios meet either of the developing country needs estimates; scenarios 2 and 7 have the highest share in 2030, at 40 percent and 43 percent of modeled costs, respectively. UNEP notes that international public finance is only one potential source of finance, with private finance and domestic resources also able to meet the overall needs. 

The level of adaptation finance goal will have implications for other types of climate finance. Mitigation still requires considerable investment, and failure to curb emissions will further increase the cost of climate impacts and thus, adaptation costs. Finance for loss and damage is also critical and will only increase if there is insufficient mitigation and adaptation action. In setting an adaptation goal, governments will need to consider these interlinkages and trade-offs. An adaptation finance goal may have the unintended consequence of constraining funding for mitigation and loss and damage. 

Some climate projects tackle both mitigation and adaptation—so-called crosscutting finance. For example, a school or hospital that includes both solar panels and passive heating and cooling technology contributes to reducing emissions and reducing the impacts of extreme heat and cold. Integrating both mitigation and adaptation considerations into a single project is often desirable, since it can be cheaper to incorporate adaptation measures from the outset rather than coming back later to climate-proof a project. 

The most recent Intergovernmental Panel on Climate Change report signals that governments should take a climate resilient development approach that integrates adaptation and mitigation. However, the Glasgow adaptation finance doubling goal was not clear about whether and how crosscutting finance could be counted, which might lead to a decline in crosscutting projects getting funded. In designing a new goal, governments will need to consider ways to ensure there is not a disincentive to supporting crosscutting projects where they make sense. This could include provisions to count a portion of crosscutting finance toward an adaptation finance goal. 

The Glasgow doubling goal is explicitly for provision (i.e., public finance) only. Adaptation actions are less likely than mitigation to yield a financial return, which makes them less attractive to private investors, so a focus on public finance does make sense. However, there is unlikely to be sufficient public finance to meet all adaptation needs, so having a goal that also includes private finance could help motivate actors to develop models for private financing of adaptation. It would be easier to calculate share-based goals, since the NCQG provided clarity about the total climate finance (including private), and there would be no need to make assumptions about the proportion of finance within these that will be public. 

All scenarios for the goal would be higher since the baselines and total climate finance scope would be higher. It would also reduce the squeeze on mitigation and loss and damage finance (as discussed above), since the total pool of potential finance to draw from is larger. However, it would provide less certainty about how much of the finance would come from public sources, which will remain vital for a large proportion of adaptation needs. 

The Glasgow doubling commitment was made by developed countries. The Paris Agreement allows for other countries to voluntarily choose to contribute toward climate finance goals; countries agreed in the NCQG’s $300 billion per year goal to count all MDB finance, rather than just developed countries’ share, and encouraged developing countries to contribute to the goal, such as through the U.N. Office for South-South Cooperation. A new adaptation finance goal could do similarly, inviting or encouraging other countries to contribute. In a challenging geopolitical environment for international public finance, allowing a broader pool of contributors could make it more attractive for individual governments to contribute to a shared effort.

The scenarios we have explored focus on increasing the quantity of adaptation finance, but there are also important ways that the quality of finance could be improved. Especially when many governments have constrained public budgets, improving the quality of finance may be a way they can improve the utility of the finance they provide to recipient communities, even if they can’t increase the quantity. This could include increasing the share of grant-based and highly concessional finance, the amount that goes to multilateral climate funds where governance is shared among countries, the amount that developing country institutions can directly access rather than going through international intermediaries, and the amount that goes to local communities. 

For climate goals to be meaningful, there needs to be confidence in reporting of progress. Climate finance has long been plagued with issues around transparency, chief among them: a years-long lag time in reporting; the lack of a widely agreed upon definition of what counts as climate finance (and within that, adaptation finance), leading to skepticism about whether reported data are for projects that are sufficiently climate-oriented; and a system that generally relies on government self-reporting with a lack of robust independent review. Alongside any new adaptation finance goal, it would be helpful to have commitments to improve transparency with more frequent, detailed, and independently reviewed reporting.