Climate | ~5 min read
Emerging into a warmer world
Adapting to climate change is vital to protect people, ecosystems and economies – especially in emerging markets, where vulnerable communities need greater support. Blended finance and other tools can help unlock the investment needed to build resilience.
While investment in climate finance has risen in recent years, overall efforts to mitigate climate change – and limit global warming to 1.5°C above pre-industrial levels – have fallen short.
Now, attention is turning to climate adaptation – in other words, how we adjust to climate change impacts.
The challenge is particularly acute for emerging markets, which tend to be more vulnerable to these impacts which include, storms, droughts and flooding. Building upon the aspiration to balance mitigation and adaptation financing, we expect discussions on climate adaptation to be a key focus at the annual global climate conference, COP 30, this November in Brazil – itself a major emerging economy.
What is climate adaptation vs. climate mitigation?
Climate adaptation
Adjusting to the effects of climate change
Examples include:
- Coastal flood defences
- Watershed and forest rehabilitation
- Early warning systems and disaster preparedness
- Drought-resilient agriculture and water management
- Urban green infrastructure
- National adaptation, planning and capacity-building programmes
Climate mitigation
Preventing the causes of climate change
Examples include:
- Renewable energy
- Sustainable forestry and reforestation
- Energy efficiency in buildings, industry and transport
- Low-carbon transport
- Methane reduction technology
- Carbon capture and storage
Source: EA Engineering Science and Technology, 2025
The overall outlook for emerging market climate financing is concerning. Despite the crucial need for finance, these regions have received just 16.7% of climate finance flows. Looking at climate adaptation funding specifically, this has covered only one-third of annual requirements.1 This needs to ramp up to
Scaling up private capital
Less than 2% of adaptation finance comes from the private sector, such as banks, institutional investors, and other investment funds. The bulk of their climate financing goes to climate mitigation initiatives which is typically more advanced in terms of standardisation and the ability to estimate financial impact. Another reason for this imbalance is that climate adaptation initiatives typically have broader scopes (see table above). Their benefits are more long-term and they lack track records of generating cash flows. The challenges of measuring and scaling adaptation investments are heightened by the higher risk premia of emerging markets.
Despite the challenges, we see potential for private markets investment in this area to increase. A World Resources Institute study estimated that every USD 1 invested in adaptation can yield over USD 10.5 in benefits,3 which include:
- Avoided material and financial losses stemming from the emergence of climate risks.
- New opportunities for private sector financing such as: climate-smart agriculture, dual use of climate resilient infrastructure (eg, flood barriers which could also be used as bridges), and water-efficient irrigation systems. All of these have shown potential for commercial viability.4
- Social and environmental benefits in the form of improved public health, food and water security, job creation and empowerment of local communities.
Investors have a critical role to play in closing the adaptation finance gap. By leveraging innovative tools such as blended finance – which combines development finance with private capital – and strategic local partnerships, investors can help de-risk investments and unlock scalable opportunities in emerging markets. Climate adaptation is not just defensive – it can be a path to long-term value creation, impact and resilience where it’s needed most.
1 & 2 Climate Policy Initiative: Global Adaptation Finance Flows vs EMDEs’ needs, 2024 (2024-2030 needs: USD 212 billion, 2022 flows: USD 76 billion)
3 World Resources Institute, Strengthening the Investment Case for Climate Adaptation: A Triple Dividend Approach, May 2025
4 OECD, Scaling Up Adaptation Finance in Developing Countries, November 2023
