Adaptation finance: The unfinished bridge to climate resilience

Adaptation finance remains one of the most pressing, yet under-addressed global challenges in the fight against climate change. The need to build climate resilience in vulnerable nations — particularly in the Global South — continues to outstrip available resources, leaving countries like Bangladesh trapped in a financial catch-22. The question is no longer whether adaptation finance is necessary but how we can get it delivered equitably and sustainably. 

With mounting climate-induced disasters, the international community must recognise not only its historical responsibility but also its shared future stake in ensuring that these nations are not left to grapple with insurmountable crises alone. Failing to act risks deepening financial precarity in countries already burdened by debt while also exacerbating global inequalities. 

The problem with the current model: An unsustainable debt burden

The Global South has borne the brunt of climate change, yet adaptation finance — vital for resilience-building — has primarily been channelled through loan-based mechanisms. This model, while intended to provide immediate relief, often exacerbates the long-term debt burden of countries already struggling with external debt.

Bangladesh, for example, a nation highly vulnerable to cyclones, floods, and rising sea levels, exemplifies this financial quandary. In 2023, the Asian Development Bank (ADB) allocated 53% of its $1.9 billion in project financing for climate adaptation in Bangladesh, but much of this support came in the form of loans. Similarly, the World Bank's $1 billion Green and Climate Resilient Development Policy Credits are structured as loans, creating a vicious cycle where funds that should be dedicated to infrastructure or social services are diverted to debt servicing. With Bangladesh's external debt hovering at 38% of its GDP, as reported by the International Monetary Fund, the nation is being pushed further into financial dependence. 

One of the dominant narratives in global climate discourse is that loans are a solution to the climate finance gap. But loan-based mechanisms are only a partial solution, and they're often overgeneralized. Not every loan results in a "debt trap," it's the nature of that debt. Countries like Bangladesh need grants, not just loans, especially when those loans are tied to stringent conditions or high interest rates. 

Still, the broader truth remains: much of the financial burden has been offloaded onto the Global South, while wealthy nations continue to fall short of their promises. The $100 billion annual pledge, first made at COP15 in Copenhagen in 2009, remains unmet—leaving many developing nations facing the grim reality of climate-induced crises with inadequate resources.

Beyond loans: Alternative models that work

What about the alternatives? Climate bonds, public-private partnerships (PPPs), and insurance mechanisms have all been floated as more sustainable solutions. Yet, despite their promise, they remain grossly underutilised. Climate bonds, for instance, have the potential to leverage large-scale private investment. However, their adoption has been sluggish, in part due to the high risks associated with investing in countries already facing financial instability. 

In nations where political instability and governance challenges persist, the risks for private investors are real. It's no wonder that while climate resilience bonds have seen success in middle-income nations like Mexico and the Philippines, they have struggled to gain traction in the least developed countries (LDCs). The fundamental issue here is de-risking investment. If we want the private sector to step up, governments—both in the Global South and the Global North—must create regulatory environments that make these investments more appealing.

This leads to a broader question about the role and shortfall of adaptation finance.

The role and shortfall of adaptation finance

At the heart of the challenge lies adaptation finance, which is critical for helping countries manage escalating risks from climate hazards while building resilience and fostering low-carbon development. According to the UNEP's Adaptation Gap Report 2021, the annual cost of adaptation for developing countries is projected to range from $140 to $300 billion by 2030, soaring to as high as $500 billion by 2050. The Adaptation Gap Report 2023 reinforces this dire assessment, showing that adaptation finance needs in developing nations are now 10 to 18 times higher than current international public finance flows.

Despite these pressing needs, global adaptation finance has seen a troubling decline. In 2021, public multilateral and bilateral adaptation finance flows to developing countries fell by 15%, amounting to just USD 21 billion. Even though global adaptation finance flows increased to $63 billion annually in 2024, according to the Global Centre for Adaptation, this amount remains far short of the $212 billion needed annually by developing nations until 2030.

This shortfall underscores the stark reality: without a significant increase in financial support, the gap between what is needed and what is provided will continue to widen, exacerbating the already critical situation faced by the most vulnerable.

Moral and economic responsibility

Developed nations have not only the historical responsibility but also the economic imperative to support adaptation efforts. If countries like Bangladesh fail to adapt, the ripple effects will extend far beyond their borders. Disruptions to global supply chains, increased migratory pressures, and heightened demands for humanitarian aid are just some of the potential consequences. A study by the World Bank estimated that without significant adaptation efforts, climate change could push more than 100 million people into poverty by 2030, thereby exacerbating social and economic pressures across borders.

Developed countries need to recognize that their economic stability is at stake. As climate change intensifies, it threatens to destabilise the very global systems —trade, migration, and food security—upon which these nations rely. So, while there is a clear ethical imperative to support adaptation, there is also a pragmatic argument: failing to invest in climate resilience now will cost the global economy much more in the long run.

The geopolitics of climate finance

Geopolitics plays a subtle but significant role in the climate finance debate. Developed nations, responsible for the bulk of historical emissions, often shape the rules of climate finance to suit their interests. For instance, wealthy nations dictate how and where adaptation funds are spent, often aligning them with geopolitical strategies rather than the needs of the most vulnerable. Take, for example, the Middle East, where geopolitical tensions have influenced the allocation of climate finance. While nations like Jordan receive support due to their strategic importance, neighbouring countries embroiled in conflict often fall through the cracks.

This issue is especially problematic when considering the geopolitical constraints faced by countries in regions such as sub-Saharan Africa. Political instability in places like Sudan or the Democratic Republic of Congo makes it nearly impossible for these nations to access adaptation finance, even as they endure the most of climate impacts. Developed countries, while acknowledging the moral imperative, are often more concerned with ensuring political stability and safeguarding their own supply chains.

And herein lies the paradox. The same nations that are contributing the least to the problem are being asked to adapt the most — with insufficient help from those who caused the crisis in the first place.

From debt to development

While geopolitical factors often dictate how and where adaptation funds are deployed—these challenges should not overshadow the available solutions. Addressing these political and financial hurdles is essential if we are to transition from theoretical discussions to practical, equitable solutions that truly bridge the adaptation finance gap.

Instead of perpetuating a debt-based model, we must advocate for adaptation finance that prioritizes grants or concessional loans. But grants alone are not the silver bullet. What is needed is a hybrid approach that blends grants with low-interest loans, public-private partnerships, and climate bonds, ensuring that financial mechanisms are aligned with the realities on the ground.

International support should focus on regional collaboration in adaptation. Cross-border initiatives like the Ganges-Brahmaputra-Meghna (GBM) basin cooperation could provide more holistic adaptation solutions for countries like Bangladesh, India, and Nepal, which face shared climate challenges.

Additionally, international institutions must provide stronger support in capacity building. Many countries in the Global South lack the technical know-how or institutional frameworks to adequately utilize adaptation finance, compounding the problem. 

Transparency is another key issue. In many cases, adaptation funds are not used efficiently, either due to corruption or mismanagement. For instance, according to Transparency International Bangladesh (TIB), about 35% of adaptation funds are misappropriated through bribery and mismanagement, leading to incomplete or poorly executed projects. A concerted effort must be made to ensure that financial flows are monitored and that adaptation projects are subjected to rigorous accountability standards.

Successful adaptation: what works, and why?

Despite the challenges, there are success stories that illustrate the potential of well-funded, community-driven adaptation efforts. Bangladesh's Floating Gardens and the Cyclone Preparedness Programme (CPP) are just two examples where adaptation finance has made a tangible difference in resilience-building. The Floating Gardens, an indigenous solution for flood-prone areas, have allowed farmers to continue growing crops during extreme weather events, bolstering food security and reducing economic vulnerability.

But these examples are not just local successes; they offer scalable solutions. The Floating Gardens model could be adapted for other flood-prone regions worldwide. Similarly, the CPP—through its collaborative, multi-stakeholder approach — can serve as a blueprint for other nations facing similar risks from extreme weather.

Similarly, Indonesia's Jakarta Flood Early Warning System and Uganda's Ecosystem-Based Adaptation (EbA) initiatives show how community engagement, local knowledge, and technological innovation can combine to create effective adaptation projects. The challenge, then, is not in the viability of adaptation but in the availability of adequate, equitable financing mechanisms.

The emerging role of loss and damage finance

One glaring omission in the current climate finance discourse is the growing demand for "Loss and Damage" finance. Unlike adaptation finance, which is designed to prepare for future climate impacts, loss and damage finance addresses the irreversible impacts of climate change—those that adaptation efforts can no longer prevent. 

The establishment of a Loss and Damage fund at COP27 was a historic moment, but it remains to be seen whether wealthy nations will follow through with the financial commitments required. Without robust loss and damage finance, countries like Bangladesh will continue to bear the brunt of climate disasters that they did not cause and cannot fully mitigate.

Rectifying global inequities

Adaptation finance is not merely a tool for economic recovery, it is a critical pathway for advancing climate justice. Climate justice goes beyond financial assistance; it demands systemic change in how funds are allocated and utilized. This ensures that marginalised voices, particularly in the Global South, are included in decision-making processes. Addressing these inequities can bridge the gap between those who caused the climate crisis and those who suffer its worst effects, rectifying historical imbalances and fostering a more resilient and just global system.

The path forward

Adaptation finance, as it stands today, is an unfinished bridge. We're stuck halfway between lofty promises and on-the-ground realities. The global response to climate change has largely been one of mitigation, but adaptation finance must be scaled up immediately if we are to protect the world's most vulnerable populations. International bodies like the Global Adaptation Commission and UNFCCC must prioritise creating new, easily accessible financing tools, while developed nations should meet their $100 billion climate finance pledge through direct grants rather than loans. The path forward requires a rethinking of how we structure adaptation finance — not as charity, but as a necessary investment in a stable global future. Without a concerted global effort, this unfinished bridge will remain a symbol of broken promises and widening inequalities. 

Md Zahurul Al Mamun is a climate change researcher and analyst