Europe | The opportunity in climate adaptation finance

Summary

Despite global adaptation finance more than doubling between 2018 and 2022, it remains far below what is needed to achieve climate resilience. In Europe, a four‑pillar strategy could unlock the investment required to turn climate challenges into opportunities.

Key points

• Key points:
• Urgent need and opportunity: Future physical risks from climate change are already determined by past GHG emissions, making adaptation essential—and with the right policies and incentives, it can become a viable strategic business opportunity for the private sector.
• The adaptation finance gap is enormous and uncertain: Global climate adaptation finance in 2022 amounted to USD 150 billion—just 7 percent of total climate finance—and falls far short of the estimated needs for the next decade, between USD 0.5 trillion and USD 1.3 trillion. This massive funding gap underscores the size of the opportunity if clear and coherent policies are adopted.
• Barriers to private investment: The main obstacles to attracting private finance include a lack of data and inadequate analysis of existing risks; long or uncertain investment horizons don’t help either, nor do unclear and unstable regulations, or the difficulty of monetizing environmental and social benefits without public incentives.
• European strategy for unlocking adaptation finance, four pillars: i) Establish a shared infrastructure for climate data and risk analysis; ii) Plan with a long‑term perspective to align public and private efforts; iii) Harmonize adaptation regulations with market standards; iv) With all of the above—and by defining the financial system’s adaptation risk appetite—innovative financial instruments will emerge to help mobilize private capital.

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