Private finance for adaptation is increasingly vital—growing these flows requires a better understanding of how much is going where.
For more than a decade, Climate Policy Initiative’s annual Global Landscape of Climate Finance (GLCF) reports have offered the most comprehensive overview of the world’s climate finance flows. Early reports did not track private finance for adaptation at all due to limitations in data and methodology.
Since 2021, we have been improving our tracking of private adaptation finance. Building on emerging methodologies and taxonomies, we began by identifying and reporting a small amount of these flows, primarily as co-financing reported for public sector adaptation projects. Even so, the amount tracked remained negligible as of 2023.
We knew we were not capturing all that exists in the real economy: CPI’s work to accelerate financial instrument design and development through the Catalytic Climate Finance Facility (the CC Facility) and the Global Innovation Lab for Climate Finance (the Lab) demonstrates that private capital is indeed flowing to adaptation. The Lab alone has supported the acceleration of around 20 adaptation-focused financial instruments over the last decade, which have gone on to collectively secure more than USD 650 million in private investment.
If the Lab is seeing this scale of private capital flowing to adaptation, clearly there are opportunities to improve the tracking of flows further.
Why do we need accurate accounting of private finance for adaptation?
CPI’s climate finance numbers are widely used; examples include UNEP’s Adaptation Gap Report, climate finance negotiations, and the Paris Agreement’s cyclical Global Stocktake analysis. Moreover, at COP29 last November, Parties adopted a decision on the New Collective Quantified Goal for climate finance, which includes a goal for developed countries to lead in mobilizing USD 300 billion annually by 2035 for developing countries, as well as a call to all actors, including those in the private sector, to scale up climate finance to developing countries to at least USD 1.3 trillion annually by 2035. These developments underscore the importance of improved tracking of private capital flowing to both mitigation and adaptation. Decision-makers require data that is as accurate and comprehensive as possible.
Improved data and reporting on private adaptation finance can also dispel the common but inaccurate narrative that there are limited viable business models for adaptation. We know this is not true—as demonstrated by the scores of adaptation financing vehicles supported through the Lab and the CC Facility. Yet, in conversations with private investors, we constantly confront the misperception that all adaptation is non-commercial. Undoubtedly, public finance remains critical. But if adaptation is framed solely as a public finance issue, we risk overlooking the crucial role of the private sector, not just as a source of finance, but also as a source of innovation and scale, all of which will be necessary to mobilize the levels of capital required to meet adaptation investment needs.
What does a decision-useful accounting look like for private adaptation finance?
In 2024, we set out to further improve CPI’s data analysis of private capital flows to adaptation. We started by sketching out the ecosystem of private actors—outlining the ways we already observed or anticipated different actors financing adaptation. In our view, a decision-useful accounting of private finance going to adaptation would capture the full picture of these activities:
| CORPORATIONS | Invest on-balance-sheet to enhance the resilience of their assets, operations, and supply chains, and produce adaptation-related products and services driven by consumer demand. |
| COMMERCIAL FINANCIAL INSTITUTIONS | Lend to businesses and consumers responding to climate hazards, including via household loans, mortgages, co-financing for adaptation projects, and credit lines and financial innovative products for adaptation and resilience solutions. |
| CONSUMERS AND HOUSEHOLDS | Invest in enhancing their own resilience and that of their properties by purchasing products that facilitate adaptation, such as flood-resilient building materials. |
| PENSION FUNDS | Have large pools of capital well-suited to long-term, big-ticket projects, such as resilient infrastructure development and resilience bonds. |
| ASSET MANAGERS | Allocate and oversee large pools of capital and can influence investee companies, including on topics of adaptation and resilience. They can also invest directly in adaptation and resilience through PE and debt, including resilience bonds and large infrastructure projects. |
| VENTURE CAPITAL | Make early-stage and high-risk investments in companies offering adaptation solutions, and help to nurture innovative adaptation solutions to reach commercial scale. |
| PRIVATE EQUITY | Deliver or incentivize adaptation and resilience by influencing investments, including leveraged buyouts and smaller, earlier-stage private companies. |
| INSURERS | Support resilience before and after climate events, not only through payouts for damages, but also innovative tools like anticipatory and parametric insurance, risk-adjusted premia, and ‘build-back-better’ incentives. They can also operate as investors in long-term adaptation-related assets such as resilience bonds. |
We made solid incremental progress in 2024, as detailed in the report Tracking and Mobilizing Private Sector Climate Adaptation Finance. Methodological improvements captured almost five times the private adaptation finance previously tracked for the period of 2019 to 2022—raising the tracked figure from USD 1 billion to nearly USD 5 billion. Our most significant methodological advancement was to add tracking of finance from asset managers, consumers, households, and venture capital, where we had previously tracked flows only from commercial banks, corporations, and private equity. Informed by this progress, the most recent 2025 Global Landscape of Climate Finance, released in June, tracks USD 5.7 billion in adaptation finance from private actors for 2023.
What’s next?
With a methodology now developed and piloted on existing available data, there is significant opportunity to advance decision-useful views of private capital allocation to adaptation.
Three high-impact opportunities to advance this effort are:
1. Build on CPI’s approach to tracking adaptation finance to make it decision-useful for as many actors as possible.
There are options to progress this work on two fronts:
- Advancing the GLCF methodology to include more high-confidence, comparable adaptation finance flows: For example, tracking could expand to capture consumer and household spending in response to climate risk by analyzing sales data for activities such as cooling solutions, residential storm-proofing, and consumer emergency warning systems.
- Advancing approaches to serve other information purposes beyond the GLCF: We also foresee the need for a methodology that tracks and differentiates between direct investment in adaptation and the broader universe of financed activities that are made more resilient by that direct investment. This effort could inform the GLCF, but is also likely to produce tracking outputs that fall outside the bounds of comparability necessary for internal consistency within those reports.
2. Structure new partnerships to address data gaps.
Leveraging our experience of working with multilateral development banks, we could dedicate capacity to institutional relationship building to address data gaps in flows from insurers, pension funds, and asset managers. This could include targeted capacity building with private investor coalitions to support the systematic identification and classification of adaptation investments.
3. Establish clear guidance on use cases for adaptation taxonomies.
Several new taxonomies for adaptation investment have been published in recent years. Given the broad ecosystem of actors involved in adaptation finance, bespoke taxonomies are necessary and helpful; however, each requires a clear use case and regular updates. We see a specific role to play in supporting updates, harmonization, and communication of taxonomies. Ultimately, updating and communicating various taxonomies is essential for increasing uptake and use among a broader range of stakeholders, including investors, pipeline developers, and policymakers. The more actors that use known taxonomies, the better the tracking of finance will be in the long run.
Together, these three areas of work would help further refine the approach to tracking private finance flows for adaptation. Better tracking of private adaptation finance flows can help channel scarce public finance where it’s most needed and identify opportunities for spurring greater private investment. We see these opportunities as key next steps to build upon existing efforts. We would love to hear from you! Please contact the authors via adminsf@cpiglobal.org.
