Adaptation Finance’s Growth Spurt Calls for a Tune-Up

There’s a paradox afflicting the adaptation finance space.

On the one hand, new funds and financing vehicles for adaptation — particularly for emerging markets — are being raised at a rapid clip, pouring millions into climate-proofing efforts. The Insurance Development Forum’s Infrastructure Resilience Development Fund is one example. Climate Fund Managers’ Climate Investor 2 is another. Scores of smaller vehicles are also taking shape across the Global South.

On the other hand, there are growing concerns that some of these may not be as well crafted (or tightly focused) as they should be. 

The Climate Policy Initiative (CPI) understands this tension well. For more than a decade, the non-profit has served as the secretariat for the Global Innovation Lab for Climate Finance. This public-private partnership has nurtured close to 100 climate finance solutions since 2014 (about 40 of them focused on adaptation) mobilizing some US$4bn for developing countries in the process.

Armed with over a decade’s experience, the organization recently published new guidance on structuring adaptation finance vehicles amidst a surge of interest — and a desire to improve the quality of submissions. “Part of putting this guide out is we’re seeing more and more applicants come through the Lab … and we’re simply not going to be able to support all of them. This can maybe help more vehicles get better at articulating what it is they’re doing on adaptation in a more standard way,” says Pallavi Sherikar, Manager at CPI.

The latest ‘Call For Ideas’ issued by the Lab garnered more than 1,100 applications from organizations pitching early-stage climate finance vehicles, triple the level seen in 2024-25. From this pool, the Lab has to select just eight finalists — two of which will be explicitly focused on adaptation, one in Latin America and one in the Philippines, and another on sustainable agriculture and food systems in Africa. The lucky few will be announced in March.

These winners may signal the future of adaptation finance in the developing world. But even if they surpass expectations, scaling into large, self-sustaining and durable financing vehicles, they won’t be enough. Closing the adaptation finance gap will require many more of them.

“There's just an enormous amount of need that is not being met," explains Morgan Richmond, a Manager at CPI. The numbers back her up. This month, it was revealed that the UK would cut overseas climate finance by more than one-fifth. Post-Trump inauguration, climate finance from the US federal government has — for all intents and purposes — halted completely.

The CPI’s latest guidance represents an effort to give fledgling adaptation finance efforts — even those that aren’t selected by the Lab — the best chance to attract capital amidst this pullback.

But it may also help address another problem — growing concern from some observers that many adaptation finance proposals are underdeveloped and, in some cases, mislabeled.