The threat of climate change is increasingly evident, and its impacts are intensifying. This is particularly the case in developing countries, which, already dealing with a multitude of challenges ranging from economic disparities to developmental goals, now face an augmented threat from unpredictable sea levels, changing weather patterns, and compromised natural resources. The repercussions of a changing climate do not just threaten their ecosystems, but also amplify the challenges of socioeconomic development and poverty eradication. Given the scope and urgency of these challenges, the international community recognised that substantial financial support would be essential to assist developing countries. Notably, international providers remain central in contributing to scaling up and mobilising finance for adaptation activities and increased climate resilience in developing countries.

Enhanced adaptation action is needed given the increasingly severe impacts of climate change. Particularly, developing countries, confronting challenges from economic disparities to developmental aspirations, are more vulnerable to the amplified threats of changing climate conditions. Achieving enhanced adaptation will require an increase in the overall volume of finance from all sources flowing to adaptation. In addition to this, enhanced efforts are also required to maximise the impact of financial flows and ensure that they reach those who are most vulnerable to climate change.

As the impacts of climate change grow more severe and frequent, greater adaptation action is increasingly urgent. International providers have a pivotal role in providing and mobilising finance flows to support adaptation in developing countries, which often lack resources and capacity to undertake adaptation measures. This chapter provides an overview of key international policy context and developments, methodological challenges in accounting for adaptation finance, various sources, mechanisms, and instruments of adaptation finance, as well as both adaptation-related financing needs and tracked finance flows. Such an overview intends to motivate the need to better identify challenges and opportunities for scaling up adaptation finance and improving its effectiveness.

This chapter reviews overall trends in adaptation finance flows between 2016 and 2021, including differences across country income groups in volume, delivery channels and instruments, setting the stage for discussions in Chapters 3 and 4 of challenges and opportunities to scale up adaptation finance. International public climate finance for adaptation from developed countries almost tripled over 2016-21, mainly driven by multilateral institutions’ increased focus on adaptation. Low-income and least developed countries, however, received the least public adaptation finance overall in absolute terms. Despite the strong context-specific nature of adaptation, little of the finance provided is delivered through local organisations. The analysis in this chapter suggests there is room to scale up adaptation finance, improve its accessibility and effectiveness, including towards mobilising private finance.

This chapter explores barriers to scaling up and mobilising further adaptation finance. These relate to economic and financial conditions, knowledge and capacity gaps, and institutional and governance arrangements. Developing countries’ financial, technical, and institutional constraints hinder both their access to international public finance and their ability to attract complementary private investment for adaptation activities. Challenges include data and knowledge gaps that hinder the ability to identify, develop and prepare potential climate adaptation projects, as well as the fragmented adaptation finance architecture and difficulties to access relevant sources of finance.

Building on the data analysis presented in Chapter 2, case studies and interviews, as well as the challenges in financing adaptation analysed in Chapter 3, this chapter identifies possible action areas through which international climate finance providers can increase the volume, accessibility, and effectiveness of finance for adaptation in developing countries. The five recommended action areas are: i) assessing the consistency of forward spending plans with the call to collectively double climate finance for adaptation by 2025; ii) supporting developing countries’ efforts to strengthen their capacities, policies and enabling environment for finance for adaptation; iii) strengthening development practices and systems to ensure efficient delivery of adaptation finance; iv) deploying public and blended finance instruments strategically to mobilise private finance for adaptation; and v) exploring and tapping into alternative financing sources and mobilisation instruments for adaptation.

This final chapter highlights ways forward for international providers across the five areas explored in Chapter 4, with a focus on how quickly different actions might take effect and the extent to which they will impact adaptation finance levels. The urgency to increase adaptation action and the multitude of challenges to be addressed to do so imply that international providers must prioritise how, when and which options they consider to meaningfully scale up adaptation finance and unlock additional private finance. As such, the chapter underscores that while enhancing the quantity of finance for adaptation is essential, it is also important to consider the qualitative impact and broader effectiveness of those resources.