We’ve reached a critical inflection point in the climate crisis, likely surpassing the 1.5°C warming threshold to avoid the most severe impacts, set by the Paris Agreement. Major investment banks like Morgan Stanley and JPMorgan now project a 3.0°C world – a reality reflected in their withdrawal from the Net-Zero Banking Alliance (NZBA). While 1.5°C remains a vital benchmark for mitigation, adaptation and resilience, investments must now align with more realistic climate trajectories.
The adaptation finance gap
Despite growing urgency, adaptation and resilience (A&R) remains dramatically underfunded, receiving just 5% of total climate finance. Estimates suggest the financing gap is $187-$359 billion per year through 2030 – while the cost of inaction could be 7 to 15 times higher. Currently, the public sector leads A&R investment, with institutional investors and commercial banks contributing just 3%. This signals a critical opportunity to mobilize private capital at scale – and to build resilience where it’s needed most.
There are promising early signs that financial institutions are beginning to unlock the value of A&R finance. On March 13, Standard Chartered announced it had closed its first adaptation finance deal, supporting climate-resilient solar PV farms across high-risk regions including Florida, Saudi Arabia and the UAE. The deal follows the April 2024 launch of the bank’s new Guide for Adaptation and Resilience Finance, which maps over 100 investable A&R activities, reinforcing the potential for A&R to emerge as a distinct and scalable asset class.
Barriers to scaling private capital
Still, several barriers continue to limit private capital flows into A&R. Asset-level climate risk data are still under development, making it challenging to fully assess exposure or model avoided losses. The absence of standardized metrics and benchmarks complicates investment comparison and impact-tracking. Regulatory uncertainty further undermines investor confidence, and climate risk are not fully reflected in asset valuations, reducing visibility into potential returns. The perception of low returns and high risk, especially for capital-intensive or first-of-a-kind projects, makes investors cautious. Finally, the complexity and long timelines of many A&R projects – often involving multiple stakeholders – create additional friction.
How climate finance data providers can help
Climate finance data providers can play a critical role in scaling private investment in A&R. By enhancing asset-level risk data through geospatial analytics, they can improve risk assessments and asset pricing. Integrating global KPIs into financial models will enable better benchmarking of climate resilience investments. Expanding scenario tools to include new regulations and the cost of inaction will help investors make better decisions. Additionally, dashboards that track investment performance and facilitate collaboration in multi-stakeholder efforts, such as blended finance, will increase transparency. Data providers have an opportunity to tap into a $2 trillion market by 2026, while enabling financial institutions to evaluate hazard-specific risks, assess the timing of adaptation benefits, and gauge the scalability and system-level impact of projects.
