ADAPTATION finance stands at the heart of one of the gravest challenges confronting the global community — how to shield vulnerable nations from the worsening impacts of climate change. Yet, the current global financial framework remains inadequate, perpetuating a cycle of debt and dependence for countries already grappling with severe environmental and economic crises. The stakes are highest for nations in the Global South, where climate disasters are not a looming threat but an already unfolding catastrophe. The question is not whether adaptation finance is necessary — it is how we can secure it equitably and sustainably before it is too late.
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The debt trap: a broken model
THE Global South has endured the most of climate change, yet adaptation finance — vital for resilience-building — has primarily been channelled through loan-based mechanisms. This model, while intended to provide immediate relief, often exacerbates the long-term debt burden of countries already struggling with external debt.
Bangladesh, for example, a nation highly vulnerable to cyclones, floods and rising sea levels, exemplifies this financial quandary. In 2023, the Asian Development Bank allocated 53 per cent of its $1.9 billion in project financing for climate adaptation in Bangladesh, but much of this support came in the form of loans. Similarly, the World Bank’s $1 billion Green and Climate Resilient Development Policy Credits are structured as loans, creating a vicious cycle where funds that should be dedicated to infrastructure or social services are diverted to debt servicing. With Bangladesh’s external debt hovering at 38 per cent of its GDP, as reported by the International Monetary Fund, the nation is being pushed further into financial dependence.
One of the dominant narratives in global climate discourse is that loans are a solution to the climate finance gap. But loan-based mechanisms are only a partial solution, and they are often overgeneralised. Not every loan results in a ‘debt trap’. Countries like Bangladesh need grants, not just loans, especially when those loans are tied to stringent conditions or high interest rates.
Still, the broader truth remains: much of the financial burden has been offloaded onto the Global South, while wealthy nations continue to fall short of their promises. The $100 billion annual pledge, first made at COP15 in Copenhagen in 2009, remains unmet, leaving many developing nations facing the grim reality of climate-induced crises with inadequate resources.
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Why alternatives matter
Climate bonds, public-private partnerships, and insurance mechanisms have emerged as promising alternatives, yet they remain underutilised. Climate bonds, in particular, hold the potential to tap into private capital markets, yet adoption has been slow due to the high risks associated with investing in countries where political and financial instability persist.
If the world is to scale these alternatives, de-risking private sector investments must become a priority. Governments —both in the Global South and Global North — must create regulatory frameworks that incentivise long-term investment in climate resilience. In countries like Bangladesh, where climate vulnerability is at its highest, regulatory reform can mitigate risks and make climate bonds a more attractive financial instrument.
This leads to a broader question about the role and shortfall of adaptation finance.
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Role and shortfall of adaptation finance
AT THE heart of the challenge lies adaptation finance, which is critical for helping countries manage escalating risks from climate hazards while building resilience and fostering low-carbon development. According to the UNEP’s Adaptation Gap Report 2021, the annual cost of adaptation for developing countries is projected to range from $140 to $300 billion by 2030, soaring to as high as $500 billion by 2050. The Adaptation Gap Report 2023 reinforces this dire assessment, showing that adaptation finance needs in developing nations are now 10 to 18 times higher than current international public finance flows.
Despite these pressing needs, global adaptation finance has seen a troubling decline. In 2021, public multilateral and bilateral adaptation finance flows to developing countries fell by 15 per cent, amounting to just $21 billion. Even though global adaptation finance flows increased to $63 billion annually in 2024, according to the Global Centre for Adaptation, this amount remains far short of the $212 billion needed annually by developing nations until 2030.
This shortfall underscores the stark reality: without a significant increase in financial support, the gap between what is needed and what is provided will continue to widen, exacerbating the already critical situation faced by the most vulnerable.
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Moral, economic imperative for global action
THE call for adaptation finance is not merely about survival for developing nations. It is about the collective future of the global economy. Inaction comes with an economic cost. If countries like Bangladesh fail to adapt, the ripple effects will extend far beyond their borders. Global supply chains will be disrupted, migration pressures will surge, and the demand for humanitarian aid will spike, which are just some of the potential consequences. A World Bank study has projected that without significant adaptation efforts, over 100 million people could be pushed into extreme poverty by 2030 due to climate impacts.
For developed nations, it’s not just an ethical imperative to support adaptation efforts — it’s an economic one. As climate change intensifies, it threatens to destabilise the very global systems — trade, migration, and food security — upon which these nations rely. So, investing in adaptation now is a necessary insurance policy for global economic stability.
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Geopolitics of climate finance
THE geopolitics of climate finance is an uncomfortable reality. Developed nations, responsible for the bulk of historical emissions, often shape the rules of climate finance to suit their interests. For instance, wealthy nations dictate how and where adaptation funds are spent, often aligning them with geopolitical strategies rather than the needs of the most vulnerable. Take, for example, the Middle East, where geopolitical tensions have influenced the allocation of climate finance. While nations like Jordan received support due to their strategic importance, neighbouring countries embroiled in conflict often fall through the cracks.
This issue is especially problematic when considering the geopolitical constraints faced by countries in regions such as sub-Saharan Africa. Political instability in places like Sudan or the Democratic Republic of the Congo makes it nearly impossible for these nations to access adaptation finance, even as they endure the most of climate impacts. Developed countries, while acknowledging the moral imperative, are often more concerned with ensuring political stability and safeguarding their own supply chains.
And herein lies the paradox. The same nations that are contributing the least to the problem are being asked to adapt the most — with insufficient help from those who caused the crisis in the first place.
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The path forward
WHILE geopolitical factors often dictate how and where adaptation funds are deployed — these challenges should not overshadow the available solutions. Addressing these political and financial hurdles is essential if we are to transition from theoretical discussions to practical, equitable solutions that truly bridge the adaptation finance gap.
Instead of perpetuating a debt-based model, we must advocate for adaptation finance that prioritises grants or concessional loans. But grants alone are not the silver bullet. We need a hybrid financing model that blends grants with low-interest loans, public-private partnerships, and climate bonds, ensuring that financial mechanisms are aligned with the realities on the ground. The international community must also invest in capacity-building initiatives to help countries in the Global South better utilise adaptation finance.
International support should also focus on regional collaboration in adaptation. Cross-border initiatives like the Ganges-Brahmaputra-Meghna basin cooperation could provide more holistic adaptation solutions for countries like Bangladesh, India and Nepal, which face shared climate challenges.
Transparency is another key issue. In many cases, adaptation funds are not used efficiently, either due to corruption or mismanagement. For instance, according to Transparency International Bangladesh, about 35 per cent of adaptation funds are misappropriated through bribery and mismanagement, leading to incomplete or poorly executed projects. A concerted effort must be made to ensure that financial flows are monitored and that adaptation projects are subjected to rigorous accountability standards.
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Successful adaptation
DESPITE the challenges, there are success stories that illustrate the potential of well-funded, community-driven adaptation efforts. Bangladesh’s Floating Gardens and the Cyclone Preparedness Programme are just two examples where adaptation finance has made a tangible difference in resilience-building.
But these examples are not just local successes; they offer scalable solutions. The Floating Gardens model could be adapted for other flood-prone regions worldwide. Similarly, the Cyclone Preparedness Programme — through its collaborative, multi-stakeholder approach—can serve as a blueprint for other nations facing similar risks from extreme weather.
Similarly, Indonesia’s Jakarta Flood Early Warning System and Uganda’s ecosystem-based adaptation initiatives show how community engagement, local knowledge, and technological innovation can combine to create effective adaptation projects. The challenge, then, is not in the viability of adaptation but in the availability of adequate, equitable financing mechanisms.
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Role of loss and damage finance
ONE glaring omission in the current climate finance discourse is the growing demand for ‘loss and damage’ finance. Unlike adaptation finance, which is designed to prepare for future climate impacts, loss and damage finance addresses the irreversible impacts of climate change — those that adaptation efforts can no longer prevent.
The establishment of a Loss and Damage Fund at COP27 was a historic moment, but the real test lies in ensuring that wealthy nations follow through on their financial commitments. Loss and damage finance is a necessity for nations like Bangladesh, where climate disasters have already led to massive, irreversible losses. Without a robust system to address these damages, vulnerable nations will continue to suffer disproportionately from a crisis they did not cause.
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Rectifying global inequities
ADAPTATION finance is not merely a tool for economic recovery — it is a critical pathway for advancing climate justice. Climate justice goes beyond financial assistance; it demands systemic change in how funds are allocated and utilized. This ensures that marginalised voices, particularly in the Global South, are included in decision-making processes. Addressing these inequities can bridge the gap between those who caused the climate crisis and those who suffer its worst effects, rectifying historical imbalances and fostering a more resilient and just global system.
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From words to action
WE ARE stuck halfway between lofty promises and on-the-ground realities. The global response to climate change has largely been one of mitigation, but adaptation finance must be scaled up immediately if we are to protect the world’s most vulnerable populations. International bodies like the Global Adaptation Commission and UNFCCC must prioritise creating new, easily accessible financing tools, while developed nations should meet their $100 billion climate finance pledge through direct grants rather than loans. The path forward requires a rethinking of how we structure adaptation finance — not as charity, but as a necessary investment in a stable global future.
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Md Zahurul Al Mamun is a climate change researcher and analyst.