Against the backdrop of accelerating global climate risks, adaptation finance is evolving from a relatively underdeveloped component of climate governance into a central issue in international climate negotiations, public investment, and green finance system development. Unlike mitigation finance, which primarily supports greenhouse gas emissions reduction, adaptation finance focuses on reducing the adverse impacts of climate change on socioeconomic systems and natural ecosystems through measures such as risk identification, resilient infrastructure development, ecosystem restoration, agricultural and water security enhancement, public health protection, disaster prevention and reduction, and social protection systems.

According to the Adaptation Gap Report 2025 released by the United Nations Environment Programme, climate-related extreme events caused average annual global losses of approximately USD 140 billion between 2000 and 2019, and these losses could rise to USD 1.7–3.1 trillion annually by 2050.[1] Adaptation finance has therefore become a critical financing issue closely linked to global climate resilience, public safety, infrastructure stability, and sustainable development.

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I. Global Demand for and Progress in Adaptation Finance

Overall, international adaptation finance is shifting from a planning-oriented approach toward implementation- and outcome-oriented financing. On the one hand, the global adaptation policy framework continues to improve. The Global Goal on Adaptation, the Belém Adaptation Indicators, adaptation finance expansion targets, and the Baku-to-Belém USD 1.3 trillion Roadmap together form a new policy foundation for adaptation action and climate finance mobilization. On the other hand, the adaptation finance gap remains substantial. International public finance, concessional finance, and multilateral development bank financing remain the primary sources of funding. Although private capital has received increasing attention, its actual contribution remains limited due to the strong public-good characteristics and insufficient commercial returns of many adaptation projects.

(1) Continuous Improvement of the International Adaptation Policy Framework: Global Adaptation Governance Is Moving from Goal Setting toward Indicator-Based Assessment and Financing Pathways

International adaptation finance is gradually evolving from broad commitments toward more specific financing pathways with measurable targets and indicators.

In December 2023, COP28/CMA5 adopted the UAE Framework for Global Climate Resilience, which established thematic and dimensional targets under the Global Goal on Adaptation, covering water resources, food and agriculture, health, ecosystems and biodiversity, infrastructure and human settlements, poverty reduction and livelihoods, and cultural heritage. During CMA7 in 2025, Parties further adopted 59 Belém Adaptation Indicators to measure progress under the UAE Framework for Global Climate Resilience. These indicators not only assess whether countries are formulating and implementing adaptation actions, but also place greater emphasis on risk identification, vulnerability reduction, resilience enhancement, benefits for vulnerable groups, and implementation support measures.

As a result, international adaptation governance is shifting from focusing on whether adaptation actions are undertaken to whether such actions are measurable, reportable, and comparable. This transition also provides the basis for adaptation finance to move beyond input-based accounting toward resilience outcome assessment.

Regarding broader climate finance goals, COP29 in Baku in November 2024 adopted a new collective quantified climate finance goal, proposing that developed countries should take the lead in providing and mobilizing at least USD 300 billion annually in climate finance for developing countries by 2035. At the same time, Parties agreed to work jointly toward scaling climate finance from public and private sources for developing countries to at least USD 1.3 trillion annually by 2035.

In support of this objective, the United Nations Framework Convention on Climate Change continued advancing the Baku-to-Belém USD 1.3 trillion Roadmap in 2025, emphasizing that expanded financing should support low-emission and climate-resilient development pathways, facilitate nationally determined contributions (NDCs) and national adaptation plans (NAPs), and reduce the burden on developing countries through grants, concessional finance, non-debt instruments, and fiscal space creation.

With regard to adaptation finance specifically, the outcomes of COP30 in Belém called for efforts to at least triple adaptation finance by 2035. Using the Glasgow Climate Pact target of approximately USD 40 billion in adaptation finance by 2025 as a benchmark, adaptation finance would therefore need to increase to roughly USD 120 billion annually in the future.

At the national level, adaptation planning coverage has improved substantially, although implementation and updating remain insufficient. According to UNEP’s Adaptation Gap Report 2025, by August 2025, 172 out of 197 countries worldwide — approximately 87% — had national adaptation plans, strategies, or policy instruments in place. Only 25 countries had yet to formulate such instruments, and 21 of them had already initiated the process. However, many existing adaptation plans still face effectiveness challenges. In 36 countries, adaptation plans have either expired or remained unupdated for more than ten years, limiting their ability to guide responses to current and future climate risks.

Overall, the international community is moving beyond simply increasing funding volumes toward improving the quality, structure, and implementation mechanisms of adaptation finance. Greater attention is now being paid to whether financing can effectively support the transformation of national adaptation plans into bankable projects, avoid exacerbating debt burdens in developing countries, and ultimately generate measurable outcomes in risk reduction and resilience enhancement. The advancement of the Belém Adaptation Indicators, adaptation finance scaling targets, and the Baku-to-Belém Roadmap also suggests that future adaptation finance will place stronger emphasis on the linkage between financial flows, project quality, and implementation effectiveness.

(2) The Adaptation Finance Gap in Developing Countries Remains Enormous, with Public Finance Serving as the Main Channel

From the perspective of financing needs, the adaptation finance gap in developing countries remains extremely large. The Adaptation Gap Report 2025 estimates that by 2035, annual adaptation financing needs in developing countries will reach approximately USD 310–365 billion. In contrast, international public adaptation finance provided by developed countries to developing countries amounted to only about USD 26 billion in 2023. Adaptation financing needs are therefore already 12–14 times greater than existing financial flows, leaving an annual financing gap of approximately USD 284–339 billion. Even if the Glasgow Climate Pact target of USD 40 billion annually by 2025 is achieved, the gap would only narrow marginally and would still fall far short of actual needs.

Figure 1. Comparison Between Adaptation Finance Needs and International Adaptation Finance in Developing Countries

Although total international climate finance has increased, the share allocated to adaptation remains low. According to the Climate Policy Initiative, global climate finance reached USD 1.9 trillion in 2023, representing approximately 15% year-on-year growth and a historic high.[2] However, only USD 64.6 billion was directed toward climate adaptation objectives, accounting for just 3.4% of total climate finance. An additional USD 57.9 billion supported projects with both mitigation and adaptation benefits, accounting for 3.0%.

This demonstrates that adaptation finance remains a weak link within global climate finance allocation and urgently requires expanded public finance mobilization, greater private-sector participation, and stronger support for vulnerable regions and critical sectors to enhance global climate resilience.

Figure 2. Structure of Global Climate Finance in 2023

Public finance continues to serve as the primary channel for international adaptation finance, with multilateral development banks (MDBs) playing a critical role. According to CPI data, USD 58 billion of adaptation finance in 2023 originated from public sources, accounting for 89.8% of total adaptation finance.

MDBs — the “main force” within public climate finance — issued a joint statement during COP29, proposing for the first time a climate finance target for 2030: annual climate finance provision to all clients would reach USD 170 billion by 2030, including USD 49 billion for adaptation finance. During COP30, MDBs reaffirmed this target and released quantified progress data in September 2025: MDB climate finance reached USD 137 billion in 2024, up 10% year-on-year, including USD 31.3 billion in adaptation finance, accounting for 22.8% of total MDB climate finance.[3] Of this adaptation finance, USD 26.3 billion flowed to low- and middle-income economies, while USD 5 billion went to high-income economies.

MDBs are increasingly becoming a critical pillar for scaling adaptation finance, particularly in areas such as flood prevention, water security, resilient infrastructure, climate-smart agriculture, and ecosystem restoration, which typically require large-scale investment and long payback periods.

By comparison, private capital continues to play only a limited role in adaptation finance. UNEP estimates that currently traceable private adaptation finance amounts to approximately USD 5 billion annually. Even under favorable policy support and blended finance arrangements, the private sector’s potential contribution to public adaptation priorities is estimated at only around USD 50 billion annually.

The main reason is that many adaptation projects possess strong public-good characteristics. Flood management, coastal protection, meteorological early-warning systems, public health infrastructure, and ecosystem restoration often lack stable commercial cash flows, making it difficult for market-based returns alone to attract sufficient private investment.

In addition, although climate finance provided and mobilized by developed countries for developing countries has increased overall, adaptation finance still accounts for only a limited share. According to the latest data from the Organisation for Economic Co-operation and Development, climate finance provided and mobilized by developed countries for developing countries reached USD 132.8 billion in 2023 and further increased to USD 136.7 billion in 2024, exceeding the USD 100 billion annual target for three consecutive years since 2022.[4] Structurally, however, climate finance from developed countries continues to flow predominantly toward mitigation, while adaptation finance accounted for only around one-quarter of total climate finance in both 2023 and 2024.

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II. Domestic Demand for and Progress in Adaptation Finance in China

Overall, China’s adaptation finance framework is gradually improving and is supported by a relatively strong financial foundation, although significant challenges remain regarding the identification and classification of adaptation-related financing.

On the one hand, the National Climate Change Adaptation Strategy 2035, provincial adaptation action plans, and climate-resilient city pilot programs together constitute China’s domestic adaptation policy system. On the other hand, adaptation finance remains largely embedded within green loans, green bonds, infrastructure investment, water conservancy financing, ecological restoration funding, and disaster prevention and mitigation expenditures, rather than existing as an independent, clearly defined, statistically traceable, and assessable financing system.

(1) China Has Established an Adaptation Policy Framework Coordinated Across National Strategy, Provincial Action, and Urban Pilot Programs

The policy foundation for China’s adaptation finance is the National Climate Change Adaptation Strategy 2035, which proposes that by 2035 China will achieve internationally advanced climate monitoring and early-warning capabilities, establish a mature climate risk management and prevention system, effectively control major climate-related disaster risks, significantly enhance society-wide climate adaptation capacity, and basically build a climate-resilient society.

The Strategy also explicitly requires provincial-level ecological and environmental authorities to lead the formulation of provincial adaptation action plans, thereby providing the policy basis for future local adaptation project pipelines and financing demand identification.

Based on this national strategy, local governments have accelerated the development of adaptation action plans and climate-resilient city initiatives. On June 25, 2025, China’s Ministry of Ecology and Environment of the People’s Republic of China released the Progress Report on Climate Change Adaptation in China (2024), stating that government departments and local authorities were continuing to implement the National Climate Change Adaptation Strategy 2035 by advancing adaptation priorities in areas such as climate monitoring and risk management, natural ecosystems, socioeconomic systems, regional coordination, and institutional safeguards.[5]

At the time of publication, 30 provinces, autonomous regions, municipalities, and the Xinjiang Production and Construction Corps had issued provincial adaptation action plans, while 39 pilot cities were actively exploring deeper climate-resilient urban development models. On October 30, 2025, the Ministry further announced that 31 provincial-level administrative regions had formulated and implemented adaptation action plans, while 39 cities were carrying out pilot climate-resilient city programs, indicating that a coordinated governance framework linking national strategy, provincial action, and urban pilots had largely taken shape.[6]

In addition, China’s NDCs have further elevated the policy importance of climate adaptation domestically. In November 2025, China submitted its 2035 Nationally Determined Contribution Report to the UNFCCC, explicitly proposing that a “climate-resilient society will be basically established” by 2035. The report also emphasized strengthening monitoring, early-warning, and risk assessment capacity; enhancing the adaptive capacity of natural ecosystems; and improving the climate resilience of socioeconomic systems and key regions.[7]

This demonstrates that climate adaptation has been integrated into China’s medium- and long-term climate governance framework.

(2) Green Finance and Climate Investment and Financing Pilots Provide an Important Financial Foundation for Adaptation Finance

China’s First Biennial Transparency Report on Climate Change, released in 2024, estimated that annual adaptation financing needs between 2021 and 2060 would average approximately RMB 1.6 trillion.[8] Before 2030, China plans to comprehensively implement adaptation actions across sectors and regions, including climate monitoring and risk management, ecosystem adaptation enhancement, socioeconomic resilience building, and regional climate adaptation planning.

This indicates that adaptation finance in China is not confined to a single sector, but instead spans water conservancy, agriculture, urban construction, transportation and energy, ecological restoration, public health, disaster prevention and reduction, and governance in key regions.

From the perspective of financial market development, China’s green finance market has continued to expand rapidly, providing an important foundation for adaptation finance. According to statistics from the People’s Bank of China, outstanding domestic and foreign currency green loans reached RMB 44.77 trillion by the end of the fourth quarter of 2025, representing year-on-year growth of 20.2% and an annual increase of RMB 7.72 trillion.[9] By the end of the first quarter of 2026, green loan balances had further increased to RMB 48.1 trillion, up 17.6% year-on-year.[10]

The green bond market has also created potential financing channels for adaptation-related investment. In 2025, China’s domestic green bond market issued 645 new green bonds with a total issuance volume of approximately RMB 1.078 trillion, exceeding the RMB 1 trillion threshold for the first time.[11] Both issuance volume and number increased significantly compared with 2024.

However, because current green loan and green bond statistics are primarily categorized according to green industries and project types, no independent adaptation finance identification label has yet been established, making it difficult to accurately calculate the actual scale of financing devoted specifically to climate adaptation.

Figure 3. Scale of China’s Green Loan and Green Bond Markets

Climate investment and financing pilot programs are increasingly becoming important platforms for market-based adaptation finance exploration in China. By the end of 2025, local climate investment and financing pilot project databases had accumulated and reserved more than 6,300 projects involving total planned investment exceeding RMB 4 trillion, while cumulative credit authorization reached approximately RMB 600 billion.[12]

This mechanism helps integrate local climate project pipelines, government-bank-enterprise coordination, and financial institution credit allocation. However, from the perspective of adaptation finance, these project databases still require clearer differentiation between mitigation-oriented and adaptation-oriented projects. In particular, projects related to flood prevention and drainage, urban flood management, meteorological early-warning systems, water security, agricultural resilience, ecosystem restoration, coastal protection, public health, and resilient infrastructure need to be more explicitly identified.

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III. Future Development Directions

First, greater emphasis should be placed on strengthening the role and implementation mechanisms of adaptation finance within the broader climate finance framework. Although total international climate finance has grown, adaptation finance still represents only a limited share, while the gap between adaptation financing needs and actual financial supply in developing countries remains substantial.

Future international climate negotiations should therefore not only emphasize expanding total climate finance volumes, but also more clearly define the position of adaptation finance within overall climate finance targets. Building on the Glasgow Climate Pact objective of doubling adaptation finance by 2025 and the Belém target of at least tripling adaptation finance by 2035, Parties should further clarify financing pathways, statistical methodologies, funding sources, and implementation assessment mechanisms to prevent adaptation finance from being overshadowed by mitigation finance and aggregate climate finance targets.

At the same time, the Belém Adaptation Indicators should be linked with adaptation finance targets, ensuring that financial commitments are evaluated not only in terms of funding scale, but also based on concrete outcomes such as risk reduction, resilience enhancement, and benefits to vulnerable populations.

Second, international cooperation should improve the concessionality, accessibility, and equity of adaptation finance. Since adaptation finance primarily serves developing countries and climate-vulnerable regions, and many adaptation projects have strong public-good characteristics with limited commercial returns, market-based financing alone cannot adequately meet demand.

Future efforts should therefore further strengthen the role of MDBs, climate funds, and development finance institutions, increase the share of adaptation finance within public climate finance, expand grants, concessional finance, and non-debt instruments, and prevent adaptation investment from exacerbating debt burdens in developing countries.

At the same time, mechanisms for adaptation finance application, approval, and project preparation support should be improved to enhance access for least developed countries, small island developing states, and climate-vulnerable countries. International financial support should also gradually move from isolated project-based funding toward systematic support for national adaptation plans, sectoral adaptation strategies, and regional resilience development, thereby helping developing countries transform adaptation planning into bankable, implementable, and assessable project pipelines.

Third, national-level identification standards and classification systems for adaptation finance should be improved. Adaptation finance has long faced challenges related to unclear boundaries, statistical difficulties, and limited performance measurement. Similar challenges exist within China’s green loans, green bonds, and climate investment and financing projects, where adaptation-related components are difficult to identify independently.

Future efforts could build upon the National Climate Change Adaptation Strategy 2035, the Green Finance Supported Projects Catalogue (2025 Edition), and China’s 2035 NDC targets, while drawing on the Belém Adaptation Indicators, the OECD climate adaptation investment framework, and climate resilience taxonomies to establish adaptation finance identification and classification standards.

Fourth, China’s green finance and climate investment systems should place greater emphasis on adaptation needs. China’s green loan market, green bond market, and climate investment pilot project databases have already achieved considerable scale, providing a strong foundation for adaptation finance development.

The next step should be to strengthen adaptation-oriented priorities within the existing green finance system by incorporating flood prevention and drainage, urban flood management, water security, meteorological early-warning systems, agricultural resilience, ecosystem restoration, coastal protection, public health, and resilient infrastructure into key support categories.

In particular, climate investment and financing pilot project databases could introduce adaptation project labels, estimate financing needs for adaptation projects, and encourage financial institutions to allocate fiscal subsidies, policy finance, concessional loans, green bonds, insurance instruments, and risk-sharing tools according to different project characteristics. This would gradually shift adaptation finance from an embedded support mechanism toward a clearer, more systematic, and more statistically traceable financing framework.

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References

[1] United Nations Environment Programme. Adaptation Gap Report 2025. 2025.

[2] Climate Policy Initiative – Global Landscape of Climate Finance 2025.

[3] European Investment Bank – Multilateral Development Banks Hit Record USD 137 Billion in Climate Finance.

[4] OECD – Developed Countries Exceed USD 100 Billion Climate Finance Goal for Third Consecutive Year.

[5] Ministry of Ecology and Environment of China – Progress Report on Climate Change Adaptation in China (2024).

[6] Ministry of Ecology and Environment of China – October Press Conference Transcript.

[7] China’s 2035 Nationally Determined Contribution Report.

[8] First Biennial Transparency Report of the People’s Republic of China on Climate Change.

[9] People’s Bank of China – Statistical Report on Loan Allocation of Financial Institutions in Q4 2025.

[10] People’s Daily – Strong Loan Support for Technology Enterprises in Q1 2026.

[11] IIGF Annual Report – 2025 Green Bond Progress Report.

[12] China News Service – China’s Climate Investment and Financing Pilot Projects Exceed 6,300.

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Author:
He Yuxuan, Research Fellow, International Institute of Green Finance (IIGF), Central University of Finance and Economics

Research Supervisor:
Liu Huixin, Executive Director of the Climate Finance Research Center, International Institute of Green Finance (IIGF), Central University of Finance and Economics

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