Introduction

The Climate Adaptation Investment Framework (CAIF) addresses the urgent need for increased investment to build resilience against the physical impacts of climate change, such as extreme heatwaves, droughts, and wildfires. In 2023, global losses from weather and climate-related disasters reached USD 281 billion, the majority of which were uninsured. Proactive adaptation investments, including climate-resilient infrastructure and improved agricultural practices, offer significant economic benefits, with benefit-cost ratios typically ranging from 2:1 to 10:1. One study identified a USD 1.8 trillion opportunity for worthwhile adaptation investments globally. However, a substantial gap exists between current finance flows, recorded in the tens of billions of dollars, and estimated annual needs in the hundreds of billions. For developing countries alone, annual adaptation needs are estimated between USD 130 billion and USD 415 billion until the 2030s.

Framing investment in adaptation

Investment and physical climate risk share a two-way relationship: climate risks affect investment returns, while targeted investments can reduce those risks by addressing hazards, exposure, and vulnerability. Barriers to autonomous adaptation by the private sector include behavioural biases, short-termism, and the public-good nature of many adaptation measures. Information gaps remain a critical hurdle, as many investors are unaware of the vulnerability of their assets to emerging or non-linear risks. The public sector plays a vital role in providing public goods like early warning systems and creating an enabling environment through regulation. Conversely, private investment is driven by profit motives but is often deterred by low perceived returns or lack of strategic direction from governments. Recorded private finance for adaptation remains limited, identified at just USD 4.7 billion annually between 2019 and 2022.

The Climate Adaptation Investment Framework

The CAIF is structured around six interlinked building blocks designed to help governments mobilise both public and private finance for resilience. The first block, strategic planning and policy coherence, emphasises the importance of National Adaptation Plans (NAPs) and the involvement of finance ministries to ensure adaptation is integrated into core fiscal decisions. Case studies include Colombia’s SISCLIMA and the Netherlands’ Delta Programme, the latter of which has allocated EUR 25 billion for flood protection between 2024 and 2037.

The second block, regulatory alignment, focuses on removing market distortions. Global agricultural support averages USD 851 billion per year, much of which could be redirected to incentivise resilience. Technical codes must also be updated; for example, Canada has launched initiatives to revise infrastructure standards for a changing climate. The third block, insurance and risk transfer, notes that while global losses reached USD 281 billion in 2023, only 40% were insured. In Europe, only 25% of catastrophe losses are covered. The report highlights the role of innovative tools like parametric insurance, exemplified by a programme restoring the Mesoamerican Reef following hurricanes.

The fourth block, public finance and investment, recommends integrating resilience into budgetary processes and using Life-Cycle Costing in procurement. The European Union has committed to ensuring 30% of its total expenditure contributes to climate objectives. The fifth block, sustainable finance, examines the growth of the GSSS bond market, where corporate issuance reached USD 2.3 trillion in 2023. Despite this, only 19% of such bonds were identified as having proceeds used for adaptation. The final block, support and incentives for private investment, covers de-risking instruments and innovation support. Examples include France 2030, a national plan investing in agri-food resilience, and business accelerators funded by the United States’ Inflation Reduction Act to encourage climate-resilient innovation.

Towards increased investment in adaptation

Accelerating investment requires a step-change similar to the rapid growth seen in the clean energy sector. Governments must move from planning to action by addressing data gaps and uneven policy implementation. The OECD intends to support this transition through analytical work on sequencing reforms and developing common metrics to measure the benefits of adaptation. International cooperation will be essential, particularly for developing countries facing limited fiscal space and high costs of capital. The framework serves as an iterative tool for self-evaluation and dialogue between the public and private sectors to identify and close domestic policy gaps.