The paper examines why adaptation finance under the UNFCCC remains misaligned with the priorities of climate-vulnerable developing countries despite formal commitments to equity, vulnerability and country ownership. Focusing on the Adaptation Fund (AF) and Green Climate Fund (GCF), it argues that governance structures create interconnected problems of underfunding, restricted access and limited transformative outcomes.

Context: Why adaptation finance matters for climate governance

The report argues that adaptation finance is a key test of whether climate governance aligns with Global South priorities. Climate finance mechanisms shape priorities, eligibility and authority between donors and recipients. Developing countries are projected to require US$310–365 billion annually for adaptation by 2035, while current international public adaptation finance remains at least twelve times lower. Because adaptation mainly addresses local impacts rather than global benefits, donor incentives remain weaker than for mitigation finance.

Voluntarism and ambiguity

The paper finds that adaptation finance remains underfunded because UNFCCC and Paris Agreement commitments are non-binding and allow donor discretion over contribution volumes, reporting and financing methods. OECD estimates showed climate finance reached US$83.3 billion in 2020, below the US$100 billion target, with adaptation receiving only a limited share.

Ambiguity over grants versus loans creates additional risks because many adaptation projects generate limited revenue, making loan financing unsuitable and potentially debt-increasing for developing countries.

The AF’s 2% levy on Certified Emission Reductions was intended to create predictable funding independent of donor decisions. However, carbon market collapse after 2012 reduced revenues significantly, forcing greater reliance on voluntary contributions. The report concludes that voluntarism prioritises donor flexibility over recipient certainty and weakens long-term adaptation planning.

Procedural barriers to access: Readiness filters

The report finds that institutional readiness strongly influences access to adaptation finance. Accreditation requirements, fiduciary safeguards and administrative procedures advantage countries with stronger governance systems rather than those with the highest vulnerability.

Studies cited show highly vulnerable countries do not consistently receive the most funding. The paper describes this as a “Low Funding Trap”, where weak institutional capacity limits finance access and perpetuates vulnerability.

Small Island Developing States face particular difficulties due to complex accreditation and documentation requirements. African countries accounted for roughly one-third of approved readiness support but received only around 15% of requested readiness funding. The report recommends context-sensitive accreditation and recognition of local governance systems alongside fiduciary standards.

Project-based adaptation and the reproduction of vulnerability

The paper argues that adaptation finance largely follows traditional development aid models focused on short-term, project-based interventions. International intermediaries continue to dominate implementation and decision-making.

As of January 2026, 109 of 153 GCF adaptation projects, representing 71% of committed adaptation finance, were implemented through international accredited entities. Within the AF, 56.5% of cumulative funding had been channelled through multilateral implementing entities compared with 19.5% through national implementing entities. The report argues this limits local ownership and reduces transformative outcomes.

Reforms and their limits

Enhanced Direct Access (EDA) pilots increased local participation and devolved some funding authority. The AF provides finance exclusively through grants, while GCF adaptation projects are predominantly grant-funded in low-income countries. UNEP reported grants represented 39% of international public adaptation finance in 2022–2023.

However, only nine EDA proposals had been approved, and entities still faced the same accreditation barriers. The report argues reforms remain constrained by donor-driven and neoliberal governance structures.

Conclusion

The report concludes that adaptation finance governance remains structurally misaligned with Global South priorities because of interconnected problems of underfunding, institutional inaccessibility and limited project-level transformation. It argues that stronger international review mechanisms, clearer contribution benchmarks and greater recognition of local governance systems are required to reduce inequitable access and improve long-term adaptation outcomes.