What is climate adaptation?

Climate adaptation refers to adjusting policies, infrastructure and behaviours to reduce vulnerability to climate change impacts. Resilience involves strengthening systems to anticipate, absorb and recover from climate-related stresses. Physical risks are acute (sudden hazards such as flooding or cyclones) or chronic (slower impacts such as sea-level rise and heat stress), both capable of impairing asset values and undermining development.

Higher vulnerability in emerging markets

Emerging markets face heightened exposure to climate hazards and lower adaptive capacities. According to BMI, nearly all the 100 most at-risk jurisdictions out of 141 covered are emerging markets (p.4), with Myanmar, Nigeria and South Sudan facing the highest environmental-related risks. Pakistan and Egypt face severe water insecurity, India faces heatwave risk, and flooding risks are pronounced in east Africa, Bangladesh and Indonesia (p.4).

Financing gap for adaptation and resilience

As of early 2026, 75 countries had submitted National Adaptation Plans, up from 53 in 2023 (p.4). According to UNEP FI, emerging markets face an adaptation finance gap of between USD284 billion and USD339 billion per year to 2035, with financing requirements 12 to 14 times higher than available flows (p.4).

Taxonomies and frameworks introduced

Sustainable finance taxonomies provide classification criteria for adaptation projects. The EU Taxonomy includes climate adaptation as one of its six environmental objectives; emerging market taxonomies — including ASEAN, South African, Mexican and Brazilian — also include adaptation criteria (p.4). The Climate Bonds Initiative has developed a resilience taxonomy for use-of-proceeds instruments (p.4).

Role of labelled debt financing

Green, social and sustainability bonds help issuers diversify their investor base and strengthen sustainability credentials. Climate adaptation is one of sixteen project categories under ICMA’s Bond Principles (p.5). Adaptation use-of-proceeds typically finances infrastructure protecting from weather events, including flood defences, storm water management and structural resilience of buildings (p.5).

More GSS bonds allocating proceeds to adaptation

Bonds referencing adaptation as a use-of-proceeds accounted for an average of 20% of total labelled bond issuance since 2020, with USD230 billion raised in 2025 (p.6). Sovereigns and supranational issuers account for over two-thirds of such bonds, reflecting the public-funding nature of adaptation (p.6).

Despite rising focus, actual allocations to adaptation remain limited

Only 92 bonds where adaptation is the sole use-of-proceeds have been issued since 2015, totalling just under USD10 billion (p.7). Of Sustainable Fitch’s ICMA-mapped cohort of nearly 4,000 bonds, 485 — 12.5% of total — are mapped to climate change adaptation, with nearly 80% allocating between 0 and 10% of proceeds (p.7).

But adaptation and resilience implicit in other project categories

Resilience outcomes are frequently embedded in investments across housing, infrastructure and food security without formal recognition as adaptation finance. Adaptation overlaps with categories such as “affordable housing” and “food security”. Allianz Research highlighted poor tracking of “embedded adaptation”, where capex on retrofits or water efficiency is not captured in official statistics (p.8).

Expanding the adaptation finance universe

GGGI’s support to Ecuador demonstrated this: by recognising resilience potential from updated building codes and climate risk maps, Ecuador developed the world’s first sovereign financing framework for affordable and resilient housing (p.8). Sustainable Fitch’s Second-Party Opinion assessed alignment with ICMA principles as ‘Excellent’; with only 13% of Ecuadorians having home insurance, the approach is viewed positively (p.9). The report recommends starting from regulatory change to integrate resilience into financing frameworks with minimal disruption.