The opportunity to move beyond 8% private finance for climate adaptation

Private finance for adaptation is lagging, with just 8% coming from business in 2022. The right policies can close this gap. At COP30, governments should make climate risk data open, weave private roles into National Adaptation Plans, and use procurement, regulation and innovative finance to reward resilience. Done well, adaptation will not be philanthropy but strategy - protecting economies and giving early movers an opportunity to shape markets.

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The numbers are stark and unforgiving. Between 2014 and 2023, extreme weather events inflicted US$2 trillion in economic losses globally, directly affecting the lives of 1.6 billion people. In the last two years alone, climate-related damages reached US$451 billion - a 19% increase that offers a foretaste of what a warming world will deliver with increasing regularity.

And yet, adaptation financing, the money that is meant to cushion the blow, is lagging substantially behind the threat.

While US$1.3 trillion was spent globally on climate mitigation in 2022, just US$76 billion was channelled into adaptation. That is less than a third of even the most conservative estimates of what is needed annually in developing countries only, which range from US$ 203-388 billion. Yet, while the private sector covered more than half of global mitigation finance that year - funds aimed at reducing emissions - it contributed just 8% to adaptation spending.

This isn't because adaptation doesn't matter to business. Quite the opposite.

Just ask shipping firms and manufacturers left stranded by the low water levels of the Rhine, Danube and Vistula in 2022, which forced cargo ships to operate at just 30-40% capacity and disrupted an US$80 billion trade artery. Or companies and entire industries affected by the historic Panama Canal drought in 2024, which forced authorities to slash daily ship transits and delay cargo worth billions - bottlenecking one of the world's most critical trade routes. Or further upstream, firms relying on semiconductors - the tiny chips embedded in everything from phones to AI systems - ask them if they aren't losing sleep out of concern for the mounting drought-stricken copper mines, where large amounts of water are needed for dust suppression and ore processing.

The list goes on, and the logic is simple: if your business depends on the movement of goods, the stability of inputs or the resilience of infrastructure - and all businesses do - then climate adaptation is not a 'nice to have', it is core risk management. Yet, despite this, adaptation continues to be largely put on tomorrow's budget line.

So why the persistent funding gap?

Part of the answer lies in the economic nature of adaptation itself. Unlike mitigation investments, which can yield direct, often profitable returns - think low-carbon transport, clean tech or energy efficiency upgrades - most adaptation investments operate as 'public goods' and are characterised by greater uncertainty. Their benefits are widespread, but their returns are hard to pinpoint, usually measured in disruptions avoided or disasters averted. Put simply, it is hard to monetise a flood that didn't happen, or book revenue on a shop that continues to exist because a wildfire didn't destroy it.

For private finance, that can pose a problem. It makes many adaptation investments unattractive, especially when risks are difficult to quantify, data is fragmented and returns don't show up on balance sheets. Often, all this leaves governments to pick up the tab. But that's far from the full picture, and it certainly doesn't mean that adaptation is a lost cause for investors.

With clearer data, the right regulatory incentives and innovative financing, we firmly believe this gap can be closed.

The tools exist, the opportunities are growing and the business case is waiting to be claimed.

First, through improved information. Investors, firms and insurers act more readily on risks they can anticipate and quantify. That requires consistent, accessible and transparent climate risk data. Governments should lead in making high-quality climate risk data publicly available and accessible, including relevant privately held data, with appropriate compensation. Standards bodies should continue to push for common definitions and metrics. And financial regulators should mandate companies to disclose their exposure to climate risks across operations and supply chains. The clearer the picture, the easier it will be for the private sector to adapt and invest.

Next, with the right incentives. Governments should embed the private sector's role into their National Adaptation Plans (NAPs) - government-led strategies that set out how countries will prepare for and respond to the impacts of climate change - not as an afterthought, but as a core partner. This means rewarding companies that invest in climate-resilient infrastructure or that design supply chains able to withstand extreme weather. While public procurement contracts currently remain focused on short-term costs, governments should make climate resilience a baseline requirement.

Meanwhile, regulators can spur innovation through 'safe spaces' like sandboxes and by clarifying antitrust exemptions for sustainability collaborations. And financial regulators should recognise the potential of climate-resilient assets to reduce risk in the long term and adapt lending requirements accordingly. Together, better information, institutional reforms and regulatory incentives can give firms and governments compelling reasons to adapt their own assets and, in turn, accelerate demand and investment.

Lastly, through innovative financing instruments. Multilateral development banks and development finance institutions can work with insurers and investors to scale up blended finance models, resilience bonds and insurance-linked mechanisms that absorb part of the risk and attract private capital.

Governments and intermediaries should also explore structured vehicles for adaptation bonds - with repayment tied to avoided losses or user-beneficiary payments - turning resilience into a cash flow, not just a moral imperative.

Insurers, meanwhile, have a wealth of data, modelling expertise and risk assessment capabilities that should be brought into public-private partnerships. By working with governments to map high-risk areas and co-invest in resilience upgrades, insurers can help prevent the very losses they're expected to cover - while keeping insurance markets functioning in places where coverage might otherwise retreat.

All of these levers must pull in the same direction. They won't align on their own.

At COP30 in Belém, Brazil, the challenge will be to move from diagnosing the gap to closing it. That means a coordinated global push to create the conditions where the private sector is not just encouraged but enabled to act. Climate adaptation cannot remain the sole responsibility of stretched public budgets. Nor can it be an afterthought - or poor cousin - in climate finance. It is where the consequences of climate change are most visible - and where the opportunity for resilience is most real.

Aligning private incentives with public goals is not just a policy fix. It's a competitive edge. The firms and economies that adapt early won't just weather the stocks - they'll shape the markets that follow.

2025 is a critical year for the Paris Agreement. Ten years on, we need to rethink how we frame the challenge. And seeing challenges differently is what business and we are all about.

ICC is committed to securing what businesses need at the upcoming climate negotiations, COP30, in Belém, Brazil. Learn more about our Opportunity of a Lifetime climate campaign and how to get involved.

This article is based on insights from the following two Oxera reports, commissioned by the International Chamber of Commerce.