Heatwaves that overwhelm health systems, polluted air that shortens lives, and floods that disrupt water, electricity, and logistics now represent the central security challenge of our time. These shocks are no longer episodic. They are happening regularly, reshaping risk across emerging economies and becoming a central source of disruption.
As this takes place, governments and investors will need to choose whether to keep absorbing compounding losses or to invest upfront to prevent them. Of these two choices, adaptation offers the fastest and most cost-effective way forward; it reduces physical climate risk before it becomes a fiscal, health, and security crisis.
Yet despite its importance, adaptation remains the most underfinanced form of climate action. Only up to 5 percent of global private-sector climate finance flows to adaptation, and only around 10 percent of disaster losses in low-income countries are insured.
The cost of inaction is rising rapidly. Extreme weather shocks fall more heavily on the Global South, where rapid urbanization, demographic growth, and limited fiscal buffers magnify exposure and deepen system-wide fragility. Sovereign credit profiles deteriorate, borrowing costs rise, and governments are pushed into a cycle of crisis and emergency spending that crowds out long-term strategic investment.
Adaptation, however, stabilizes revenues, protects assets, and reduces volatility before losses materialize. Properly designed, it preserves returns while also strengthening productivity, competitiveness, and access to capital.
Adaptation is frequently advanced through individual projects, but its real impact is realized at the city level. Integrated infrastructure and service design is what embeds resilience over time. By 2050, African cities, for instance, will host nearly 950 million more residents than today, demanding resilient infrastructure. Whether that infrastructure locks in vulnerability or resilience will shape global stability for decades. Urban systems rely on hospitals, water utilities, energy grids, transport networks, and food distribution. When they fail, losses cascade across the economy. Those failures translate quickly into fiscal pressure, forcing governments to spend reactively on relief, reconstruction, and imports, rather than proactive investment in systems that strengthen resilience. When cities adapt, by contrast, benefits compound across sectors.
In the coming decades, the fastest gains will be derived from financing resilient cities and systems at scale, using blended capital and risk-sharing mechanisms to mobilize additional investment in adaptation and resilience.
Well-designed adaptation consistently delivers some of the highest returns in development finance. Every dollar invested in adaptation can generate more than $10.50 in economic benefits through avoided losses, productivity gains, and fiscal stabilization. The health dividend alone makes the case unavoidable. In Bangladesh, sustained investments in arsenic-free water infrastructure resulted in reductions in cardiovascular diseases and cancer, translating into higher worker productivity and lower healthcare costs. Under Brazil’s leadership, the Belém Health Action Plan, adopted in November 2025 at COP30 and launched with an initial three-hundred-million-dollar commitment from the Climate and Health Funders Coalition, provides a roadmap for embedding climate resilience directly into health systems, reframing adaptation as health-system insurance rather than discretionary spending.
The most powerful leverage point for adaptation lies at the intersection of agriculture, water, and cities. Sub-Saharan Africa loses an estimated four billion dollars annually to post-harvest losses, much of it driven by climate-related spoilage and water stress. These losses ripple quickly through urban economies, raising food prices, increasing import dependence, and straining household and public budgets. Kenya’s $250-million Climate-Smart Agriculture program offers a replicable blueprint for financing climate-resilient food systems at scale. Backed by the World Bank, the African Development Bank, and private financiers, it blends concessional and commercial capital to de-risk investments in drought-resistant crops, cold storage, and micro-irrigation. Over six years of implementation, over 771,000 smallholder farmers, 55 percent of whom are women, have benefited, with average yields increasing by 24 percent.
Skeptics argue that adaptation returns are indirect and difficult to observe through conventional measures of financial performance. At the project level, the observation challenge is real. At the system level, however, it is not. Markets price adaptation through aggregate risk exposure across portfolios, balance sheets, and economies, rather than individual projects. The challenge is not the returns from adaptation investment but the mismatch between who pays and who benefits. Adaptation generates economy-wide benefits that do not accrue to a single investor unless financial structures are designed to align incentives and share risk.
The financial architecture to support private investment in climate adaptation is already taking shape. Take the Climate Investment Fund for Pakistan, or CIFPAK. A United Kingdom and International Finance Corporation (IFC) blended adaptation facility launched in 2024, it combines concessional first-loss capital with IFC-managed investment and a separate technical assistance window. By mitigating early-stage development and structuring risks, it builds a pipeline of bankable adaptation transactions and mobilizes development finance institutions and private investors across agriculture, water, infrastructure, and climate-linked financial services.
The most effective urban adaptation measures are already well established. Urban forests, parks, green roofs, cool corridors, building-level cooling, reflective surfaces, lakes, and modern storm-drainage systems reduce heat stress and flood risk while improving air quality. These are not aesthetic upgrades; they function as core infrastructure that reduces risk and protects economic performance. Far from pilot projects, these interventions are now being integrated into citywide systems. Ahmedabad’s Heat Action Plan (India) and Medellín’s green corridors (Colombia) demonstrate how adaptation can deliver durable health, economic, and social returns when embedded at scale.
The binding constraint is execution. What remains missing is deployment architecture: the pipelines, intermediaries, and risk-sharing mechanisms that translate adaptation from need to transaction. Africa’s adaptation finance ecosystem is beginning to close this gap. The Adaptation Finance Window for Africa, launched by the Investment Mobilisation Collaboration Alliance (a global coalition of donor and development partners), has committed forty million euros (nearly $47 million) to de-risking private investment in climate-resilient infrastructure, using catalytic capital.
For investors, adaptation is no longer a question of values but of valuation. Investors with exposure to long-duration infrastructure and real assets have embedded physical climate risk into asset analysis for years. What has changed is breadth. Shorter-horizon capital is now being forced to price risks once assumed to sit safely beyond typical holding periods. When structured well, adaptation protects service continuity and cash flows, delivering more predictable returns by reducing compounding losses.
Three features now determine whether adaptation becomes investable at scale: risk-sharing through guarantees, first-loss tranches, and insurance; standardization through repeatable structures and credible metrics; and local-currency alignment, since adaptation revenues are inherently domestic.
The coming decade will determine whether the Global South builds infrastructure that deepens climate vulnerability or establishes the foundations for resilient systems that unlock prosperity. At its core, this is a capital allocation decision with long-term implications for risk and returns. The Global South represents trillions of dollars in investment across infrastructure, systems, and services. Whether those assets appreciate or deteriorate as climate impacts intensify will depend on whether adaptation is embedded at the point of allocation. Mitigation remains essential, but without adaptation, both resilience and returns will remain fragile.
Sara Lemniei is the chief executive officer of SLK Capital. She has two decades of experience across investment banking, principal investing, and financial and strategic advisory.
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Image: 21 January 2026, Kenya, Nairobi: The Nairobi Expressway meanders past the Central Business District (CBD) and the new office buildings of Westlands. The road leads to the International Airport and was built as a public-private project by the Government of Kenya and the China Road and Bridge Corporation (CRBC), a Chinese state-owned construction company. Foreign Minister Wadephul is currently on a visit to the city. Photo: Sebastian Christoph Gollnow/dpa
