Designing The New Finance Architecture For Adaptation And Resilience
The underfinancing of climate adaptation presents systemic risks to global economic stability. Particularly the most climate-vulnerable nations could lose over 100% of their GDP from disasters in 2024 (CISL 2023). Most recent studies show that a 1-degree Celsius rise in global temperature lowers world GDP by 12% (National Bureau of Economics 2024). Despite this urgency, less than 5% of global climate finance tracked is directed towards adaptation and resilience, highlighting a critical gap in the collective response to climate change. Of the USD 63 billion adaptation finance tracked in 2021-2022, only 2% came from the private sector, underscoring a significant untapped potential for transformative change towards climate-resilient communities, businesses, and natural ecosystems (Climate Policy Initiative 2023). Nevertheless, the business opportunity for financing adaptation and resilience could bolster the global economy by up to USD7 trillion by 2030 (Global Center on Adaptation 2019). However, the current adaptation finance landscape is impeded by several barriers, including a lack of collaboration among financing actors, insufficient enabling policies and regulations to incentivize private finance flows, and the absence of a climate information architecture with standardized frameworks and metrics to guide investments in climate resilience. The G20’s commitment is crucial in creating the necessary market signals to mobilize and scale finance for adaptation and resilience by facilitating an environment that encourages private sector engagement, supporting the development of innovative financial instruments, and advocating for policies that enable investment in climate resilience, the G20 can significantly contribute to safeguarding global economic stability and ensuring a climate-resilient future. This policy brief advocates for the G20 to spearhead a financial system transformation that caters towards the designing of the new finance architecture for adaptation and resilience.
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