Climate Resilience Investment: A Critical Need for the Global South
Heatwaves, polluted air, and floods are no longer isolated events but a central security challenge, regularly reshaping risk across emerging economies. Governments and investors now face a choice: continue absorbing escalating losses or proactively invest in adaptation measures. According to a report by Sara Lemniei, CEO of SLK Capital, adaptation offers the fastest and most cost-effective path forward, reducing physical climate risk before it spirals into a fiscal, health, and security crisis.
Despite its importance, adaptation remains severely underfinanced. Currently, only up to 5 percent of global private-sector climate finance flows to adaptation, and a mere 10 percent of disaster losses in low-income countries are insured. This lack of investment is particularly concerning given the rising cost of inaction. Extreme weather disproportionately impacts the Global South, where rapid urbanization, population growth, and limited financial resources exacerbate vulnerability.
The consequences of failing to adapt are significant. Sovereign credit profiles deteriorate, borrowing costs increase, and governments are forced into a cycle of crisis management, diverting funds from long-term strategic investments. Conversely, adaptation stabilizes revenues, protects assets, and reduces volatility, ultimately preserving returns and strengthening productivity and competitiveness.
The City as the Epicenter of Adaptation
While adaptation efforts often take the form of individual projects, their true impact is realized at the city level. Integrated infrastructure and service design are crucial for embedding resilience over time. By 2050, African cities are projected to house nearly 950 million additional residents, demanding resilient infrastructure. The choices made now will shape global stability for decades to come.
Urban systems – hospitals, water utilities, energy grids, transport networks, and food distribution – are interconnected. Failures in one area can cascade across the economy, leading to fiscal pressure and reactive spending on relief and reconstruction. When cities adapt, the benefits compound across sectors.
Financing the Transition: Blended Capital and Risk-Sharing
Significant gains can be achieved by financing resilient cities and systems at scale, utilizing blended capital and risk-sharing mechanisms to mobilize additional investment. Well-designed adaptation consistently delivers high returns in development finance, with every dollar invested potentially generating more than $10.50 in economic benefits through avoided losses, productivity gains, and fiscal stabilization.
The health benefits of adaptation are particularly compelling. In Bangladesh, investments in arsenic-free water infrastructure resulted in reductions in cardiovascular diseases and cancer, leading to increased worker productivity and lower healthcare costs. Building on this, the Belém Health Action Plan, adopted at COP30 in November 2025, provides a roadmap for integrating climate resilience directly into health systems, framing adaptation as a form of health-system insurance.
A Case Study: Kenya’s Climate-Smart Agriculture Program
The intersection of agriculture, water, and cities represents a powerful leverage point for adaptation. Sub-Saharan Africa loses an estimated $4 billion annually to post-harvest losses, largely due to climate-related spoilage and water stress. These losses ripple through urban economies, driving up food prices and increasing import dependence.
Kenya’s $250-million Climate-Smart Agriculture program offers a replicable model for financing climate-resilient food systems. Supported by the World Bank, the African Development Bank, and private financiers, the program blends concessional and commercial capital to de-risk investments in drought-resistant crops, cold storage, and micro-irrigation. Over six years, over 771,000 smallholder farmers, 55 percent of whom are women, have benefited, with average yields increasing by 24 percent.
Addressing the Investment Gap
Skeptics argue that adaptation returns are indirect and difficult to measure. However, markets already price adaptation through aggregate risk exposure across portfolios and economies. The challenge lies in aligning incentives and sharing risk to ensure that investors benefit from the economy-wide advantages of adaptation.
Initiatives like the Climate Investment Fund for Pakistan (CIFPAK), launched in 2024, are demonstrating how blended finance can mitigate early-stage development risks and attract private investment in adaptation projects across agriculture, water, infrastructure, and climate-linked financial services.
Proven Adaptation Measures and the Need for Execution
Effective urban adaptation measures – urban forests, green roofs, cool corridors, and modern storm-drainage systems – are well-established. These interventions reduce heat stress and flood risk while improving air quality, functioning as core infrastructure rather than mere aesthetic upgrades. Cities like Ahmedabad, India, and Medellín, Colombia, are demonstrating the durable health, economic, and social returns of embedding adaptation at scale.
The primary constraint is execution. Closing the gap requires robust deployment architectures – pipelines, intermediaries, and risk-sharing mechanisms – to translate adaptation needs into tangible transactions. The Adaptation Finance Window for Africa, launched by the Investment Mobilisation Collaboration Alliance, has committed €40 million ($47 million) to de-risking private investment in climate-resilient infrastructure.
For investors, adaptation is increasingly a matter of valuation. Those with long-duration infrastructure and real asset exposure have long factored physical climate risk into their analyses. Now, shorter-horizon capital is also being forced to price risks previously considered distant. When structured effectively, adaptation protects service continuity and cash flows, delivering more predictable returns by reducing compounding losses.
Key features for scaling adaptation investment include risk-sharing through guarantees and insurance, standardization through repeatable structures and metrics, and local-currency alignment. The coming decade will determine whether the Global South builds climate-resilient systems or deepens its vulnerability. This is ultimately a capital allocation decision with profound long-term implications.
