Underfinanced.
Underprepared.
Inadequate investment andplanning on climate adaptation
leaves world exposed

Executive Summary

Adaptation Gap Report 2023

Adaptation Gap Report 2023: Underfinanced. Underprepared.
© 2023 United Nations Environment Programme
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Supported by:Underfinanced.
Underprepared.
Inadequate investment andplanning on climate adaptation
leaves world exposed

Executive Summary

Adaptation Gap Report 2023

Adaptation Gap Report 2023: Underfinanced. Underprepared.

Executive summary

Despite the clear signs of accelerating climate risks
and impacts worldwide, the adaptation finance gap iswidening and now stands at between US$194 billion
and US$366 billion per year. Adaptation finance needs
are 10–18 times as great as current international public
adaptation finance flows – at least 50 per cent higher thanpreviously estimated.
This is the main conclusion of a comprehensive assessmentof the literature and new analyses to provide updated
estimates of the costs and needs of adaptation in developing
countries, as well as the international finance flows required
to address these needs. The report also provides updates
on adaptation planning and implementation and concludes
that global progress on adaptation is slowing rather thanshowing the urgently needed acceleration.
In view of ever-increasing weather extremes such as amulti-year drought in East Africa, flooding in China andEurope, and extreme heat and wildfires in the United Statesof America and Canada, among others, narrowing theadaptation finance gap is of particular importance becauseof the high benefits that investments in adaptation can offer
in terms of reducing climate risks and improving equity andclimate justice. Left unchecked however, increasing climate
risks will inevitably lead to more climate-related losses
and damages. Therefore, the Adaptation Gap Report 2023
(AGR 2023) also focuses on loss and damage to support
Parties in the negotiations following the decision at thetwenty-seventh session of the Conference of the Parties
to the United Nations Framework Convention on Climate
Change (COP 27) in Sharm El-Sheikh to establish a loss
and damage fund and funding arrangements for vulnerable
developing countries.

Global temperatures and climate impacts and risks
continue to rise, highlighting the urgent need for
rapid acceleration of global adaptation action.
Current climate action is woefully inadequate to meet thetemperature and adaptation goals of the Paris Agreement.
While global average temperatures are already exceeding
1.1°C above pre-industrial levels, current plans reflected in
the nationally determined contributions (NDCs) are putting
us on a path towards 2.4°C–2.6°C by the end of the century.

1

IV

Even if the rise in temperature eventually slows as a resultof more ambitious collective climate change mitigation
efforts, climate risks will accelerate with every fraction of adegree because of the compounding and cascading natureof climate-related impacts.
In addition, the Intergovernmental Panel on Climate Change(IPCC) concludes that residual climate risks – that is risks
remaining after ambitious adaptation efforts – will persist
even if the Paris Agreement goals are reached. Residual
climate risks, in turn, will inevitably lead to both economic
and non-economic losses and damages (figure ES.1). This
demonstrates the importance of accelerating and scaling
up both mitigation and adaptation action, to respectively
avert catastrophic climate change and minimize theclimate impacts that remain. In addition, more focus must
be placed on anticipatory, just and effective adaptation
action and support.

One out of six countries still does not have a national
adaptation planning instrument and more must be
done to close the remaining gap.
Five out of six Parties to the United Nations Framework
Convention on Climate Change (UNFCCC) have establishedat least one national adaptation plan, strategy or policy,
and just under half of them have two or more nationallevel instruments, which serve to replace or update
the initial ones (figure ES.2). Moreover, 25 per cent ofcountries have put in place legal instruments that require
national governments to plan for adaptation. There has
also been significant improvement in certain aspects ofthe potential adequacy and effectiveness of adaptation
planning 1 since 2021. Both findings suggest a growing
determination to address climate risks, but more needs tobe done to ensure implementation of planning instruments.
Meanwhile, 15 per cent of Parties still do not have a national
adaptation planning instrument, and the rate of increase
dropped from 4 per cent to 1 per cent in 2022. While halfof the 29 countries without any such instrument are in theprocess of developing one, most of them are particularly
vulnerable to climate impacts, and more must be done tosupport them to close the remaining gap faster.

In the absence of an agreed definition, potential adequacy and effectiveness of national adaptation planning processes are assessed through using
comprehensiveness, inclusiveness, implementability, integration, and monitoring and evaluation as proxy metrics.

Executive Summary

Figure ES.1 The conceptual landscape of the Adaptation Gap Report series: connecting temperature change and levels ofclimate risk and adaptation with the international climate negotiations
A. Global surface temperature change
relative to the period 1850–1900

5.0

B. Risk levels at the end of the century
under contrasting emission scenarios
and a hypothetical adaptation scenario

Projections fordifferent scenarios

Risk level
without
adaptation

Very high

SSP5-8.5
SSP3-7.0
SSP2-4.5
SSP1-2.6
SSP1-1.9

°C

3.0

2.0
1.5

Residualrisksremaining
after
adaptation(black arrow)

Moderate
Present-day
risk levels

1.0

0
1950

Risks
avoidedthrough
adaptation(white arrow)High

IPCC risk scale

4.0

2000

2050

2100

Undetectable

C. Connection with the international
climate negotiations

Negotiations on
adaptation financewill influence theextent to whichdeveloping countries
are able to adapt.

Negotiations onloss and damage
will help
developing countries
address unavoided
residual risks.

These negotiations
are framed by the
global goal on
adaptation and theglobal stocktake(section 1.3).

Low High

Emission scenario
Source: Panel A inspired by IPCC (2022, 2023). https://www.ipcc.ch/report/ar6/syr/figures/figure-spm-4 and https://www.ipcc.ch/report/ar6/wg1/figures/summary-for-policymakers/. Panels B and C: Authors’ own elaboration.
Note: SSP stands for shared socioeconomic pathway.

Figure ES.2 Number of national adaptation planning instruments published globally each year, as at 5 August 2023
30

Number of countries

25
20
15
10
5

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

1st adaptation planning instrument

2nd adaptation planning instrument

3rd adaptation planning instrument

4th(+) adaptation planning instrument

2020

2022 2023(up to5 Aug)

V

Adaptation Gap Report 2023: Underfinanced. Underprepared.

Progress in adaptation implementation in developing
countries is plateauing.

This means that the gap between implementing adaptation
actions and the accelerating climate risks is widening.

The number of adaptation actions supported through thefour international climate funds 2 was lower in 2022 thanin the previous year but their value has been rising due
to investments in very large projects (figure ES.3). This
probably does not reflect a trend, but rather points tofluctuations driven by non-climate-related events such as
COVID-19 and the war in Ukraine. While there is significant
variability in both value and number of new projects, thefinancial value continues to grow whereas the number of
new projects appears to have stagnated for the past decade.

Considering that the AGR’s first detailed analysis ofadaptation communications shows that a majority ofactions implemented by developing countries dependon external financial support, failure to reinvigorate
investments in adaptation action will inevitably lead tomore unabated climate impacts and subsequent loss
and damage. This will make debt-ridden developing
countries even more vulnerable to climate-related extreme
events and slow onset changes and is particularly true
for least developed countries (LDCs) and small island
developing States (SIDS).

60

600

50

500

40

400

30

300

20

200

10

100

0

US$ million

Number of projects

Figure ES.3 Number of new adaptation projects funded through the UNFCCC climate funds02007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
US$0.5–10 million

US$10–25 million

Estimated adaptation costs and needs fordeveloping countries are significantly higher
than previous estimates, with a plausible central
range of US$215 billion to US$387 billion per year
this decade.
This year’s AGR has under taken a comprehensive
assessment of the literature and has commissioned newstudies to provide updated estimates, using two major
evidence lines. First, based on modelling analysis, theAGR 2023 estimates the costs of adaptation for developing
countries (i.e. non-Annex I countries) in this decade atapproximately US$215 billion per year (range: US$130 billion

2

VI

US$25–50 million>US$50 million

Total value of projects(per year)

Total value of projects(5-year moving average)

to US$415 billion). These adaptation costs are projected torise significantly by 2050 because of growing climate risks.
Second, the AGR 2023 has also assessed the adaptation
finance needed to implement domestic adaptation
priorities, based on extrapolation of costed NDCs andnational adaptation plans (NAPs) to all developing
countries. These are estimated to be US$387 billion
per year (range: US$101 billion to US$975 billion) in thisdecade. The estimated new range of US$215 billion to
US$387 billion per year is significantly higher than earlier
AGR estimates and is equivalent to between 0.6 per centand 1.0 per cent of all developing countries’ gross domestic
product (GDP) combined.

Adaptation Fund, Green Climate Fund, and the Global Environment Facility’s Least Developed Countries Fund and Special Climate Change Fund.

Executive Summary

Despite the urgent need to accelerate and scale up
international public adaptation finance to developing
countries, these flows have declined since 2020.
International public climate finance flows to developing
countries decreased by 15 per cent to US$21.3 billion in
2021 after having increased to US$25.2 billion between
2018 and 2020. In contrast, mitigation finance continuously
increased over the same period, setting an important
precedent. Meanwhile, international public adaptation
finance over the past five years has also suffered froma low disbursement ratio, at 66 per cent, as comparedto the overall development finance disbursement ratio of
98 per cent. This indicates that there are barriers specificto adaptation, such as low grant-to-loan ratios, and lack ofknowledge about adaptation policies. To ensure adaptation
finance flows from developed to developing countries
double to reach about US$40 billion by 2025 as pledged
at COP 26 in Glasgow, finance providers must on averageincrease annual adaptation flows by at least 16 per centbetween 2022 and 2025.

The adaptation finance gap is likely 10–18 times as
great as current international adaptation financeflows – at least 50 per cent higher than previous
range estimates.
The adaptation finance gap – that is the difference
between estimated adaptation financing needs and costs(US$215 billion to US$387 billion) and finance flows(US$21.3 billion) – has grown. The AGR 2023 estimates thatthe plausible central adaptation finance gap for developing
countries is currently in the range of US$194 billion to
US$366 billion per year. While the doubling of adaptation
finance by 2025 and the new collective quantified goal for2030 that is under deliberation will be instrumental in helping
to close this finance gap, the increase in international publicfinance alone is unlikely to close it. For example, achieving
the goal of doubling adaptation finance (by 2025) would only
reduce the gap by between 5 per cent and 10 per cent.

Figure ES.4 Comparison of adaptation financing needs, modelled costs and international public adaptation finance flows
in developing countries

400

Adaptation
financing needs(US$387 billion/year
up to 2030)

US$ billion/year for developing countries

350

The adaptation
finance gap

300
Modelled costsof adaptation(US$215 billion/year
this decade)250

The gap is estimated at US$194
to US$366 billion/year (based on
2021 adaptation finance flows)

200

150

Adaptation costs/financeneeds are 10–18 times asmuch as current flows

100

International
public finance(US$21 billion
in 2021)50

0Finance needs

Modelled costs

Doubling ofadaptation finance(from 2019 levels)

Finance flows

Note: Values for needs and flows are for this decade, while international public finance flows are for 2021. Domestic and private financeflows are excluded.

Nonetheless, greater international public adaptation financecould still effectively reduce climate risks and deliver highbenefits. For instance, studies indicate that US$16 billion

invested in agriculture per year would prevent about
78 million people from starving or chronic hunger becauseof climate change impacts. Similarly, every US$1 billion

VIIAdaptation Gap Report 2023: Underfinanced. Underprepared.

invested in adaptation against coastal flooding leads to a
US$14 billion reduction in economic damages. Therefore,
more must be done to bridge the adaptation finance gap.
However, due to budgetary constraints, countries areoften inactive, adapt reactively and/or rely on international
support, causing overall costs to rise, limiting effectivenessand leading to maladaptation.

Gender equality and social inclusion are
inadequately included in adaptation finance needs
and flows.
There is global recognition that climate change canexacerbate inequality in multiple dimensions of social
identity, including gender, indigeneity, age, ethnicity, migrant
status or disability. At the same time, adaptation activities
considering gender and other social identities are linked
with higher effectiveness in achieving their objectives. The
AGR 2023 has analysed the integration of gender equality
and social inclusion 3 in costed NDCs and NAPs. It findsthat only 20 per cent of these plans have a dedicatedbudget for such activities, and that the amount allocatedis generally low, averaging 2 per cent. Of the international
public finance for adaptation that is also tagged withgender equality as a principal objective, only 2 per cent isassessed as gender-responsive, with a further 24 per centconsidered gender-specific or integrative. Other aspectsof social inclusion also receive little attention among
both finance flows and needs. These findings highlightthe need for greater transparency and consistency in thereporting of gender equality markers, and that climate
finance providers must increase adaptation funding thatis responsive to gender and social inclusion in order tosupport more equitable and effective adaptation.

Bridging the adaptation finance gap requires moreinternational, domestic and private finance, ideally areform of the global financial architecture and betterinternational cooperation.
Domestic expenditure and private finance are potentially
important sources of adaptation finance, but quantitative
estimates are not yet available because their flows remaindifficult to track. Nonetheless, domestic budgets are likely to
be a large source of funding for adaptation in many developing

VIII

countries, ranging from 0.2 per cent to over 5 per cent ofgovernment budgets. There is also fragmented evidence
of increasing private-sector adaptation interventions allover the world and in most sectors (e.g. water, food andagriculture; transport and infrastructure; tourism). These
include ‘internal investments’ by large companies, financial
institutions’ provision of finance for activities that contributeto adaptation, and companies’ provision of adaptation
goods and services. In addition, non-financial privatesector actions could have substantial impacts in reducing
risks over time. For example, engineering, design, insurance,and lending practices and standards are moving towards
incorporating climate science into their benchmarks,
requirements and guidelines. However, neither domestic
expenditures nor private finance flows are likely to bridge
the adaptation finance gap alone, especially in low-income
countries including LDCs and SIDS, and there are important
equity issues related to using these flows to fill the gap inthese countries.
This report identifies seven ways to bridge the adaptation
financing gap (figure ES.5). The core continues to be
dominated by (i) international public adaptation finance, (ii)domestic expenditure on adaptation and (iii) private-sector
finance for adaptation, even if relative contributions toclosing the adaptation finance gap remain uncertain. Four
additional potential approaches to bridge the finance gap
are identified: (iv) remittances by migrants to their homecountries which often contribute significantly to GDP, (v)increasing finance tailored to small and medium-sizedenterprises since they comprise the bulk of the private
sector in many developing countries, (vi) reform of the
global financial architecture, 4 for instance as proposedby the Bridgetown Initiative, which has enormous potential
to support developing countries in boosting their resilienceagainst future climate shocks, including through changes
in managing vulnerable countries’ debt burden, and (vii)
implementation of article 2.1(c) of the Paris Agreement
on making finance flows consistent with a pathway towards
low-carbon and climate-resilient development.
It is important to note that these seven ways offer different
opportunities and constraints across countries – forexample, LDCs rely most heavily on international support,
in particular grants – and bridging the adaptation financegap requires attention to both quantitative and qualitative
aspects such as access to finance and equity.

3

Gender equality and social inclusion (GESI) was analysed based on an approach that included four categories of progressively greater gender andsocial inclusion: blind; specific; integrative; and responsive.

4

This includes the Bretton-Woods Institutions (World Bank and International Monetary Fund) and the World Trade Organization, together with otherinternational financing institutions, such as multilateral development banks.

Executive Summary

Figure ES.5 Seven ways to bridge the adaptation finance gap

7. I
m
e in

fin
an
cin
g

on

4. Increa
s

ple
me
nt
at
i

Additional approaches

al

an

itt

nci

ar

m

fin a
ch

it e

5.

c

re

Core approaches

ces

financeReo f t he gl o b altu

ris Agreement
the Paefor m

3. Private-sector

2. Domestic
expenditure on
adaptation

of
(c)
2.1
le
tic
ar
of

s
ME
rS
fo

6. R

1. International
public adaptation
financelna
tio redainer equ e at
nt
r i is r anc ale
e
t
n fin
sc
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Gr erat ock
l
op un
co to

Slow and insufficient action on mitigation andadaptation is increasingly translating into soft andhard limits to adaptation, some of which may havealready been reached.
One of the ways in which loss and damage from climatechange arise is when efforts to avoid or minimize climate
impacts through mitigation and adaptation fail. The points
at which adaptation fails to avert climate impacts are called
the limits to adaptation, which can be ‘hard’ or ‘soft’.
Hard limits are those that arise in systems and that can
only be averted through mitigation of greenhouse gases.
Climate-sensitive ecosystems, such as coral reefs and thecryosphere, may be among the first to experience hard
adaptation limits leading to both intrinsic and instrumental
loss and damage.5
Soft limits are those that can be avoided or minimized
through more concerted efforts at adaptation, though
the limits may change over time as a result of shifts inboth climate acceleration and technological and political5

development, or as the evaluation of trade-offs changes. By
far the best and most cost-effective ways to reduce both
hard and soft adaptation limits is through greatly accelerated
investments in mitigation and adaptation but, considering
the level of climate change already embedded in the system,some soft and even hard limits may be unavoidable.

Lack of conceptual clarity is a clear barrier tomaking political and operational progress on loss
and damage.
While there is no universally agreed definition,
conceptualizations range from considering all anthropogenic
climate change impacts as loss and damage, to only
considering impacts that occur after limits to adaptation
have been reached as loss and damage. Justice is a major
theme underpinning the conceptualizations of loss anddamage, including by the UNFCCC, recognizing that losses
and damages are experienced most harshly by thoseleast responsible for or most sensitive to climate change:
developing countries and vulnerable members of society.

Intrinsic values are revealed, for example, in World Heritage listings and people’s connections to places and values, so there is no commensurable
substitute to their loss or damage. Instrumental values are those that arise from the goods and services provided by ecosystems to those who dependon them directly or indirectly.

IX

Adaptation Gap Report 2023: Underfinanced. Underprepared.

There is also general agreement that losses and damages
can be categorized as economic or non-economic.
Economic losses and damages (ELD) include impacts
that can be assigned a monetary value, such as damages
to infrastructure or loss of earnings or productivity. Noneconomic losses and damages (NELD) encompass a wide
spectrum of impacts that are not easily assigned a monetary
value, such as loss of life, health or mobility; loss of territory,
cultural heritage, or Indigenous or local knowledge; loss of
biodiversity and so on. While there are well-establishedquantitative methods to assess ELD, for NELD theassessment is mainly qualitative, but it is important to avoid
missing the climate impacts that cannot be priced. Becauseof this lack of clarity among stakeholders, there is an urgent
need to reach international consensus on key concepts toensure accelerated progress and operationalization of loss
and damage, including the new loss and damage fund andfunding arrangements agreed at COP 27 in 2022.

Loss and damage is increasingly mentioned in NAPs
and NDCs, but these documents say little about
options to address loss and damage and largely
miss NELD.

capacity-building, early warning systems, insurance,compensation, social protection measures, support forrebuilding livelihoods and for communities to preserve theirculture, humanitarian response and forecast-based finance,
reflecting the grey zone that exists in practice between
adaptation and loss and damage. While countries capture
ELD relatively well, only a handful of NAPs address NELD.
Developing a list of measures addressing ELD and NELD,
both ahead of and during/after events, will be importantin the context of setting up the institutional framework foraddressing loss and damage within the UNFCCC and at
national levels.
Given the complex, compounding, cascading andtransboundary nature of climate risk, coordination acrossglobal frameworks besides the UNFCCC, such as the Sendai
Framework for Disaster Risk Reduction, and the Sustainable
Development Goals, will contribute towards strengthening
loss and damage management approaches. There is alsoa need for more regional and subnational cooperation onloss and damage with transboundary characteristics totake advantage of opportunities of scale and to overcome
barriers to implementation. Finally, all responses must
respect country ownership and be equitable, inclusive,
accessible and adequate.

Actions to address loss and damage include disasterrisk management, assessment of losses and damages,
Figure ES.6 Averting, minimizing and addressing losses and damagesave

Rrts edulos ces a s ri
nd sk
da |
m
ag
e

R
min
imiz educesri
es lo
ss a sk |nd damaClimatechangeevent

ge

Mitigation

Adaptation

Residual risk

Avert loss and damage:

Minimize loss and damage:

Address loss and damage:• Mitigation to
reduce emissions• Adaptation• Disater risk
reduction• Transfer risk e.g.
social protection
insurance• Retain risk e.g.
contingency fund

Loss and damage
Extreme or
slow onset event:• Storm / Typhoon /Cyclone• Extreme drought• Rising sea levels• Ocean acidification• Glacial melt
• Heatwave• Flood• Wildfire

Address loss and damage:• Emergency
response• Rebuilding funds• Relocation support• Livelihood
programmes• Social protection

Adapted from: Richards, J.A. (2022). https://www.lossanddamagecollaboration.org/stories-op/how-does-loss-and-damage-intersectwith-climate-change-adaptation-drr-and-humanitarian-assistanceXExecutive Summary

Many uncertainties remain regarding thefinancial needs for addressing loss anddamage, but innovative funding sources andgovernance structures must be found to reach thenecessary scale.
A recent study estimated that damages in the 55 most climatevulnerable economies alone exceeded US$500 billion overthe past two decades. These costs will rise steeply in the
coming decades, particularly in the absence of strong
mitigation and adaptation, but more robust numbers areneeded that underpin the urgency of addressing loss anddamage. There is currently little evidence on the activities
and associated costs of addressing loss and damage
as it is a costly and time-consuming exercise requiring
significant technical capacity, and most countries are yet
to identify and assess their loss and damage risks andfinancial needs. Since the financial needs for addressing
loss and damage are likely to grow significantly in the future,

exploring innovative sources of finance (such as marine
shipping levies, aviation levies, taxation, debt relief, debt
swaps and special drawing rights) besides grants, insurance
and concessional loans will be essential to reach thenecessary scale. As well as assisting developing countries
particularly vulnerable to climate risks in coping with loss
and damage, the finance must also be used for capacitybuilding, institutional strengthening, data collection andanalysis, disaster preparedness, and management of theconsequences of NELD while respecting the principles of
equity, justice, inclusiveness and ownership. Governancearrangements to help deliver loss and damage financecould be built around the dedicated loss and damage fund,the Santiago Network for Loss and Damage (SNLD) and theWarsaw International Mechanism for Loss and Damage
associated with Climate Change Impacts (WIM) and could
include existing institutions supporting humanitarian aid,disaster risk reduction, risk transfer, development financeand climate finance.

XI

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