Global adaptation finance costs, the adaptation finance gap, and adaptation investment planning

• The UNEP Adaptation Gap Report and Adaptation Finance Update estimate the adaptation finance gap for developing countries by comparing their modeled adaptation costs and finance needs with current adaptation finance flows to developing countries.
• The Adaptation Gap Report 2023 estimated adaptation costs and financing needs at US$231 billion/ year to US$416 billion/year (2022 prices) for developing countries this decade (0.6%–1.0% of GDP for all developing countries). Adaptation finance flows to developing countries in 2022 were assesse d by the OECD at US$27.5 billion (public flows only) and US$32 billio n (leveraged finance flows included). The implied gap is lower due to domestic public adaptation flows and priv ate sector finance, but there is no robust data on these.
• The magnitude of the adaptation finance gap reflects the difficulty in converting National Adaptation Plan (NAP) or Nationally Determined Contribution (NDC) adaptation priorities into investment-ready programs and mobilizing the finance to implement these.
• Given the adaptation finance gap, adaptation investment planning is a key priority as part of the overall NAP or NDC process. It aims to take a strategic approach to develop an investment pipeline of programs, rather than working at the project level, and to unlock opportunities from various sources of finance to implement priorities at scale.
• Adaptation investment planning involves greater prioritization and integration of adaptation within existing government planning and financing frameworks, considering the sequencing of actions over time, and assessing the economic benefits and potential revenues from adaptation rather than just the costs.
• Such planning is supported by an analysis of the enabling conditions to help implement and finance adaptation, including capacity-building, institutional strengthening, and addressing barriers and constraints.

There are several initiatives supporting countries to convert their NDCs and NAPs into adaptation investment plans, i.e., that support the development of a pipeline of bankable projects and provide methodological frameworks and key lessons.