While capital markets have learned to value decarbonisation, they remain ill-equipped to price adaptation. Global climate finance exceeded 1.9 trillion US dollars in 2024, yet less than four per cent supported adaptation and resilience. The rest continues to chase mitigation – technologies that reduce or remove emissions – because they offer measurable, monetisable returns and (to some extent) clear policy signals. Finance for adaptation, by contrast, remains fragmented, under-incentivised, and poorly integrated into investment decision-making.
This imbalance is no longer tenable. The physical impacts of climate change have caused an estimated 3.6 trillion US dollars in economic losses since 2000, and these costs are rising faster than mitigation investments can curb them. Adaptation finance must therefore be seen not as residual spending but as preventive investment, essential insurance for the global economy.
At the University of Edinburgh, research at the Business School and through the Centre for Business, Climate Change and Sustainability (B-CCaS)1 explores how financial architectures can be redesigned to support climate resilience.
Incorporating resilience
Mainstreaming climate risk across financial systems means embedding resilience metrics into every major investment and insurance decision. Progress has been uneven.
Carbon metrics such as tonnes of CO2 avoided have become the lingua franca of climate finance, but they do not capture resilience value: the avoided losses and stability gained from adaptation. This ‘carbon tunnel vision’ narrows capital allocation and systematically undervalues projects that protect lives and assets rather than reduce emissions.
To correct this, regulators and market actors must adopt resilience-based disclosures alongside mitigation targets. Expanding frameworks such as the Task Force on Climate Related Financial Disclosures (TCFD) to include physical- risk preparedness can create demand for adaptation solutions within corporate supply chains and infrastructure portfolios.
Similarly, insurers – among the world’s most climate-exposed financial institutions – can play a pivotal role by linking premiums, credit ratings, and lending conditions to resilience performance. Typically, when insurance markets reward prevention, capital flows follow.
Universities and research centres can accelerate this mainstreaming process by developing transparent methodologies for measuring resilience. The absence of standardised adaptation metrics is not merely technical, it is financial.
Without a common language of resilience, investors cannot benchmark opportunities or price risk accurately. Collaborative efforts between academia, financial institutions, and data providers can fill this void by quantifying avoided losses, social co-benefits, and long-term productivity gains from resilient systems.
These issues were central to recent work presented by B-CCaS member Karishma Ansaram2 at the Adaptation Futures Conference in New Zealand early in 2025, where she discussed the capacity-building needs of climate-finance institutions. Her ongoing research on data reporting and metrics for Green Climate Fund (GCF) projects is helping to shape how financial intermediaries track resilience outcomes and improve transparency.
Finance for adaptation
Closing the adaptation finance gap will require both public leadership and private innovation. Public funds remain the backbone of adaptation finance, but they are insufficient to meet global needs – estimated between 500 billion and 1.3 trillion US dollars per year by 2030. To leverage private capital, financial architecture must evolve from reactive grant-making to proactive risk-sharing.
Blended-finance models can be powerful enablers. Government or multilateral investors can provide first-loss capital or guarantees that absorb early-stage risk, thereby crowding in commercial investors.
In the venture-capital ecosystem, catalytic public investors such as Canada’s Business Development Bank, profiled in recent research, can use their longer-term horizons to nurture adaptation technologies that traditional funds often overlook. These include innovations in water management, fire-resilient materials, and predictive climate analytics – sectors that protect economies from physical risk while generating investable returns.
These themes are echoed in recent dialogues we have led through the Scotland Beyond Net Zero Climate Finance3 Roadshows and the Centre of African Studies conference4 on post-carbon Africa, which brought together financial institutions and policymakers to identify derisking instruments and equitable pathways for mobilising private investment in adaptation.
Policy coherence is equally important. The success of clean-energy finance over the past decade owes much to consistent policy signals – tax credits, renewable-energy standards, and carbon-pricing mechanisms – that reduced uncertainty and created markets.
Adaptation requires an equivalent set of ‘resilience incentives.’ Governments can integrate adaptation criteria into public procurement, infrastructure planning, and disclosure regulations. Doing so creates predictable demand for adaptation technologies, which, in turn, supports venture investment and innovation.
Building an enabling ecosystem
Finance for adaptation will not scale through capital markets alone. It depends on an enabling ecosystem that includes governance reform, digital infrastructure, and capacity building.
Transparent data platforms and interoperable taxonomies can reduce information asymmetries that deter investors. Artificial intelligence5 and remote-sensing technologies6 can improve the measurement of physical climate risk, while open-source digital tools can democratise access to resilience analytics for small and medium-sized enterprises.
This innovation mindset is already visible at the University of Edinburgh, where a team from the MSc Climate Change Finance and Investment programme recently won the 2025 Climate Investment Challenge7 for designing a resilience credit market to mobilise private and public finance for adaptation in the Philippines. The project demonstrates how academic initiatives can translate climate-finance theory into practical market instruments that advance resilience goals.
At the same time, adaptation must be reframed as a driver of competitiveness, not a cost of compliance. Entrepreneurs developing resilience technologies should be treated as climate innovators, and venture investors should recognise the latent market potential of protecting assets worth trillions.
Educational and research institutions have a critical role in nurturing this reframing – through interdisciplinary curricula, evidence-based policy design, and partnerships that translate science into financeable solutions. For example, the University of Edinburgh’s Mastercard Foundation Scholars Program8 is equipping justice-oriented climate leaders across Africa with postgraduate training, entrepreneurial pathways and digital skills for resilience and sustainable transitions.
From mitigation to mutuality
The evolution of climate finance from mitigation-centric to resilience-inclusive is not only an economic adjustment but also a moral and systemic one.
Adaptation finance aligns investment with the realities faced by communities, businesses, and ecosystems already living with climate disruption. It calls for a shift from carbon accounting to mutual risk management – a recognition that resilience is the new return.
As COP 30 approaches, the challenge for the international community is to unleash these financial enablers at scale. Mobilising private capital for adaptation will demand policy stability, innovative risk-sharing instruments, and a credible measurement framework. But most of all, it requires a change in mindset: to see adaptation not as a sunk cost but as an asset class that safeguards the foundations of prosperity.
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This article was first published in the COP30 Advancing Action Brochure on 10 November 2025.
Photo credits: Feature image of forest city: Getty Images/shomos uddin; Plants growing on stacks of coins: Getty Images/pcess609
- Centre for Business, Climate Change & Sustainability ↩︎
- Karishma Ansaram – Lecturer in Climate Finance and Investment Profile ↩︎
- Scotland Beyond Net Zero ↩︎
- Centre of African Studies (CAS) Annual Conference ↩︎
- How AI is tackling the climate and environmental crisis ↩︎
- Space and satellites innovation programme ↩︎
- MSc CCFI students win £12,000 at the 2025 Climate Investment Challenge ↩︎
- Mastercard Foundation Scholars Program ↩︎
