Leveraging Philanthropy to Strengthen Climate Resilience

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Despite the growing acknowledgement of the importance of climate adaptation in the Global South, adaptation finance still receives unequal treatment in the climate action financing portfolio, especially compared to mitigation finance. The importance of adaptation, therefore, needs to be continuously reiterated in various forums. While the net-zero target years are in the far distance and lag far behind the intensifying climate impacts, it is becoming increasingly crucial for the Global South, bearing the brunt of the climate crisis, to adapt or build resilience.

The 2024 Adaptation Gap Report reveals that the global annual financial gap for adaptation is in the range of US$215-387 billion annually, contrasting with the US$28 billion mobilised till 2022. This persistent gap stems from how adaptation is largely perceived as a “public good”, wherein investments would yield low economic returns on investment. This perception fails to account for the far-reaching social rate of return associated with adaptation projects, which include safeguarding communities, reducing disaster recovery costs, and bolstering long-term economic resilience. A higher adaptive capacity increases community resilience and, thus, reduces loss and damage, which is a fact hardly acknowledged by the market framework, leading to grave market failures.

A higher adaptive capacity increases community resilience and, thus, reduces loss and damage, which is a fact hardly acknowledged by the market framework, leading to grave market failures.

Closing this gap is not merely an ethical and normative imperative but a strategic necessity. In light of this, philanthropy presents a promising avenue to help close the adaptation finance gap, offering a unique opportunity to direct much-needed funds to high-impact adaptation projects.

The adaptation imperative

The case for adaptation financing is both practical and ethical. On the practical front, adaptation is vital to reducing the long-term social costs of carbon (SCC), which measures the economic damage caused by emitting an additional tonne of carbon. While mitigation directly reduces emissions and thus the SCC, adaptation indirectly mitigates these costs by enhancing resilience to climate impacts. Without adequate adaptation, the escalating risks of public health crises, infrastructure damage, and biodiversity loss amplify the SCC, imposing severe social and economic burdens, especially on vulnerable communities.

From an ethical or climate-justice perspective, adaptation financing addresses the inequity of climate impacts. The Global South, which has contributed the least to global emissions, faces the harshest climate impacts. Building resilience is essential to ensure these regions can navigate a just transition while mitigating the disruptive ripple effects of climate change. Ignoring adaptation exacerbates vulnerabilities, widens inequalities, and undermines development gains.

Building resilience is essential to ensure these regions can navigate a just transition while mitigating the disruptive ripple effects of climate change.

However, adaptation remains critically underfunded. Its classification as a public good, with non-excludable benefits and imperceptible short-term returns, discourages private-sector investment. The lack of a standardised definition of ‘adaptation’ further complicates funding allocation, as impacts are more challenging to measure compared to mitigation efforts. Additionally, the inherently complex nature of adaptation, requiring integrated cultural, social, and economic solutions, makes it less attractive to traditional funding mechanisms seeking quick, quantifiable outcomes.

Given these entrenched challenges, philanthropy presents a promising avenue to address the adaptation financing gap. Thus, driven by a commitment to social good, philanthropy is uniquely positioned to support high-risk investments without expecting immediate economic returns. This aligns well with the nature of adaptation, which often involves long-term, complex projects with indirect social benefits.

The role of philanthropy

The global wealth pool is vast, with an estimated US$454.4 trillion in net private wealth by the end of 2022, expected to increase by 38 percent to US$629 trillion by 2027. Given the importance of adaptation in mitigating climate risks, the philanthropic sector, especially through corporate and private foundations, presents an untapped potential to direct these funds where they are needed most.

Philanthropy is uniquely positioned to play a pivotal role in climate adaptation. Defined as private initiatives focused on the public good, philanthropy operates outside profit-driven motives, which allows it to prioritise social returns rather than financial gains. This makes philanthropy a natural ally in addressing issues central to climate adaptation, which often involve public goods that are non-excludable and non-rival—such as infrastructure, water resources, and food security. These projects do not promise immediate financial returns but offer high social returns that far outweigh their initial costs. The 2019 Global Commission on Adaptation underscored this by showing how US$1.8 trillion invested in critical adaptation areas—like early warning systems, resilient infrastructure, and sustainable agriculture—could generate US$7.1 trillion in benefits over a decade.

A broader trend highlights that between 2019 and 2021, philanthropic contributions for mitigation grew by approximately 25 percent annually while adaptation finance remained stagnant, capturing only a fraction of the funding needed.

Corporate philanthropy, particularly after the COVID-19 pandemic, has shown a growing interest in addressing climate change. However, the philanthropic interest in climate remains skewed towards mitigation. For example, in 2022, corporate philanthropic donations for climate mitigation amounted to a median of US$637,500, with little or no equivalent funding allocated to adaptation. A broader trend highlights that between 2019 and 2021, philanthropic contributions for mitigation grew by approximately 25 percent annually while adaptation finance remained stagnant, capturing only a fraction of the funding needed.

The potential for philanthropy to drive change in climate adaptation is immense. Philanthropies can take risks and fund initiatives that may not yield immediate profits but have far-reaching social benefits. However, to unlock this potential, governments must create an enabling environment that facilitates the flow of philanthropic capital towards adaptation projects. By offering incentives, removing barriers, and aligning national climate agendas with the long-term goals of adaptation, governments can empower philanthropies to become key players in bridging the adaptation finance gap.

The way forward

The potential of philanthropy in addressing the climate adaptation finance gap is significant, but unlocking this potential requires targeted strategic actions. The following are key recommendations on how governments, philanthropic organisations, and development stakeholders can work together to maximise the role of philanthropy in supporting climate adaptation efforts:

• Create an enabling environment: Governments play a crucial role in creating a conducive environment that facilitates the flow of philanthropic capital toward climate adaptation. By reducing bureaucratic hurdles and designing regulatory frameworks that specifically support climate adaptation, governments can increase the efficiency of these investments rooted in altruism. Additionally, recognising and rewarding philanthropic contributions through tax incentives, recognition schemes, or public-private partnership models can further enhance the attractiveness of adaptation.
• Promote blended finance models: To unlock the full potential of philanthropy, blending public and private funding is essential. Public funds can de-risk investments by providing guarantees or first-loss capital, making philanthropic investments in high-risk adaptation projects more attractive. This approach mitigates risks and improves financial viability, encouraging private-sector involvement. Blended finance models should allow philanthropy to take on greater risk, especially in sectors with limited traditional funding. Governments should incentivise these models through policy reforms, creating dedicated platforms that enable philanthropic capital to work alongside development finance institutions (DFIs) and multilateral development banks (MDBs).
• Enhance capacity and technical assistance: Philanthropic organisations are uniquely positioned to provide technical assistance alongside funding, which can be a game changer for adaptation projects. Governments and philanthropy should work together to design capacity-building programmes with an added focus on bridging knowledge gaps, especially in developing nations where local expertise on climate adaptation is often scarce. Such programmes can empower local communities, governments, and non-governmental organisations to design, implement, and sustain adaptation projects.
• Track and monitor philanthropic contributions: A major challenge in the philanthropic sector is the lack of transparent mechanisms to track and monitor funding flows, particularly for adaptation efforts. Establishing a centralised, publicly accessible database for tracking philanthropic contributions to climate adaptation will improve accountability, transparency, and coordination. This database can help governments, DFIs, MDBs, and other stakeholders assess the effectiveness of philanthropic funding and make data-driven decisions on where to channel future investments. This will also improve the visibility of philanthropic funding and make it easier to align with national and global climate adaptation targets.
• Leverage philanthropy to bridge North-South funding gaps: Philanthropy can also play a critical role in bridging the Global North-South funding divide. Adaptation efforts in developing countries, particularly Small Island Developing States and Least Developed Countries, face substantial financial barriers. By directing philanthropic capital to these regions, wealthier countries can help ensure that vulnerable populations can access the resources needed for resilience-building. This can also include knowledge transfer, investment in innovative solutions, and support for community-led adaptation projects often overlooked by traditional funding channels.

Philanthropy holds untapped potential to close the adaptation finance gap by assuming risks, providing long-term funding, and offering technical expertise. For this potential to be fully realised, governments must cultivate an environment that attracts and accelerates philanthropic investment. Through this, philanthropy can aid in bridging the climate adaptation gap and strengthening global resilience.

Nilanjan Ghosh is Director at Observer Research Foundation (ORF), India, where he leads the Centre for New Economic Diplomacy (CNED) and ORF’s Kolkata Centre.

Sharon Sarah Thawaney is Executive Assistant to the Director of ORF Kolkata and CNED, Nilanjan Ghosh.

• Economics and Finance
• Climate Change
• India
• 2024 adaptation gap report
• adaptation financing
• adaptation financing climate change
• adaptation gap report 2024
• climate finance global south
• climate financing
• global commission on adaptation 2019
• philanthropic donations for climate mitigation
• philanthropy commitment on climate change
• social costs of carbon

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