Heatwaves that overwhelm health systems, polluted air that shortens life expectancies, and floods that disrupt water, electricity, and logistics are now central security challenges of our time. These shocks are no longer temporary. These occur regularly, reshaping risks across emerging economies and becoming a central source of disruption.
When this happens, governments and investors must choose between continuing to absorb compounding losses or investing upfront to prevent them. Of these two options, adaptation provides the fastest and most cost-effective method. Mitigating physical climate risks before they become financial, health, and security crises.
However, despite its importance, adaptation remains the most underfunded form of climate change action. only up to 5 percent Most of the global private sector climate finance is going towards adaptation. about 10% A proportion of catastrophe losses in low-income countries are insured.
The cost of doing nothing is rapidly increasing. Extreme weather shocks hit the Global South even harder, where rapid urbanization, population growth and limited fiscal buffers exacerbate the damage and exacerbate systemic vulnerabilities. Sovereign credit conditions deteriorate, borrowing costs riseAnd governments are forced into cycles of crisis and emergency spending that crowd out long-term strategic investment.
However, adaptation stabilizes returns, protects assets, and reduces volatility before losses materialize. Properly designed, they can also enhance productivity, competitiveness, and access to capital while maintaining profitability.
Although adaptation is often driven through individual projects, its real impact is realized at the city level. Integrated infrastructure and service design builds in long-term resiliency. For example, by 2050 in African cities; The number of residents increased by 950 million people We need a more resilient infrastructure than we currently have. Whether that infrastructure contains vulnerabilities or ensures resilience will shape the world’s stability for decades to come. Urban systems depend on hospitals, water utilities, energy grids, transportation networks, and food distribution. When they fail, losses cascade throughout the economy. Such failures quickly lead to fiscal pressures, forcing governments to spend reactively on bailouts, reconstruction, and imports rather than proactively investing in systems that strengthen resilience. In contrast, when cities adapt, the benefits compound across sectors.
The fastest gains in the coming decades will come from financing resilient cities and systems at scale, using blended capital and risk-sharing mechanisms to mobilize additional investment in adaptation and resilience.
Well-designed adaptations always yield the highest returns in development finance. Every dollar invested in adaptation $10.50 or more It provides economic benefits through loss avoidance, increased productivity, and financial stability. The health dividend alone makes this case inevitable. Continued investment in arsenic-free water infrastructure in Bangladesh as a result It leads to fewer cardiovascular diseases and cancers, which leads to higher worker productivity and lower health care costs. Under Brazilian leadership, Belem Health Action Planadopted at COP30 in November 2025 and launched with an initial $300 million commitment from the Climate and Health Funders Coalition, provides a roadmap for reframing adaptation as health system insurance rather than discretionary spending and embedding climate resilience directly into health systems.
The most powerful leverage points for adaptation are at the intersection of agriculture, water, and cities. Sub-Saharan Africa is estimated to 4 billion dollars Most of it is caused by climate-related rot and water stress. These losses quickly ripple through urban economies, raising food prices and increasing import dependence, putting pressure on household and public finances. Kenyan $250 million climate smart agriculture program provides a replicable blueprint for financing climate-resilient food systems at scale. With support from the World Bank, African Development Bank, and private financial institutions, it uses a combination of concessional and commercial capital to de-risk investments in drought-tolerant crops, cold storage, and micro-irrigation. Over 6 years since its introduction, 771,000 smallholder farmers55% of whom are women, benefiting with an average yield increase of 24%.
Skeptics argue that the benefits of adaptation are indirect and difficult to observe using traditional measures of financial performance. At the project level, the challenges of observation are real. However, this is not the case at the system level. Achieve market price adaptation through aggregate risk exposure across portfolios, balance sheets, and the economy, rather than individual projects. The challenge is not the returns from adaptation investments, but the mismatch between who pays and who benefits. Adaptation benefits the entire economy but does not accrue to any single investor unless financial structures are designed to align incentives and share risks.
A financial architecture to support private investment in climate adaptation is already taking shape. Please take it Pakistan Climate Investment Fund, or CIFPAK. A mixed UK/International Finance Corporation (IFC) adaptation scheme launched in 2024, combining concessional first loss capital with IFC-managed investment and individual technical assistance windows. By de-risking early-stage development and structuring, we build a pipeline of bankable adaptation deals and mobilize development finance institutions and private investors across agriculture, water, infrastructure, and climate-related financial services.
The most effective urban adaptation measures are already established. Urban forests, parks, green roofs, cool corridors, building-level cooling, reflective surfaces, lakes, and modern storm drainage systems reduce heat stress and flood risk while improving air quality. These are not aesthetic upgrades. They serve as core infrastructure that reduces risk and protects economic performance. Far from being pilot projects, these interventions are now being integrated into city-wide systems. Ahmedabad heat countermeasure plan (India) and the Medellin Green Corridor (Colombia) demonstrate how adaptation, when incorporated at scale, can deliver sustainable health, economic and social benefits.
Binding constraints are execution. What is missing is the deployment architecture: the pipelines, intermediaries, and risk-sharing mechanisms that transform adaptation from needs to transactions. Africa’s adaptive finance ecosystem is beginning to fill this gap. Africa’s Adaptation Finance WindowLaunched by the Investment Mobilization Collaboration Alliance, a global coalition of donors and development partners, the organization has committed €40 million (approximately $47 million) to leverage catalytic capital to de-risk private investments in climate-resilient infrastructure.
For investors, adaptation is no longer a matter of values, but a matter of valuation. Investors with exposure to long-term infrastructure and real assets have been incorporating physical climate risks into their asset analysis for many years. What has changed is the width. Shorter-term capital is now forced to price in risks that were supposed to be safe beyond normal holding periods. When properly configured, adaptation protects service continuity and cash flow, reduces compounding losses, and provides more predictable returns.
Currently, three features determine whether adaptation measures are investable at scale: guarantees, first loss tranches, and risk sharing through insurance. Standardization with reproducible structures and reliable metrics. Reconciliation with local currencies, as adaptation revenues are domestic in nature.
The next decade will determine whether the Global South builds infrastructure that further exacerbates climate vulnerabilities or establishes the foundations of resilient systems that can unleash prosperity. Essentially, this is a capital allocation decision that has a long-term impact on risk and return. The Global South is home to trillions of dollars of investment across infrastructure, systems, and services. Whether these assets improve or deteriorate in value as climate impacts intensify depends on whether adaptation measures are built in at the time of allocation. Mitigation remains essential, but without adaptation, resilience and revenues remain vulnerable.
Sarah Lemney is the Chief Executive Officer of SLK Capital. She has 20 years of experience in investment banking, principal investments, financial and strategic advisory.
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Tuesday, October 21, 2025
Lake Chad Basin Could Promote Growth, Not Conflict
african sauce
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Despite its vast oil, gas and mineral resources, the Lake Chad Basin remains in a precarious situation. Transforming resources for peace requires transparent governance, community trust, and responsible partnerships that deliver real benefits for people across the basin.
Image: Nairobi, Kenya, January 21, 2026: The Nairobi Expressway meanders past the Central Business District (CBD) and new office buildings in Westlands. The road leads to the international airport and was built as a public-private project by the Kenyan government and Chinese state-owned construction company China Road and Bridge Corporation (CRBC). Foreign Minister Wadepulu is currently visiting the city. Photo: Sebastian Christoph Gornau/DPA