Advancing adaptation: Breaking barriers to a trillion-dollar opportunity

At a glance

• Momentum for climate adaptation is increasing, but deployment lags. Adaptation that protects people and places from extreme weather events delivers benefits worth three times its cost on average. Yet globally, only $190 billion is spent annually on 20 proven measures, a third of the amount needed to meet developed-economy protection standards. Good economics alone don’t guarantee spending—deployment readiness depends on clear demand, capacity to act, and financing.
• Deployment-ready climate adaptation measures that protect lives and livelihoods represent a $460 billion annual opportunity by 2050. That’s 40 percent of the $1.2 trillion annual spending needed by 2050, when the global temperature could rise to 2°C above preindustrial levels on current emissions trajectories. More than two-thirds of this opportunity could be in high-income places, where the ability to pay and bankable projects are more prevalent. Much of the spending would go into measures like cooling, stormwater management, and irrigation.
• The majority of the remaining $690 billion of adaptation requires innovation to become deployable. Technological and financial innovation that reduces costs, particularly measures to cope with heat and drought in lower-income regions, could make an additional 40 percent of the $1.2 trillion deployable. Stronger incentives, clearer demonstrations of benefits, and improved delivery capabilities could make measures accounting for an additional 15 percent deployment ready. For the rest, demand already exists, but enabling bankability will require innovative revenue mechanisms and financing structures.
• Leaders can use an understanding of opportunities, barriers, and responses to enhance decision-making. Companies can build capabilities to assess and value adaptation, form implementation partnerships, and develop solutions to address the resilience needs of others where market signals are clear. Financial institutions can identify opportunities aligned with their risk appetite and can structure projects to improve bankability. Governments and philanthropies can strengthen demand for adaptation and can direct scarce capital toward closing affordability gaps.

Around the world, momentum is growing to plan for and protect people and places from extreme weather events, ranging from high temperatures to intense flooding. Governments and companies are seeking to understand their exposure to such events more proactively and develop potential responses to enhance resilience. The weather events of 2026 against the backdrop of a strengthening El Niño are further intensifying the focus on climate adaptation.¹“Record-breaking heat and extreme weather continue,” World Meteorological Organization, August 12, 2026; David Trilling, “A super El Niño is starting. Here’s what scientists know—and don’t,” Harvard Climate Brief, September 21, 2026; Morgan Sherburne, “El Niños more intense over last 40 years than previous thousand,” University of Michigan News, August 27, 2026.

Previous MGI research, Advancing adaptation: Mapping costs from cooling to coastal defenses, examined a set of 20 proven adaptation measures that protect people and assets against patterns of extreme weather.²In this research, “adaptation” refers to measures that protect against patterns of extreme weather, both those experienced today and those expected with climate change. It differs from disaster response and recovery, which address the aftermath of extreme weather events, and from risk transfer such as insurance, which shifts financial loss. While adaptation is sometimes used interchangeably with “resilience” in research literature, resilience is also used more broadly to describe the capacity to absorb shocks, adjust, and recover. For more details, see Advancing adaptation: Mapping costs from cooling to coastal defenses, McKinsey Global Institute, December 11, 2025. Early-warning systems give communities time to prepare for extreme weather events, irrigation helps farmers manage drought, and urban trees, cool roofs, and improved drainage reduce vulnerability to extreme heat and heavy rainfall. These measures are tried and tested, preventing disruption to economic activity, physical damage, and health impacts that can far outweigh their costs.

Yet the world has a “resiliency gap.” Many people are not protected from today’s extreme weather patterns. By our estimate, the world in 2020 spent only about a third of what was required to protect people exposed to climate hazards at standards established in advanced economies. And as the global temperature climbs, the pattern and occurrence of hazards are expected to shift, shaping future adaptation needs.

The resiliency gap is the conundrum at the heart of climate adaptation. If many measures are proven and economically viable, what prevents them from being deployed at scale? In this research, we identify barriers that prevent demand, implementation, and financing for adaptation and the responses that can help overcome them.

As mentioned in our prior research, some caveats are in order. Climate modeling is an evolving field, and complex phenomena come with uncertainties. We aren’t climate scientists, so we rely primarily on external climate models used in the sixth assessment report of the Intergovernmental Panel on Climate Change.³Climate change 2023: Synthesis report, Contribution of Working Groups I, II, and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change, Intergovernmental Panel on Climate Change (IPCC), 2023. Our findings aim to provide an order-of-magnitude economic analysis to help inform decision-making.

Ultimately, individuals, governments, and companies decide if, where, and how to adapt. Understanding where deployment is likely to take place going forward and which responses can enable harder-to-deploy adaptation can help companies and countries seeking to invest in resilience make informed decisions.

Despite overall attractive economics, climate adaptation is stymied by demand and financing barriers that prevent investment. These barriers crop up because widely shared benefits don’t always make a compelling case for households, companies, and governments to act or for capital providers to extend financing. Understanding these barriers helps explain why the resiliency gap persists and what shapes decisions about deploying adaptation measures.

Climate adaptation is gaining momentum

Recently, governments have stepped up adaptation planning, implementing measures and incorporating climate risk into public policy. The number of countries with national adaptation plans jumped from 84 in 2020 to 144 in 2026, a 71 percent increase, and countries that specified their financing needs in those plans more than doubled, from 14 to 29.⁴Estimated for 198 countries in December 2020 and September 2026. Figures include national adaptation plans formally submitted to the United Nations Framework Convention on Climate Change (UNFCCC), submitted to the European Union, or independently adopted. Seventy-eight countries submitted adaptation plans to the UNFCCC. See “Submitted NAPs from developing country parties,” United Nations Climate Change, updated October 7, 2026, and “NAPs shared by developed country parties,” UNFCCC, updated November 5, 2025. For a similar analysis, see Alexis Trittipo, Hamid Samandari, Homayoun Hatami, and Mihir Mysore, “Paving the way to resilience: Strengthening public-sector adaptation planning and execution,” McKinsey, November 27, 2023. Beyond planning, some governments are increasingly updating building standards to reflect changes in climate hazards. From 2020 to 2026, 79 national, state, and local codes around the world were updated for hazards such as wildfires and extreme heat, compared with just 19 from 2015 to 2020.⁵Building code updates were identified through a structured review comparing each jurisdiction’s adaptation-relevant codes and standards at a 2020 baseline against a 2026 snapshot and spanned national, state and provincial, and local instruments in 186 countries. A code was counted as “updated” when its edition changed, a new standard was adopted, or its scope expanded to address climate hazards. Examples of updated codes include the shift from ASCE 7-16 to ASCE 7-22 (with updated wind provisions for hurricane-prone regions) in the United States and California’s replacement of Building Standards Code Chapter 7A with the statewide Wildland-Urban Interface Code (Title 24, Part 7). “Chapter 7A [SFM] materials and construction methods for exterior wildfire exposure,” in 2022 California Building Code, Title 24, Part 2 (Volumes 1 and 2), International Code Council, effective January 1, 2023.

Companies, too, are seeking to protect assets and people as well as increasingly playing a role in providing adaptation solutions. S&P Global reports that the share of the 9,242 companies in its Corporate Sustainability Assessment disclosing adaptation plans increased from 19 percent in 2022 to 46 percent in 2025.⁶Paul Munday, Alessandro Badinotti, and Lindsey Hall, “As climate risk mounts, more companies turn to adaptation planning to build resilience,” S&P Global, September 15, 2026. In a recent MSCI study, almost nine in ten companies reported undertaking resilience activities to protect their own operations, while about half reported revenue from resilience-related products or services.⁷Resilience activities include actions companies take to assess, manage, or reduce their exposure to physical climate risks, such as conducting climate risk assessments, strengthening assets and operations, developing business continuity plans, and investing in technologies and solutions that improve resilience. Linda Eling Lee et al., The hidden adaptation economy: A new view of corporate resilience and opportunity, MSCI Institute, March 2026.

Nonetheless, a resiliency gap remains—and adaptation costs increase as Earth warms

Despite this momentum, a resiliency gap persists. In past MGI research, we studied 20 tried-and-true measures that are broadly applicable to diverse industries, economies, and demographic groups to protect people and places exposed to four categories of hazards—heat, wildfires, drought, and flooding.⁸We analyzed eight types of hazards in four categories. Two hazards, heat stress and wildfire weather (referred to as “wildfires” in this report), are chronic and happen every year in places exposed to them. The remaining six hazards—coastal flooding, riverine (fluvial) flooding, flooding caused by excessive rainfall (pluvial), heat waves, nonsurvivable heat, and drought in agricultural areas (referred to as “drought” in this report)—are acute, meaning they are intense but rare events. For acute events, places may be exposed to them, but the actual event may not occur every year. Since our focus is on understanding and quantifying adaptation costs, we define hazards by drawing on protection standards commonly established in developed economies. We also examined 20 adaptation measures that protect people and places from those hazards: air-conditioning, fans, passive cooling for buildings, white roofs, urban trees, cooling shelters, temporary outdoor cooling, personal cooling, early-warning systems, irrigation, crop shade cover, detention basins, stormwater networks, swales, levees, sea dikes, mangroves, floodproofing, fuel management, and underground power lines. To capture local dynamics of exposure and vulnerability to hazards globally, we divided the world into pixels of one square kilometer and then grouped those pixels into nine demographic groups based on income levels and degree of urbanization. We defined demographic groups using the current thresholds of income groups and urbanization levels from the World Bank. Low-income regions have GDP per capita less than $4,000, middle-income regions have GDP per capita of $4,000 to $12,000, and high-income areas have GDP per capita exceeding $12,000. Population in cities exceeds 1,500 people per square kilometer and more than 50,000 people in total, while towns have a population density between 300 and 1,500 people per square kilometer and total population of more than 5,000. All other areas are classified as rural. These include air-conditioning and cooling centers for heat, underground power cables to reduce wildfire risk, irrigation for drought, and levees and detention basins for flooding.⁹Beyond the four categories of hazards examined in this research, protection is needed against other hazards such as cold, which is outside the scope of our analysis. As global temperatures rise, fewer places are expected to experience freezing days, potentially reducing cold-related deaths and heating costs. By 2050 at 2°C of warming, about 3 percent of land that currently experiences freezing days is projected to no longer do so. The population living in these areas is expected to decline from 1.2 billion today to around 1 billion, and spending on global heating could fall by 25 to 35 percent on average. At the same time, fewer freezing days may also pose risks including reduced glacial freshwater supplies and thawing permafrost. See sidebar “What about cold?” in Advancing adaptation: Mapping costs from cooling to coastal defenses, December 2025, McKinsey Global Institute.

In this research, we focus on a subset of climate hazards that meet three criteria: (1) they have a well-established and direct link to climate change as the primary driver; (2) they are not slow-onset events, the impacts of which emerge over time; and (3) they have sufficient data to enable spatial analysis. For example, the link between water stress and climate change is not direct, since other factors, particularly population growth and rising demand for water, are at play. While these and other hazards may be highly relevant for adaptation planning in any given location, they fall outside the scope of our global analysis.

We found that global annual spending on these 20 measures was about $190 billion in capital and operating costs in 2020.¹⁰We compared our estimates of current adaptation spending with the Climate Policy Initiative’s (CPI) estimate of adaptation finance flows of $130 billion to $152 billion in 2023. CPI’s taxonomy includes $65 billion to $87 billion of household products with “high adaptation likelihood” and $65 billion of other tracked adaptation finance. CPI’s figure does not fully capture all the hazards and measures in our analysis. For example, it excludes urban trees and cooling shelters. For measures directly comparable to CPI’s estimate, our estimate of current spending is about $140 billion a year, which is in line with its estimate. CPI’s 2026 edition reports $64 billion of tracked adaptation finance in 2024, broadly flat from 2023, and notes that much household and corporate spending on measures such as cooling and storm proofing is not labeled or tracked as adaptation finance. See Baysa Naran et al., Global landscape of climate finance 2024, Climate Policy Initiative, October 2024; Sasha Abraham et al., Global landscape of climate finance 2026, Climate Policy Initiative, June 2026. That spending provided some 1.2 billion people with protection at standards typically established in developed economies.¹¹Observations of global temperatures indicate that Earth warmed by 1.1°C relative to preindustrial levels in the decade prior to 2020, when our analysis starts and what we refer to as 2020 climate conditions. (The average for the 2015–24 decade is 1.24°C of warming relative to the global temperature between 1850 and 1900.) We aligned the assessment of climate hazards at 1.1°C of warming with baseline population and GDP values for 2020 to apply the observed average climate from 2011 to 2020 to socioeconomic conditions in 2020. In this report, warming levels refer to long-run average temperatures rather than temperatures in any given year, in line with typical climate analysis. See “Summary for policymakers,” in Climate Change 2021: The Physical Science Basis, Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, 2021, and “Indicators of global climate change 2024: Annual update of key indicators of the state of the climate system and human influence,” in Earth System Science Data, Copernicus Publications, 2025. Our analysis excludes Antarctica because it is unpopulated. Yet a resiliency gap persists. Achieving those standards to protect all 4.1 billion people exposed to a climate hazard today would cost almost three times more, or $540 billion annually.¹²Our estimate of 4.1 billion people living in places exposed to climate hazards at 1.1°C in 2020 aligns closely with the World Bank’s estimate of 4.5 billion, though the hazard sets differ somewhat. The World Bank includes cyclones, which our analysis does not. Our analysis additionally considers heat stress, nonsurvivable heat, and wildfire weather, which the World Bank does not. Moreover, even for similar hazards, definitions vary. As a result, overall exposure numbers differ. See Miki Khanh Doan et al., Counting people exposed to, vulnerable to, or at high risk from climate shocks, Policy Research Working Paper number 10619, World Bank, November 2023; Coupled Model Intercomparison Project (CMIP6), 2021; NASA NEX-GDDP, 2021; Fathom Global Flood Map Fathom 3.0, 2021; Inter-Sectoral Impact Model Intercomparison Project Phase 2b (ISIMIP2b), 2017; Matti Kummu, Maija Taka, and Joseph H. A. Guillaume, “Gridded global datasets for gross domestic product and Human Development Index over 1990–2015,” Scientific Data, February 6, 2018, Volume 5. The gap is largest in low-income places, about $200 billion, or 2.7 times the gap in middle- and high-income places, $75 billion each.¹³These figures represent the cost to protect against or adapt to damages from hazards. They do not represent the damages or losses incurred from those hazards. According to Bloomberg, global multi-hazard damages in critical impact channels such as property damage, business disruption, labor productivity, and crop yield losses amounted to approximately $1 trillion in 2020, which is consistent with our estimates considering exposure to hazards, typical damage functions in the literature, and resilience gaps today. Swiss Re finds $177 billion in expected annual losses to property from flooding and $106 billion in losses to property from wildfires from 2014 to 2023. These figures also align with our estimates. For details, refer to “Canada, Singapore and UK among countries most prepared for climate change, BloombergNEF’s new ranking of climate adaptation preparedness finds,” BloombergNEF, October 13, 2025; Chandan Banerjee et al., “Changing climates: The heat is (still) on,” Swiss Re Institute, February 28, 2024; and “Focus on natural catastrophes: Wildfires,” Swiss Re, January 22, 2025.

Going forward, adaptation needs could rise. Although countries made commitments to reduce emissions under the Paris agreement, the world is not on track to meet them.¹⁴The overarching goal of the Paris Agreement is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” Paris Agreement, United Nations, December 12, 2015. Despite efforts to decarbonize, the world is not on track to meet these goals. See “The hard stuff 2025: Taking stock of progress on the physical challenges of the energy transition,” McKinsey Global Institute, November 6, 2025. On current emissions trajectories, various estimates suggest the multidecadal mean surface temperature could rise to 2°C above preindustrial levels by 2050, with further warming expected thereafter.¹⁵We assessed 25 current-trajectory emissions scenarios, based on policies announced or implemented, from the IPCC, the Network for Greening the Financial System (NGFS), and the International Energy Agency (IEA) to reflect the wide range of climate estimates. These scenarios suggest that 1.5°C of warming relative to preindustrial levels would be reached somewhere between 2025 and 2035, when warming is measured as a 20-year average centered on a given year and relative to a preindustrial average. In 2030, figures under those 25 scenarios range from 1.45°C to 1.55°C. As of 2026, the UN Environment Programme (UNEP) suggests that, under current policies and alternative near-term trajectories, the world is almost certain to exceed 1.5°C of warming. In the IPCC scenarios, the median level of warming by 2050 is 2°C, and in the more recent NGFS and IEA scenarios, it is 2°C. By 2100, the temperature estimates from the same set of models are 3.0°C (average of IPCC scenarios, with a maximum of 3.7°C), 2.9°C (NGFS and IEA Current Policies), and 2.5°C (IEA Stated Policies). The IPCC and NGFS scenarios are based on an assumption that currently announced policies are maintained. For NGFS, this covers national climate policies that were legislated and supported by instruments as of March 2024. For IPCC scenarios, specific policies reflected vary by model. The IEA Current Policies scenario (2025) considers only policies already adopted in legislation and regulation, assuming no future change, even where governments have indicated their intention to do so, and takes a cautious perspective on the pace at which new energy technologies are deployed and integrated into the energy system. The Stated Policies scenario draws on a wider interpretation of the policy environment, incorporating not only enacted measures but also formally proposed ones and other official strategy documents that signal the intended policy direction. The UNEP Emissions Gap Report 2026 further finds that current national climate commitments fall well short of the emissions reductions needed to limit global warming to 1.5°C. Limiting overshoot—navigating exceedance of 1.5°C and pathways towards return, United Nations Environment Programme, September 2026, and World energy outlook 2025, International Energy Agency, November 2025. Emissions Gap Report 2026, United Nations Environment Programme, October 13, 2026. As global temperatures rise, more people and places are expected to experience climate hazards, sometimes with greater severity. Because some adaptation measures take years to build and remain in service for decades, decisions made today need to account for conditions through at least midcentury. Therefore, even as efforts to decarbonize continue, planning for the adaptation needed for a 2°C world is prudent, so we use it in this research as a planning scenario, not a forecast.

By 2050, some 8.9 billion people will live in places exposed – in line with developed-economy protection standards – to at least one climate hazard (though of course the impact of hazards varies).¹⁶Although the hazards we studied are considered meaningful enough to protect against, not all are created equal. Their impact can be very different, which means not all 8.9 billion people exposed at 2°C will experience hazards in the same way. What we call “heat stress” is defined as a period of more than a month of very hot and humid weather annually, reducing productivity and possibly harming health. “Heat waves” are rarer and briefer, defined as at least a week of locally high temperatures—and a heat wave in Mumbai is different from a heat wave in Antwerp. While such conditions can pose real risks, they don’t occur every year and are of relatively short duration when they do, often with lower overall impact than heat stress events. The annual cost of protecting them at developed-economy standards using the 20 measures we analyzed could rise to $1.2 trillion (Exhibit 1).¹⁷To estimate the adaptation cost to protect to developed-economy standards currently and at 2°C warming, we identify protection standards in developed economies as a benchmark. We assess the adaptation measures that are most suitable to provide protection, incorporating considerations of physical feasibility and cost-effectiveness to identify measures most appropriate in each location. If either of these considerations is not met, we identify the next-most-effective option for providing protection. These assessments have been conducted for ten regions and nine demographic groups within them. For more details, see Advancing adaptation: Mapping costs from cooling to coastal defenses.

Total cost estimates include capital expenditures amortized over the lifetime of the asset and the average annual operating expenses of deploying adaptation measures through 2050. About 40 percent of the $1.2 trillion in annual adaptation costs would be for capital expenditures, such as building infrastructure like levees and detention basins or purchasing durable goods like air conditioners and fans. The remaining 60 percent would be spent on operating costs, including infrastructure maintenance, electricity costs to run cooling technologies, and water costs for irrigation.

In 2025, the UN Environment Programme estimated $310 billion in annual adaptation costs for developing countries by 2035. While differences in time period, geographic coverage, and scope limit comparability, aligning our analysis to UNEP’s scope yields about $110 billion annually—broadly consistent once non-overlapping categories are excluded. UNEP also cites at least $250 billion in private-sector costs, such as residential cooling in low- and middle-income countries, closely matching our $290 billion estimate. For more, see Adaptation gap report 2025: Running on empty, United Nations Environment Programme, October 2025.

About $190 billion a year of the increased costs would go into protection against increased severity of hazards in places currently exposed, while $430 billion annually would protect places newly exposed to hazards.

These figures are not projections of anticipated spending. After all, the world spends only $190 billion of the $540 billion that protecting against today’s hazards would cost annually. Rather, this calculation provides a benchmark based on developed-economy protection standards for decision-makers weighing future adaptation choices.

At 2°C of warming, more than half of the $1.2 trillion in adaptation spending would be for protection against heat, with active cooling measures like air-conditioning accounting for the largest share. This reflects the prevalence of heat stress, which is more prolonged and often more debilitating than briefer, less frequent heat waves. Protecting against drought would account for one-fifth, with about 15 percent needed for the installation and operation of irrigation systems. Building levees and detention basins to mitigate riverine flooding and flooding from excessive rainfall, as well as undergrounding power lines and investing in fuel management to reduce wildfire risk, would also require sizable investments, particularly in specific regions (Exhibit 2). Of course, careful planning would be needed to avoid maladaptation when implementing measures. For example, constructing a seawall or flood defense in one area may inadvertently increase flood risk elsewhere, while installing air-conditioning requires consideration of potentially significant emissions associated with energy use and refrigerants.¹⁸Currently, air conditioners are among the most effective solutions for protecting against heat, particularly for indoor workers. We estimate annual cooling needs in 2050 of roughly 2,400 TWh, which is in line with estimates from the International Energy Agency. Heat pumps offer a more energy- and emissions-efficient alternative but remain costlier up front and are not yet widely scaled, so our cost estimates overall likely represent a lower bound, to the extent that heat pumps become the preferred solution going forward. Other, more affordable active cooling options—such as evaporative coolers and fans—as well as passive cooling measures can also serve as energy- and emissions-efficient substitutes, but they are significantly less effective. For more, see The future of cooling: Opportunities for energy-efficient air conditioning, International Energy Agency, 2018; Giacomo Falchetta et al., “Inequalities in global residential cooling energy use to 2050,” Nature Communications, September 16, 2024, Volume 15; and Jason Woods et al., “Humidity’s impact on greenhouse gas emissions from air conditioning,” Joule, April 2022, Volume 6, Number 4.

While adaptation is often considered a matter for the public sector, our estimates indicate that half of the $1.2 trillion in adaptation costs could be investments typically made by private actors—consumers and companies—implementing measures such as active cooling and floodproofing to protect assets. About 30 percent of the costs for measures like sea dikes and early-warning systems could be publicly funded, while 20 percent could be implemented through either public programs or private initiatives for measures like irrigation (Exhibit 3).

Why is adaptation not happening despite being a good buy?

Implementing the 20 adaptation measures can generate benefits, measured as avoided damages, well beyond their costs. Benefits could include, for example, avoided damage to infrastructure or assets, avoided losses in labor productivity or crop yields, and avoided adverse health impacts. On average, these benefits are roughly three times costs in 2020, which could increase to about seven times costs at 2°C of warming.¹⁹The 20 measures we examined confer benefits, measured as the value of avoided economic damages, that on average outweigh their costs by at least a factor of 1.5 times globally. The benefit-to-cost ratios (BCRs) in this report are global averages for adaptation measures in places exposed to hazards and can vary significantly at the local level, a necessary consideration in adaptation planning in specific locations. Benefits in the BCR estimation are the annual average losses avoided by implementation of adaptation measures, estimated as the expected annual value damages would diminish. Average annual damages are drawn from research literature and represent the impact of climate hazards on human capital, physical capital, and natural capital, typically including both direct and second-order impacts. Because micro-level damage functions for hazards in the literature often understate some impacts, particularly on natural capital—such as the economic value of marine ecosystems—and are unlikely to fully capture hard limits of adaptation, such damages are outside the scope of our analysis, and our estimates of BCRs are limited to the damages they include. For more, see Yida Sun et al., “Global supply chains amplify economic costs of future extreme heat risk,” Nature, March 2024, Volume 627, Number 8005, and Ebru Kirezci et al., “Global-scale analysis of socioeconomic impacts of coastal flooding over the 21st century,” Frontiers in Marine Science, January 2023, Volume 9.

At the macro level, the task of estimating damages is complicated by model limitations, differing estimates of how physical risks translate into economic damages, interactions with demographic and technology trends, and the potential for tipping points and nonlinear climate impacts, creating significant uncertainties. The IPCC’s Sixth Assessment Report, reviewing more than 20 estimates, found that global GDP loss at 4°C of warming could range from slightly more than zero percent to more than 30 percent. See “Key risks across sectors and regions,” Figure 16.12, in Climate change 2022: Impacts, adaptation and vulnerability, Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, 2022. In some cases, these estimates reflect damages after accounting for those avoided through adaptation.

Resilience investments can also create value by extending the useful life of exposed assets, delaying costly replacement or retrofitting.²⁰“Climate change and natural disasters,” World Bank, accessed October 2026; OECD, Infrastructure for a climate-resilient future, April 2024.

Yet despite favorable overall economics, it isn’t a given that stakeholders will undertake this spending. After all, if adaptation decisions were based only on cost-benefit economics, there would be no resiliency gap today. Clearly, even when economics are compelling at an economy-wide level, the financial case can still be weak for an individual actor—a household, a company, or a government—expected to pay.

For example, a sea dike may prevent losses worth many times its cost across an urban area. Residents, businesses, landowners, and insurers would all benefit from the measure, and so the benefit-to-cost ratio for society at large may be high. However, the financial case for the implementer could be weak.²¹Estimating a societal BCR is subject to uncertainty. Adaptation benefits depend on the timing and severity of future hazards, and some benefits, such as avoided health impacts, ecosystem services, and reduced disruption, are particularly difficult to monetize. BCR estimates can vary depending on the warming level, time horizon, discount rate, treatment of nonmarket benefits, and available data. Moreover, realized benefits may differ from estimated BCRs due to implementation challenges, differing local conditions, or lower-than-expected adaptation effectiveness. Because adaptation benefits often come in the form of avoided losses, realized benefits could also be evaluated against a counterfactual scenario rather than directly observed. Uncertainty about the underlying assumptions going into a BCR estimate can reduce confidence in acting on it, even when the estimated BCR is high. See, for example, “Assessing the costs and benefits of climate change adaptation,” European Environment Agency, March 3, 2023, modified August 7, 2026; Anna Josephson et al., The economics of climate adaptation: An assessment, arXiv working paper, November 2024; Marshall Burke et al., “Quantifying climate loss and damage consistent with a social cost of carbon,” Nature, March 25, 2026, Volume 651, Number 8107. The public agency responsible for constructing a dike is unlikely to receive a dedicated revenue stream from the project to recoup its costs, and numerous unrelated demands are competing for its money and attention. Financial institutions, similarly, may find it difficult to invest in assets not associated with a direct revenue stream.

Thus, the resiliency gap stems less from the macroeconomics of adaptation than from barriers that block implementation by individual decision-makers. For adaptation to advance to deployment, two conditions must be met. A household, company, or government must want and be able to implement it, and a bank or an investor must be willing to finance it on acceptable terms. Failure to meet the first condition creates demand barriers, and failure to meet the second puts up financing barriers.

Importantly, demand and financing barriers can arise from the same underlying economic frictions—including resource constraints, information gaps, and difficulties in assessing and pricing risk—and they often reinforce one another. For example, the underlying economic challenge of limited resources of households or governments can create competing spending priorities for implementers, which is a demand barrier, and counterparty risk for funders, which is a financing barrier.²²This builds on existing literature on a range of barriers to adaptation. Commonly cited examples include limited climate-risk information and awareness, resistance to adaptation, insufficient capital and financing mechanisms, misaligned incentives, regulatory challenges, and technical constraints. See, for example, Michael Mullan and Nicola Ranger, Climate-resilient finance and investment: Framing paper, OECD Environment Working Papers number 196, July 2022; Adapt now: A global call for leadership on climate resilience, Global Commission on Adaptation, September 2019; Ananthakrishnan Prasad et al., Mobilizing private climate financing in emerging market and developing economies, International Monetary Fund Staff Climate Note number 2022/007, July 2022; Arame Tall et al., Enabling private investment in climate adaptation and resilience: Current status, barriers to investment and blueprint for action, World Bank, 2021; Guide for adaptation and resilience finance, Standard Chartered, KPMG, and United Nations Office for Disaster Risk Reduction, April 2024. See also Closing the investability gap, Global Adaptation and Resilience Investment Working Group, October 2026.

Ultimately, households, companies, and governments decide what to spend on. Even when they can finance and implement adaptation, they may choose to forgo it and bear the risk. Nonetheless, understanding the demand and financing barriers that could hold adaptation back can help improve decision-making.

Four demand and four financing barriers stand in the way of adaptation

Demand for adaptation can be weak for several reasons. Those seeking to implement adaptation measures may have more pressing uses for limited resources, underestimate the benefits, lack incentives to invest, and face practical challenges in execution.

Competing spending priorities. Households, companies, and governments may value adaptation but prioritize other needs when resources are constrained. For example, providing developed-economy standards of climate protection at 2°C would cost roughly $130 per person annually on average.²³When referring to adaptation costs, we refer to the cost per person in places exposed to at least one hazard at 1.1°C in 2020 to 2°C in 2050. In Bangladesh, $130 is roughly half of average monthly household income, more than 40 percent of which is spent on food.²⁴Household income and expenditure survey: HIES 2022—Key findings, Bangladesh Bureau of Statistics, April 2023. In advanced economies, adaptation may cost about 0.5 percent of GDP exposed to climate hazards, while in emerging economies, it could cost more than 2.0 percent. These trade-offs explain why the resiliency gap in 2020 was concentrated disproportionately in lower-income places.

Gap in perceived benefits. The benefits of adaptation can be difficult to see until disaster makes the risks and costs of inaction tangible. This can reflect limited awareness of the risk a hazard poses, uncertainty about whether it will occur or how severe it could be, or uncertainty about whether a particular adaptation measure will work as intended. Following the 2025 Los Angeles wildfires, for example, government agencies and businesses across California increased investment in wildfire resilience.²⁵“Governor Newsom signs legislation investing additional $170 million to prevent catastrophic wildfires, issues executive order to fast-track projects,” State of California, April 14, 2025; Daniel Nohrstedt et al., “Exploring disaster impacts on adaptation actions in 549 cities worldwide,” Nature Communications, June 2022, Volume 13; “Climate resilience technology: An inflection point for new investment,” McKinsey, September 29, 2025. As time passes, the influence of significant events on adaptation behavior can diminish.²⁶Daniel Nohrstedt et al., “Exploring disaster impacts on adaptation actions in 549 cities worldwide,” Nature Communications, June 2022, Volume 13.

Misaligned incentives. Those who pay for adaptation do not always capture its benefits, weakening incentives to invest. For example, under traditional funding models, all taxpayers may finance projects such as sea dikes while the direct benefits of dikes accrue most in specific coastal communities.²⁷Lisa Danielson and Michael Mullan, “The challenge of coastal adaptation,” in Responding to rising seas: OECD country approaches to tackling coastal risks, OECD, March 2019.

Execution challenges. Large-scale adaptation can require complex coordination of assets, stakeholders, and institutions, creating delays, roadblocks, and even cost overruns. For example, the Room for the River program in the Netherlands, designed to improve safety for four million people living in river deltas, required more than a decade of coordination and consultation by multiple levels of government and stakeholders.²⁸“Room for the River,” Rijkswaterstaat (Ministry for Infrastructure and Water Management), Government of the Netherlands, accessed October 2026; “Room for the River Programme,” Dutch Water Sector, April 15, 2019; and Jeroen Frank Warner, Arwin van Buuren, and Jurian Edelenbos, Making space for the river: Governance Experiences with Multifunctional River Flood Management in the US and Europe, IWA Publishing, 2012.

Financing barriers arise when capital providers are uncertain whether projects can be originated efficiently, generate sufficient revenue, repay financing, and perform as expected. We consider four types of financing barriers.

Operational risk. Lenders may face transaction-cost and intermediation frictions that make projects costly to originate, aggregate, monitor, and finance. In Ahmedabad, India, thousands of individual cool-roof installations were too small for conventional lenders to finance one by one. Local community organizations and municipal actors like the Ahmedabad Municipal Corporation and Mahila Housing Trust helped aggregate projects so financing could reach households.²⁹Ahmedabad heat action plan, 2019 update, Natural Resources Defense Council and Ahmedabad Municipal Corporation, April 2019; “Building climate resilience and energy efficient livelihoods,” Mahila Housing Trust, accessed October 2026.

Revenue risk. Adaptation investments may generate substantial dispersed or indirect societal value but can lack predictable, dedicated revenue streams to repay investors. Miami Beach, for example, needed to finance pump stations, drainage upgrades, tidal controls, and raised roads to address chronic flooding, but these investments would not generate dedicated revenue. The city established a stormwater utility fee paid by property owners, creating a predictable revenue stream to support borrowing and continued investment.³⁰“Miami Beach stormwater infrastructure adaptation,” Adaptation Clearinghouse, accessed August 2026; Hannah Miet, “The Miami Beach playbook for coastal resilience,” Urban Land, Urban Land Institute, May 2026.

Counterparty risk. Lenders may be constrained by credit market imperfections when they doubt a borrower’s ability to repay, making them reluctant to finance projects on acceptable terms. For example, Bangladesh had limited access to affordable commercial financing for rehabilitating roughly 850 kilometers of coastal embankments that protect against flooding. Instead, it relied on the World Bank’s International Development Association concessional finance, securing $400 million for the first phase with a 40-year maturity. The association’s preferred-creditor status helps it offer terms unavailable in commercial markets.³¹“Coastal resilience in Bangladesh: Protecting coastal communities from tidal flooding and storm surges,” World Bank, September 10, 2019; “World Bank provides $400 million to upgrade Bangladesh’s embankment system,” World Bank, June 28, 2013; “Building coastal resilience to protect lives and livelihoods in Bangladesh,” World Bank, August 29, 2022; “IDA financing,” International Development Association, World Bank, accessed August 2026.

Technology risk. Uncertainty over technology maturity and performance can limit investors’ ability to assess and bear risk. Limited performance data or difficulty in quantifying resilience benefits at scale can stymie adoption. Singapore’s NEWater program, for example, grappled with uncertainty over whether high-quality reclaimed water could be produced at scale. PUB, the national water agency, built a full-scale demonstration plant to test the technology and validate water quality and reliability. Once the technology was proven, the Singapore government could develop public–private partnerships to support some additional plants, which were operated under long-term contracts between PUB and private companies.³²“NEWater,” PUB, Singapore’s National Water Agency, accessed October 2026; Jean Lim, “NEWater,” Singapore Infopedia, National Library Board of Singapore, accessed October 2026.

Demand and financing barriers together determine deployment readiness

Different adaptation measures face different combinations of demand and financing barriers. For example, municipal levees and fuel management in low-income places may confront counterparty risk related to financing but have different demand barriers. Levees often compete with other spending priorities, while fuel management may be constrained by underappreciated wildfire risk, making its benefits unclear or intangible.

Other measures may have minimal demand barriers but different financing barriers. In middle-income places, implementing air-conditioning may be stymied by few financing barriers, while early-warning systems may encounter revenue risk because they lack the predictable cash flow lenders typically require (Exhibit 4).

And in practice, multiple barriers may constrain a single measure. Flood infrastructure in low-income places may face counterparty risk if the implementing agency cannot meet lenders’ credit requirements as well as revenue risk if the project lacks the cash flow to service financing. We focus on the primary demand and financing barrier for each of the 20 adaptation measures in our research, while recognizing that multiple barriers may need to be addressed.

Not all climate adaptation investments are equally ready to move forward. Some can proceed with relatively little friction because implementers have the resources, incentives, and capabilities to act and financing is readily available. In other words, they are deployment ready, with minimal demand and financing barriers.

Others must overcome significant obstacles before investment can happen. As adaptation needs grow, there is no guarantee that they will translate to deployment-ready adaptation opportunities. The mix of measures that meet the threshold of minimal demand and financing barriers will shape where adaptation is likely to occur without targeted interventions and the scale of the resilience challenge that remains.

Adaptation measures with a value of $460 billion could be deployment ready by 2050

For the 20 adaptation measures we studied, total annual adaptation costs to protect the world at developed-economy standards could rise from roughly $540 billion in 2020 to $1.2 trillion at 2°C through 2050.

How much of that could be deployment ready? By our estimate, deployment-ready adaptation could reach about $460 billion a year, or 40 percent of the $1.2 trillion needed by 2050, compared with about $190 billion spent today.³³Using the 1.1°C 2020 data set, we estimate that approximately $190 billion is currently spent annually on the 20 adaptation measures analyzed. Applying our methodology, approximately $160 billion of adaptation needs are assessed as being deployment ready. This suggests that current spending includes measures that face identified barriers but have nevertheless been implemented. These measures can protect people from heat, wildfire, drought, and flooding, and safeguard homes, livelihoods, businesses, and economies.

Our analysis of deployment readiness is based on a granular assessment of the demand and financing barriers that stand in the way of deployment of 20 adaptation measures across demographic groups by level of income and urbanization as well as across regions (see sidebar “Our research methodology”). While not a definitive prediction, this assessment offers a way for stakeholders to better understand where deployment could occur without targeted responses and where adaptation markets could develop. This creates an opportunity for companies providing adaptation solutions and capital providers financing their deployment.

Our analysis finds that more than two-thirds of the $460 billion of deployment-ready measures by 2050 will be in high-income places, spanning measures like active and passive cooling, stormwater management, early-warning systems, and irrigation.

By 2050, much of the growth in deployment-ready opportunities relative to current spending is expected to occur where increasing climate exposure coincides with an ability and willingness to pay. For example, as heat stress and heat waves become more frequent and prolonged in markets where households and businesses have sufficient purchasing power, demand for air conditioners and fans is likely to increase, as it did in Europe in the unusually hot summer of 2026.³⁴Thibault Spirlet, “Europe is warming to America’s obsession with staying cool,” Business Insider, July 26, 2026. Similarly, more frequent and widespread drought in higher-income places could increase demand for irrigation and other agricultural resilience measures where stakeholders may have a higher ability to pay and where the measures can generate revenue by increasing agricultural output and supporting financing.

The deployment-ready market could be bigger still when considering the wider universe of adaptation.³⁵“Climate resilience technology: An inflection point for new investment,” McKinsey, September 29, 2025. Beyond the 20 measures in our analysis, deployment-ready measures could develop, for example, in sector-specific activities, such as increasing the resilience of power systems, and across the broader adaptation ecosystem, including supply chain resilience and hazard-management software (Exhibit 5).

Several tailwinds could further bolster deployment-ready adaptation. The occurrence of extreme weather events and growing risk awareness could make the benefits of adaptation more tangible for implementers. Economic development could increase disposable incomes and the ability to pay for adaptation. Improving cost-benefit economics as hazards intensify could further strengthen incentives to adapt, as could the external environment through, for example, policy shifts or the impact of risks on insurance premiums. Moreover, broader investments in areas such as energy reliability and supply chain resilience could also provide adaptation benefits, even if undertaken for other purposes.

The majority of adaptation costs at 2°C could face deployment barriers

At 2°C, roughly 60 percent of the cost of adaptation measures to protect to developed-economy standards would still encounter demand or financing barriers. These measures represent an additional $690 billion of adaptation costs, but their potential to translate from needs to deployment that protects lives and livelihoods, particularly for vulnerable communities, and a commercially addressable market is contingent on addressing underlying barriers (Exhibit 6).

Affordability is a central constraint, with measures costing roughly $440 billion confronting competing spending priorities and counterparty risk. This combination of barriers is prevalent in lower-income regions where heat and drought exposure are high but households, businesses, and governments often have less ability to pay and more limited access to affordable finance. Residential cooling illustrates this challenge. Measures like air-conditioning offer compelling health and productivity benefits, but many households may be unable to afford the equipment or ongoing electricity expense, given other essential spending requirements or may lack access to electricity altogether.

Measures constrained primarily by execution challenges or a combination of misaligned incentives and revenue risk account for the next two largest categories of spending, each roughly $50 billion.

In the first category, willingness and ability to pay exist, but practical capacity to act is limited by required stakeholder coordination. White roofs in high-income cities, for example, can require coordination of large numbers of buildings and property owners, making government facilitation key to implementation. These measures may be closer to becoming commercially addressable if execution constraints can be resolved.

In the second category, those bearing the costs of a measure may capture only part of its benefits while the measure itself generates insufficient revenue to support financing. Levees in higher-income towns are one example. Translating benefits into willingness to pay and financeable revenue is a prerequisite for commercial deployment.

The remaining roughly $150 billion of adaptation costs at 2°C is distributed across measures with other combinations of demand and financing barriers. (Note that this analysis excludes technology risk because we focus on tried-and-true adaptation measures, although it could still become a constraint to the deployment of other measures, which we discuss in Chapter 4.)

Demand and financing barriers vary widely depending on the hazard

Primary demand and financing barriers vary by hazard, reflecting the economics of the underlying measures to protect against different hazards and the places where they must be deployed (Exhibit 7). Measures that generate direct revenue or productivity gains often face different barriers than those with the main benefit in avoiding future losses, while the ability to pay and access to finance vary substantially by location.

Heat adaptations are split roughly evenly between measures having limited barriers and those with significant demand and financing constraints. Among constrained measures, the most common combination of barriers is competing spending priorities and counterparty risk. This reflects where heat adaptation is needed. In higher-income places, implementers often have resources or the ability to use financing to invest in cooling. But lower-income populations, whose limited ability to pay and weaker creditworthiness translate to higher demand and financing barriers, also face substantial heat exposure.

Wildfire adaptation is primarily constrained by gaps in perceived benefit, because investment decisions about measures like fuel management and underground power lines can depend heavily on the perceived likelihood and consequences of catastrophic events that may not occur every year. This is true at all income levels. Indeed, wildfire weather is the hazard against which high-income places have the largest resiliency gap today relative to other hazards.³⁶On average, 25 percent of people living in high-income places lack protection against the four categories of hazards we studied (heat, wildfires, drought, and flooding). For wildfires alone, 70 percent of those exposed lack protection. See Advancing adaptation: Mapping costs from cooling to coastal defenses, McKinsey Global Institute, December 2025.

Nearly half of the adaptation measures related to drought in our analysis have limited barriers. Measures like irrigation can increase agricultural yields and generate revenue streams that support demand and financing, while drought adaptation costs are disproportionately concentrated in higher-income regions. Although drought accounts for about 20 percent of adaptation costs globally at 2°C, it represents 30 percent of adaptation costs in higher-income regions such as the EU-30 and North America.³⁷The EU-30 encompasses the 27 member states of the European Union, plus Norway, Switzerland, and the United Kingdom. Other Europe and Central Asia include Kazakhstan, Russia, Türkiye, Ukraine, Uzbekistan, and other countries in the region. This concentration in places with greater access to capital helps explain why a comparatively large share of drought adaptation faces limited barriers.

Misaligned incentives often stymie implementation of flood protection infrastructure because benefits accrue to property owners, businesses, and residents in flood-prone areas while the costs are typically shouldered by the broader community. Revenue risk can compound this challenge because flood-protection infrastructure often lacks cash flow and may require mechanisms such as user fees, value capture, and beneficiary payments to monetize its benefits.

Each region faces different hazards, requires different climate adaptation measures, and varies in its ability to pay for and finance those measures. Lower-income regions face greater adaptation costs relative to residents’ average income as well as greater deployment barriers. Higher-income regions need to spend less as a share of residents’ average income but still encounter demand and financing barriers. Differences in income, hazard exposure, and the measures required to adapt help explain why deployment readiness varies between regions.

Lower-income regions have higher adaptation costs and more barriers to deployment

MGI’s previous analysis on adaptation found that low-income regions currently have larger resiliency gaps. The disparity is greatest in protection from heat. For example, some 60 percent of India’s population and 30 percent of Nigeria’s live in places that already experience heat stress.³⁸Heat stress is defined as at least 28 days in an average year of either humid heat, when the daily average wet-bulb globe temperature (WBGT, a measure that combines heat and humidity) exceeds 29.4°C, or dry heat, when the daily maximum air temperature exceeds 40°C. Yet air-conditioning coverage in these countries is scant, at about 10 percent in India and 3 percent in Nigeria.³⁹The future of cooling: Opportunities for energy-efficient air conditioning, International Energy Agency, 2018; Giacomo Falchetta et al., “Inequalities in global residential cooling energy use to 2050,” Nature Communications, September 2024; Giacomo Pavanello et al., “Air-conditioning and the adaptation cooling deficit in emerging economies,” Nature Communications, September 2024; Lucas Davis et al., “Air conditioning and global inequality,” Global Environmental Change, May 2021; and Marina Andrijevic et al., “Future cooling gap in shared socioeconomic pathways,” Environmental Research Letters, September 2021. By contrast, in the United States, just 4 percent of the population may experience heat stress today, but air-conditioning coverage exceeds 90 percent.

At the same time, lower-income regions are also expected to have higher adaptation costs to protect to developed-economy standards relative to their GDP going forward. At 2°C of warming, adaptation to protect to developed-economy standards would cost an estimated 2.0 to 3.0 percent of GDP in India and Sub-Saharan Africa, compared to just 0.3 to 0.5 percent of GDP in higher-income regions such as North America, the EU-30, and Advanced Asia.⁴⁰Advanced Asia spans Australia, Japan, New Zealand, Singapore, South Korea, and other advanced Asian and other Pacific Island countries.

But higher adaptation costs are only part of the challenge for lower-income regions. Their adaptation needs are more likely to face demand and financing barriers. This helps explain the large resiliency gap in these regions today and lower share of adaptation costs linked to measures that are deployment ready going forward. Less than 20 percent of the adaptation investment needed in Sub-Saharan Africa and India at 2°C is expected to be deployment ready, compared with more than half in higher-income regions (Exhibit 8). Put differently, the regions that need greater protection relative to their capacity to spend also face greater barriers to deploying it.

The mix of demand and financing barriers varies by region

In lower-income regions with large populations, much of the adaptation needed is for protection against heat, including cooling measures that require households, companies, and governments to devote resources to adaptation when they have other pressing needs. Competing spending priorities are the biggest demand barrier in India and Sub-Saharan Africa, accounting for roughly 80 percent of adaptation costs that face a demand barrier (Exhibit 9).

Adaptation in high-income regions also confronts demand barriers, but of a different nature. In regions such as Advanced Asia and the EU-30, where adaptation costs are primarily related to large flood-protection infrastructure, misaligned incentives are more common because the public entities funding protection may find it difficult to directly capture the benefits or impose fees on all who benefit.

Some barriers cut across income levels. Gaps in perceived benefits can constrain wildfire protection everywhere, while execution challenges can arise for widely dispersed adaptation measures such as residential white roofs.

Even where demand barriers are limited, financing barriers can still prevent deployment. The primary financing constraint varies across regions. Counterparty risk is the largest financing barrier in lower-income regions, constraining implementation of measures accounting for roughly 75 percent of adaptation costs in Sub-Saharan Africa, India, and Emerging Asia, compared with only about 10 percent in higher-income regions.⁴¹Emerging Asia encompasses Afghanistan, Bangladesh, Indonesia, Malaysia, Myanmar, Nepal, Pakistan, the Philippines, Thailand, Vietnam, and other emerging Asian and Pacific Island countries. Higher-income regions, by contrast, are more likely to face revenue risk. In these regions, those wishing to implement adaptation may be willing and creditworthy, but investments based on avoided losses for measures like detention basins and sea dikes may not generate predictable cash flow against which private capital can easily lend, making financing more challenging.

Experience demonstrates that barriers to climate adaptation can be overcome. Many measures are now an integral part of their environments—the Thames Barrier in London, for instance, and the MOSE Project in Venice. Implementing more of them requires governments, companies, and communities to better collaborate to reduce costs, resolve complex engineering and technical challenges, create revenue streams, and mobilize innovative financing to close funding gaps. Understanding what has enabled successful adaptation can help identify how to move more measures from identified need to actual deployment.

Targeted responses can overcome barriers to adaptation deployment

As noted previously, the deployment-ready opportunity across the 20 measures we analyzed amounts to $460 billion annually by 2050.

Of course, this opportunity is contingent on measures that are currently deployment ready maintaining that status as they scale to respond to increasing adaptation needs. The remaining $690 billion, or 60 percent of the $1.2 trillion in total annual adaptation costs at 2°C, is more challenging, stymied by demand or financing barriers, often in combination. Without targeted responses, a substantial share of adaptation needs may be unmet, many of them in the communities most exposed to climate hazards. A common pattern of responses emerges from our analysis of barriers (Exhibit 10).⁴²For this classification, we combined demand and financing barriers into groups based on the key types of responses needed to unlock them. Six patterns emerged: innovating to reduce costs, building capabilities and coordination, realigning incentives, demonstrating value, enabling bankability, and proving feasibility.

Innovating to reduce costs could address by far the largest challenge. Innovation could make $440 billion of measures, or 40 percent of the $1.2 trillion of annual adaptation costs at 2°C, deployment ready by reducing affordability barriers.

An additional $210 billion, or 15 percent of the total annual costs, requires increasing willingness or ability to act. Of this, roughly $80 billion annually could address building capability and coordination, for example building detention basins and other flood infrastructure in higher-income regions where coordination between different government departments is required. Realigning incentives, for example, for levees and irrigation systems in higher-income rural areas, could eliminate barriers to roughly $70 billion annually. Demonstrating value, primarily for wildfire protection measures, could move another $60 billion annually of adaptation measures toward deployment.

For the remaining 5 percent, demand broadly exists, but financing remains constrained. Enabling bankability could address roughly $40 billion annually, creating revenue streams with innovative structures to support financing. Such structures could support early-warning systems in middle-income places, where benefits do not naturally translate into project revenues, for example. Proving feasibility can help newer technologies attract financing, although we have primarily focused on measures with established track records in this research.

In reality, the implementation of any given adaptation measure is local and may require several of these responses to work together, depending on the stakeholders involved and the conditions for implementation.

Select examples of how barriers have been overcome

Below, we lay out potential actions for decision makers, drawing on an understanding of barriers and examples of adaptation from around the world. This list of actions can be a starting point for determining whether and how to best implement adaptation efforts and evaluate trade-offs and synergies with other priorities.

Innovating to reduce costs is a priority when adaptation must compete with essential spending priorities because high costs put it beyond the reach of potential implementers or high borrowing costs make financing hard to secure. The affordability challenge for households and businesses may extend beyond the upfront capital or financing costs for resilience. Adaptation measures may increase ongoing expenses, such as electricity bills from air-conditioning. Left unaddressed, unaddressed climate risks can also raise costs, such as insurance premiums or post disaster recovery expenses. These challenges are particularly relevant in lower-income communities where households and governments may value adaptation but lack the resources to pay for it.

Building capability and coordination becomes a priority when adaptation requires complex planning and delivery by multiple stakeholders and institutions. This is particularly relevant for large infrastructure programs with fragmented responsibilities and lengthy approvals that can impede progress.

Realigning incentives becomes a priority when those bearing the costs of adaptation do not capture enough of the benefits to justify action. This is particularly relevant for measures that deliver benefits spread across communities or assets while costs are concentrated among specific governments, businesses, landowners, or households.

Demonstrating value is important when those who would benefit from adaptation underestimate the risks they face or do not fully recognize its value. This can be especially challenging when the occurrence and severity of hazards are uncertain. For example, wildfire weather may occur regularly, but whether a wildfire starts and causes losses remains uncertain and depends on many factors, making the value of investment in protection less immediately apparent.

Enabling bankability becomes the priority when demand for adaptation broadly exists but projects cannot attract financing on acceptable terms. This is particularly relevant when projects lack predictable revenue streams, are too small to finance efficiently, or carry risks that capital providers are unwilling to bear.

Proving feasibility is important when newer adaptation technologies lack a track record of reliable performance, creating uncertainty that can deter financing. This is particularly relevant for newer technologies that need to demonstrate performance in real-world conditions and at scale before capital providers are willing to invest.

These case studies and example actions show how barriers to adaptation can be overcome at the local level. But local actors do not have to undertake these efforts alone. In some instances, global actions and platforms can support local efforts.

For example, risk transparency through better data on climate hazards, exposure, and the benefits of adaptation can help improve decision-making. Know-how can provide the technical, institutional, and delivery expertise needed to design, structure, and implement adaptation effectively. Common standards can reduce the cost and complexity of designing and replicating solutions in different locations. Capital mobilization can connect local adaptation opportunities with larger pools of finance, including by aggregating projects and developing common investment metrics.⁵²Investing in resilience: Lessons from private finance for unlocking investment in adaptation, Glasgow Financial Alliance for Net Zero, June 2026.

These actions do not replace locally tailored responses. Rather, they can make those responses more effective and accelerate deployment.

For those seeking to invest in climate resilience, the patterns of response highlighted in the previous chapter can help inform how to best tackle barriers to adaptation. Companies, financial institutions, and public- and social-sector actors can use this understanding to consider how to strengthen their own resilience and support the resilience needs of others (Exhibit 11).

Corporations can build capabilities, partnerships, and innovative solutions for adaptation

The barriers identified in this research, including gaps in perceived benefits, competition from other investment priorities, and execution challenges, confront companies. To overcome them, companies can consider building capabilities to better value adaptation and partnerships to implement responses.

• Build the muscle to value adaptation. Developing tools and expertise within existing risk and capital-planning processes is one place to start. This helps quantify the costs of adaptation and its benefits in terms of avoided losses and other business benefits. With this understanding, decision-makers can more effectively identify potential actions and better assess adaptation against other investment needs, considering current and future climate hazards.
• Prioritize where and how best to embed adaptation. With a better understanding of the value of adaptation, companies can determine where dedicated adaptation investments meet the financial return thresholds that typically apply to other investments and the sequence for deploying pertinent measures. Resilience can also be embedded into planned projects because building it into the design and upgrading of assets can avoid expensive retrofits and extend asset lives. In some cases, investments that companies make for broader resilience beyond protecting against extreme weather events, like energy reliability or supply-chain resilience, can also strengthen climate resilience. In implementing measures, companies can also consider how to best account for uncertainty in future climate risks in their adaptation responses. Responses could range from implementing “no regrets” measures that deliver benefits under any scenario and carefully sequencing responses to establishing more conservative design standards for critical assets and flexible strategies with trigger points that signal when further investment is needed as conditions evolve.
• Consider building partnerships that could overcome coordination and capability challenges. Realizing the benefits of adaptation can depend on suppliers, distributors, communities, and infrastructure providers acting in tandem. Partnerships can align incentives and add capabilities that companies lack. In South Africa, Woolworths partnered with its fruit suppliers, a regional water authority, and the World Wide Fund for Nature to mitigate shared water risks because no single farm or company could secure its water supply and quality without coordinated resilience action across the catchment.⁵³Woolworths Holdings Limited, Good business journey report 2023, September 2023; Breede catchment water stewardship programme, WWF South Africa, July 22, 2020.

Understanding demand and financing barriers also allows companies that are providers of resilience solutions to identify where clear demand for adaptation is likely to exist and the role they can play in supporting the resilience needs of others.

• Provide adaptation solutions and consider how to innovate to unlock demand. Some companies also have an important role to play in adaptation as solution providers. AiDASH, for example, uses satellite data and AI to help utilities manage vegetation, wildfires, storms, and other physical risks to infrastructure. In 2026, Schneider Electric agreed to acquire approximately 90 percent of the company for $350 million.⁵⁴“Half year 2026 results,” Schneider Electric, July 30, 2026. However, solution providers may need to build skills to distinguish between near- and longer-term opportunities. Near-term markets may have demonstrated willingness to pay, for example, in the wake of recent extreme weather events or may have policies that trigger a demand response. Longer-term opportunities include markets where adaptation needs are growing but demand has yet to materialize at scale. Capturing these longer-term opportunities may require companies to continue to innovate to lower costs, demonstrate the value and feasibility of their solutions, and move from pilots to scalable projects.

Financial institutions can participate in growing adaptation markets and consider how to spur demand

Banks can identify and structure adaptation opportunities that fit their risk appetite.

• Support adaptation demand across existing relationships and products. Banks can identify the households and businesses they already serve where clear demand for adaptation already exists and use those established relationships to explore opportunities to provide financing. BMO offers discounted financing for qualifying climate-resilience investments, for example, to small and midsize businesses that floodproof buildings.⁵⁵BMO Financial Group, “BMO Launches Greener Future Financing Program to Help U.S. Businesses Build Climate Resilient Operations,” April 22, 2024. Such measures can help strengthen the resilience of households and businesses and potentially improve the resilience of banks’ portfolios.
• Examine where and how to enable bankability. Where demand broadly exists but financing is constrained, banks can identify what’s needed to get capital to flow. This could involve innovative structuring and underwriting approaches like aggregating smaller investments and standardizing successful approaches to reduce transaction costs, making financing easier to scale.⁵⁶Investing in resilience: Lessons from private finance for unlocking investment in adaptation, Glasgow Financial Alliance for Net Zero, June 2026.
• Consider partnerships that could unleash novel revenue streams. Where demand exists, stakeholders including banks, implementers, beneficiaries, and insurers can come together to create revenue streams that could support financing for adaptation (see sidebar “Translating resilience benefits into predictable revenue streams”). This could include beneficiary payments, payments tied to future energy or insurance savings, and dedicated fees or subscription models that replace upfront payments with recurring fees.
• Build and share an evidence base from financed projects. Sharing data on how adaptation investments perform against expected physical risks and their resilience outcomes with implementers can make the benefits of adaptation more visible and potentially strengthen incentives to invest. Building a track record can also reduce uncertainty for financiers over time, helping inform underwriting and credit decisions.

Investors can consider how to advance adaptation in their portfolios and support emerging solutions.

• Evaluate how to strengthen the resilience of portfolio companies. Investors can identify where physical climate risks could materially affect portfolio companies and encourage resilience investments to manage those risks.
• Consider where private capital can close commercialization gaps in adaptation. When adaptation technologies are moving from early-stage innovation to commercial scale, investors can provide targeted risk capital to help establish commercially viable business models. CoolPact Capital, for example, is a dedicated investment vehicle designed to finance early-stage cooling companies in India.⁵⁷2025 Global Innovation Lab for Climate Finance impact report, Climate Policy Initiative, March 2026; Arun Krishnan and Aanandita Sikka, “CoolPact Capital India Fund,” Climate Policy Initiative, October 3, 2024.

Insurers can use their expertise to strengthen resilience and manage residual risks

Insurers can advance adaptation by creating incentives for asset owners to reduce risk, collaborating with other stakeholders to support investments that protect multiple beneficiaries, and providing protection against residual risk.

• Determine whether insurance can play a role in encouraging resilience. Premiums and coverage signal underlying physical climate risk. Lower premiums for resilient assets are unlikely to be sufficient on their own, and combining them with more stable coverage and pricing as well as partnerships with banks on premium-linked financing could help strengthen incentives to invest in adaptation. In California, insurers have begun offering discounts on property insurance for homeowners who adopt wildfire adaptation measures, though it is too early to determine how popular those are.⁵⁸Avery Ellfeldt, “California insurers begin giving discounts for fire-proofed homes,” E&E News, September 19, 2024.
• Consider building partnerships with other insurers to support shared resilience. Measures such as levees, sea dikes, and watersheds manage flooding and protect whole communities. But they benefit multiple beneficiaries, making it difficult for any single insurer to justify the investment. Insurers can work together and with other stakeholders to aggregate beneficiaries, quantify avoided losses, and explore financing structures that could support investment in shared resilience. In the United Kingdom, for example, the FloodAction Coalition brings together insurers, investors, and landowners to cofinance natural flood management. At launch, it set a target to bring an initial £150 million pipeline of projects online in 2026 and build a £1 billion-plus resilience market by 2028.⁵⁹Josh Recamara, “Insurers lead UK push to turn flood risk into investable resilience,” Insurance Business, November 4, 2025; “The Conduit: UK Environment Secretary welcomes launch of Aviva led FloodAction Coalition,” The Conduit, November 5, 2025.
• Provide products and services to manage residual risk. When asset owners choose to bear some or all of a risk, they can use insurance to shift part of the financial burden through conventional policies or variations such as parametric insurance. Such products were launched for women farmers in India and construction workers in Hong Kong to help protect them from income loss during extreme heat.⁶⁰Insuring against extreme heat: Navigating risks in a warming world, World Economic Forum, January 2025; and Reema Nanavaty and Prerna Saxena, “How heatwaves have sparked new ways for women farmers in India to protect their crops,” World Economic Forum, March 25, 2025.

The public and social sectors can consider approaches to strengthen demand, delivery, and target capital

The public and social sectors can determine if and where to step in to create an environment that encourages demand for adaptation and supports its effective delivery, as well as deploy capital where adaptation offers clear benefits but affordability constraints and other barriers constrain investments. Given their finite resources and competing priorities, decision-makers will confront trade-offs and consider how to act strategically, for example by targeting support to places where affordability and financing constraints are greatest.

• Evaluate the role policy can play to create demand when market signals are insufficient. Some jurisdictions are embedding resilience standards in building codes, zoning, and procurement to make risks and benefits more visible.
• Examine opportunities to improve coordination. When willingness and ability to pay exist but execution is holding adaptation back, one approach is to establish dedicated teams with clear accountability to coordinate between agencies. Doing so can help resolve bottlenecks such as lengthy approvals and contracting delays that prevent projects from moving forward.
• Explore how to prioritize scarce public and development capital where it can have the greatest impact. Given scarce resources, prioritization is key to adaptation and other development priorities. One approach is to target support to populations and measures facing the greatest ability-to-pay constraints to help close affordability gaps. Focusing on measures with large benefit-to-cost ratios is another approach. Yet another is distinguishing investments that require public or concessional funding from those where targeted public support could mobilize additional private capital and stretch scarce resources further. The Green Climate Fund’s investment in the Acumen Resilient Agriculture Fund, for example, used its first-loss equity to reduce investment risk and attract other investors to agribusinesses, supporting climate resilience among smallholder farmers in Africa (see sidebar “How can blended finance advance adaptation?”).⁶¹Independent evaluation of the adaptation portfolio and approach of the Green Climate Fund: Project deep dives, Green Climate Fund, February 2021; “World Bank steps up climate action in Türkiye with major guarantee for resilience project,” World Bank, June 30, 2025.
• Evaluate how to embed resilience into economic development. Integrating climate risk and resilience requirements from project appraisal through design and construction can often cost less than adapting assets later and can potentially improve project performance and useful life. Importantly, the presence or absence of adaptation may influence the pace of economic development.⁶²Rising to the challenge: Success stories and strategies for achieving climate adaptation and resilience, World Bank, 2024.
• Explore building a pipeline that investors can act on. Funding project preparation and working with sponsors to turn adaptation plans into well-structured projects could give investors visibility into upcoming opportunities and make it easier to develop financing approaches that can be replicated.⁶³Investing in resilience: Lessons from private finance for unlocking investment in adaptation, Glasgow Financial Alliance for Net Zero, June 2026.

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Around the world, companies, capital providers, and public-sector actors have found ways to overcome barriers to adaptation through innovative financing, regulation, and incentives that better align costs and benefits. The examples in this report point to a way forward to address resiliency gaps and adaptation needs by illustrating how various parties have overcome barriers to protect people, assets, and operations, enhance resilience across value chains, and develop new solutions. Ultimately, households, governments, and companies choose where and how to invest in resilience. Understanding the barriers to adaptation and potential responses can help them make more informed decisions and turn the world’s adaptation needs into effective action.