Risk to Reward 2025

An emphasis on mitigation, with adaptation finance gaps growing Understanding how this capital is allocated, whether towards mitigation, adaptation or dual-benefit activities, reveals important insights about investor priorities, perceived risks and the maturity of financial instruments across climate sectors (see Figure 7). Regional distribution of private climate finance in EMDEs, by use (2023) FIGURE 7 Central Asia & Eastern EuropeEast Asia & PacificLatin America & CaribbeanMiddle East & North AfricaSouth Asia Sub-Saharan AfricaTransregional Total: $187 bn 96%$179 billionMITIGATION98%95% 4%9%87% 100% 100%96% 13%25%61% 2%4% 1%$2 billionADAPTATION 3%$5 billionDUAL BENEFIT1% 3% 1% Source: Climate Policy Initiative (CPI), 2025.26 We must address the chronic imbalance between mitigation and adaptation finance by directing more private investment into resilience-building solutions, supported by catalytic and concessional capital. Without this shift, the transition will be neither just nor sustainable. The solutions exist; now we need to replicate and scale them quickly. Barbara Buchner, Global Managing Director, Climate Policy Initiative In 2023, private climate finance in EMDEs remained heavily concentrated on mitigation, which absorbed 96% of total flows, while dual-benefit projects received 3% and adaptation accounted for just 1%. This imbalance reflects the commercial logic of private investors: mitigation investments, particularly in clean energy and transport, offer predictable cashflows, proven business models and access to risk-sharing instruments such as green bonds and public co-finance.27 By contrast, adaptation projects typically lack monetizable outcomes, carry diffuse benefits and require significant concessional capital to become investment-ready.28 Additionally, adaptation has historically been viewed as a public good and therefore the responsibility of governments. As a result, adaptation sectors continue to be sidelined from private capital flows, highlighting the need for targeted de-risking and pipeline development, including developing a better understanding of the private sector’s role in adaptation and resilience. From Risk to Reward: Unlocking Private Capital for Climate and Growth 13