Climate finance was booming. Global flows doubled to $1.3 trillion a year in 2021-22. But just 5% of this sum went to adaptation, down from 7% two years earlier. The question is not just whether there is enough money, but whether it is reaching the right places and making a difference once it arrives. The evidence suggests a worrying mismatch between where finance flows and where vulnerabilities lie.

Take Africa. By its own national commitments, the continent needs roughly $53 billion a year to adapt to climate change. It receives only $13 billion. At current levels of support, it will have mustered $195 billion by 2035 - barely a tenth of the $1.6 trillion needed. Worse, more than half of Africa’s adaptation funds go to just ten countries, leaving the poorest and most fragile states starved of support.

This is not just inequitable but perverse. Fragile states are often those most at risk from climate impacts. Yet their weak institutions make donors nervous, so they receive little beyond emergency relief. Between 2019 and 2021, fragile and conflict-affected countries got roughly as much emergency funding ($26 billion) as adaptation finance ($28 billion). In effect, the system waits for disaster before opening the purse. Proactivity is out; fire-fighting is in.

Nor is the problem confined to Africa. East Asia and the Pacific hoovered up 45% of adaptation flows in 2021-22, despite being home to far stronger state capacity and deeper pools of domestic capital. Geography, it seems, is destiny, but the wrong kind.

The sectoral breakdown is equally lopsided. Infrastructure, water systems, and institutional support account for more than 60% of multilateral adaptation spending. Roads, dams and pipes matter, but they overshadow urgent needs in farming and food security. In Africa, agriculture represents a quarter of stated needs, yet most funds go to big projects, not to the smallholder farmers who feed 80% of the poor.

Meanwhile, “cross-sectoral” projects, a catch-all that is so broad that effectiveness is almost impossible to track, accounted for nearly half of Africa’s adaptation flows in 2021-22. The result is a finance architecture that loves concrete but ignores crops. That is a dangerous bias when food systems, not motorways, are often the first to buckle under climate stress.

The most glaring shortfall is the near absence of private money. Investors have piled into renewable power and carbon markets, but when it comes to adaptation, they have barely shown up. Private flows make up less than 3% of global adaptation finance, a figure that has barely budged since 2019.

The reasons are well rehearsed: adaptation projects lack clear revenue streams, offer uncertain returns and often generate public goods that cannot easily be monetised. Building a seawall may protect thousands, but it produces no income. Hence, the burden falls overwhelmingly on public budgets that are already straining under debt and competing demands.

Yet this caution may prove penny-wise and pound-foolish. Research by the World Bank suggests more than two-thirds of adaptation costs lie in sectors typically funded by the public purse. But that does not mean private capital has no role. Indeed, estimates suggest climate-adaptation solutions could unlock $9 trillion in investment opportunities by 2050. The paradox is that the sector is seen as uninvestable precisely when the need - and the market - are exploding.

Even when money flows, the results are mixed. Evaluations of adaptation projects funded by international climate mechanisms find that roughly half are rated either unsatisfactory or unsustainable once support ends. Many investments are incremental, patching cracks rather than transforming vulnerabilities.

Measurement compounds the problem. What counts as resilience in Bangladesh may look very different in Botswana. The lack of clear yardsticks undermines accountability and makes learning across projects difficult. Donors can boast of billions disbursed, but cannot prove that those billions bought real resilience.

There are bright spots. New financial instruments are beginning to emerge. Debt-for-adaptation swaps allow countries to redirect repayments into climate projects. Parametric insurance products trigger payouts when rainfall or temperature thresholds are breached. Catastrophe bonds, pioneered by the Philippines and Mexico, deliver rapid cash after storms and earthquakes.

Local mechanisms show equal promise. In Bangladesh, community adaptation funds give villages direct control over spending, leading to more targeted investments. In Brazil, participatory budgeting has allowed poor communities to channel climate money into the things they value most - often basics like drainage and shade. These bottom-up approaches achieve what top-down multilateral processes often fail to: legitimacy and local ownership.

To turn billions into resilience rather than waste, three changes are necessary.

Adaptation finance stands at a crossroads. On one hand, record sums are being mobilised; on the other, they are being misdirected and under-leveraged. Without reform, the world risks spending billions to achieve little more than business-as-usual with shinier pipes and walls.

As climate shocks multiply, the tolerance for waste will shrink. The choice is between building a system that channels money to where it matters, or presiding over a Potemkin village of resilience - impressive on paper, flimsy in reality.

In the end, the test of adaptation finance is brutally simple: does it help people withstand the storms, heat and droughts to come? At present, the answer is too often “not really”. Unless that changes, the world may find itself with plenty of money in the pot and precious little resilience to show for it.

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