“Adaptation finance has made progress at COP30”

Pieternel Boogaard is Managing Director of IFAD’s Office of Technical Delivery.
Photo: © IFAD

Rural 21: At COP30, the International Fund for Agricultural Development (IFAD) presented new evidence showing that investing in small-scale farmers to help them adapt to climate change and build prosperity yields significant economic and social returns. Can you briefly explain what this new evidence consists of?

Pieternel Boogaard: IFAD’s analysis — including existing literature coupled with evidence from our own investments — demonstrated that adaptation investments deliver strong financial returns alongside environmental sustainability and climate resilience. Beyond savings in cost, investments in adaptation can bring benefits between two and ten times the money invested in sectors such as water infrastructure, early warning systems and climate-smart agriculture. 

This aligns with what we are seeing in our own portfolio. An IFAD investment in climate-resilient coastal infrastructure in Bangladesh increased the incomes of 5 million people by 11 per cent, while achieving a 35 per cent Economic Internal Rate of Return, an indicator of the overall economic value an investment creates for society relative to its cost. Further, impact assessments in Cambodia and Montenegro show that climate-smart infrastructure and market information systems increased production and profitability, leading to increased farmer resilience by over 50 per cent. This is supported by research from the World Resources Institute that found average returns between 20 and 27 per cent across 320 adaptation investments in 12 countries. 

In other words, adaptation is not a sunk cost but a bankable approach that protects livelihoods and the environment, while it stabilises food systems and generates measurable returns for investors and communities alike. 

Rural 21: At the conference, IFAD presented its new publication, Adaptation Finance: Building the Investment Case. How can climate change adaptation serve as a driver of economic opportunities?

Pieternel Boogaard: Climate adaptation is projected to generate a two trillion US dollar annual market by 2026, representing massive business opportunities across sectors, particularly in agriculture. 

Adaptation is more than a reactive strategy to the climate threat, it builds macroeconomic stability by reducing fiscal shocks from disasters, safeguarding livelihoods and containing food price volatility. Essentially, it functions as an economic buffer that safeguards investments and unlocks greater return potential from small-scale production systems. 

Countries with higher climate vulnerability face a “climate premium” to borrow money, which can be up to 1.17 percentage points higher than those less vulnerable. Adaptation investments are an antidote to this premium cost. How? Beyond avoiding losses, adaptation creates new markets and economic stability that addresses vulnerability factors. For example, nature-based solutions alone could generate 32 million jobs by 2030, adding to the 60 million jobs already engaged. 

These investments strengthen rural economies and reduce disaster-related losses, therefore they directly lower the fiscal risk profile that drives the climate premium (caused by climate shocks) on borrowing costs. 

Beyond the wider economic impact, adaptation investments serve the immediate needs of the rural communities. IFAD investments in climate-resilient production and value chains enable climate-informed market systems that stabilise cash flows and predictability. This directly increases farm-level livelihoods and prosperity in rural communities.

Through our publication, we aim to demonstrate the benefits of properly structured adaptation projects. These investments not only deliver returns that attract private investment, but they also help stabilise fiscal space as they build resilience, create employment, and drive inclusive rural transformation.

Rural 21: How do investments in adaptation affect the income and productivity of farmers and rural communities?

Pieternel Boogaard: Adaptation investments directly boost farmer incomes and productivity through multiple pathways. Climate-smart practices can increase productivity by between 15 and 25 per cent under climate stressed conditions. 

We are talking about improving water management, adopting climate-resilient crop varieties, utilising climate information services or climate proofing market access. These investments reduce costs, help diversify production and increase market opportunities for small-scale farmers. 

While it is crucial to support resilience of production systems, IFAD also invests across the value chain to ensure that these market opportunities are open to rural communities. Through a farm-to-fork approach, IFAD not only increases production at farm-level but also ensures that farmers have the access to markets crucial to enabling them to generate income from their products, which helps them to graduate from subsistence-level farming.

Critically, adaptation investments also create positive impacts across different demographic groups. Women, who comprise a significant portion of the agricultural workforce in developing countries, benefit from reduced labour burdens through climate-smart technologies and gain increased decision-making power through enhanced income opportunities. Youth engagement in climate-resilient value chains creates employment pathways that make rural livelihoods more attractive and sustainable for the next generation and stabilises rural-urban migration.

Additionally, Indigenous Peoples traditional knowledge systems are increasingly recognised and integrated into adaptation strategies, ensuring that investments respect and strengthen community-led approaches to climate resilience while protecting cultural heritage and land rights.

Rural 21: The financing needed for adaptation measures in developing countries is 12 to 14 times higher than current financial flows. What options are available to close this financing gap, and what are the biggest obstacles?

Pieternel Boogaard: Closing the adaptation finance gap requires mobilising both public and private capital through financial instruments that de-risk investment for borrowers and investors. To do this, a suit of instruments is required to address climate needs at national and sub-national levels. Grants and loans alone will not enable us to unlock the capital to address the financing gap. 

While most IFAD resources target traditional blended approaches (mixing public and private funding) for de-risking (IFAD mobilised additional resources at a ratio of 1:2.3 over 2022-2024), we have also been diversifying our instruments over the last ten years to provide alternative financing options. Most notably, leveraging our AA+ credit rating enables us to raise funds through bond structures. Specifically, IFAD has tailored thematic sustainability bonds drawing in additional resources at scale from the private sector. To date, IFAD has mobilised more than one billion USD through bonds.

The biggest obstacles we face in adaptation financing are persistent misconceptions. Adaptation is wrongly seen as too costly, or as having no revenue model or measurable returns, despite the fact that evidence shows benefit-cost ratios of 2:1 to 10:1, as mentioned earlier. Additionally, adaptation approaches typically require longer-term investment patience compared to more traditional investments, making them often appear to be public services rather than profitable opportunities. 

Bridging the gap therefore requires demonstrating how adaptation stabilises returns, creates bankable project pipelines and generates stable cash flows in the medium to long term. To address this, the development community needs to work together to build the investment case for adaptation. This requires generating the evidence base of economic and financial returns from adaptation, and showcasing predictable risk-return profiles. This is crucial if we are to mobilise the private sector to scale investments to reach the 1.3 trillion USD by 2035 target. 

Rural 21: What progress has COP30 made in terms of adaptation finance?

Pieternel Boogaard: The discussions at COP30 focused on three crucial areas to move adaptation finance from ambition to implementation: i) establishing more dependable funding mechanisms, ii) building a stronger pipeline of investible projects, and iii) ensuring coordinated support at the national level.

In line with these focus areas, adaptation finance has made progress at COP30. This is shown by the reaffirmation of the tripling of global climate fund investments against 2022 levels, as well as large commitments, such as the five billion USD for the Plan to Accelerate Actions on Land Restoration and Sustainable Action by 2030, along with similar commitments for Nature Based Solutions and the Tropical Forests Forever Facility. 

We have also seen a strong emphasis placed on making adaptation finance more accessible and deployable. This is exemplified by the newly established Fostering Investible National Planning and Implementation (FINI) for Adaptation & Resilience initiative and the creation of Country Platforms for climate finance, which are a positive step towards supporting the conversion of national adaptation plans to pipelines of investment ready. In support of this, it is very positive to see a suite of development banks announcing a substantial increase in their financial support for adaptation investments in low- and middle-income economies. 

Despite the progress achieved, it is critical to acknowledge the scale of the challenge. As we aim to reach 1.3 trillion USD a year in climate finance by 2035, commitments of USD 5 billion to the Plan to Accelerate Actions on Land Restoration and Sustainable Action by 2030 fall far short of where we need to be. As the development community, we need to increase our efforts to create the political will to scale adaptation efforts. One key starting point for organisations like IFAD is enhancing the investment case for adaptation and unlocking the potential of the private sector in this space. 

Ines Lechner, editor Rural 21

More information:
IFAD website
COP30 website