Climate adaptation needs billions. The AfDB thinks it has a fix

For more than a decade, Gareth Phillips has been wrestling with a problem that has dogged global climate policy: how to finance adaptation to climate change in a way that is credible and scalable. Phillips, who manages the climate and environment finance Division at the African Development Bank, has worked on climate finance since the early days of carbon markets, when emission reductions were still an unfamiliar concept. He watched how abstract ideas, such as cutting greenhouse gas emissions, slowly turned into assets that could be bought, sold, and traded, and eventually into a voluntary market dominated by corporate buyers. But climate adaptation, he said, never made that leap. It never became something investors figured out how to back. In climate policy, adaptation refers to the actions countries and communities take to cope with the impacts of climate change — such as building seawalls to protect coastlines, shifting to climate-resilient crops, or using water more efficiently as supplies shrink. The need for those measures is growing rapidly. Every tonne of carbon emitted today increases future adaptation costs. Yet global spending on adaptation remains far below what experts say is required, with most funding still coming from public sources that have failed to keep pace with demand. “We’re mobilizing $10 [billion], $20 [billion], $30 billion a year for adaptation, and the need is $150 [billion], $200 [billion, $300 billion a year … we’re an order of magnitude or more short of what we need,” he told Devex. That gap is what led Phillips to develop the bank’s adaptation benefit mechanism, or ABM — an early-stage initiative designed to unlock new public and private finance for climate adaptation by giving resilience a clearer financial structure. Once agreed milestones are met, the mechanism issues certified adaptation benefits tied to those outcomes. Governments, companies, or foundations can then purchase those benefits, with the proceeds used to cover projects’ financing gaps and allow them to move forward. The theory At its core, ABM is an attempt to solve a structural problem in climate finance: adaptation has never had a functioning system to channel investment at scale. Article 6 of the 2015 Paris Agreement sets out how countries can cooperate to meet their climate goals. In practice, most political and financial attention has flowed to Articles 6.2 and 6.4, which govern carbon markets and emissions trading. Those provisions made it possible to quantify emissions reductions, trade them across borders, and attract private capital. Article 6.8, by contrast, was designed to cover “nonmarket approaches,” which are especially important for the financing of adaptation. But it has never been meaningfully operationalized. “Article 6.8 has been totally neglected,” Phillips said. “All the focus has been on 6.2 and 6.4.” The result, he argued, is that while mitigation benefited from clear rules, registries, and accounting systems, adaptation was left reliant on fragmented aid flows and voluntary pledges, with no common framework to scale investment or track results. The bank’s adaptation benefit mechanism was created to change that — by turning Article 6.8 from a largely theoretical provision into something that can actually funnel money. Rather than creating a tradable commodity, ABM provides a structured way to finance adaptation through verified, validated results. It gives governments and companies a recognized mechanism, rooted in the Paris Agreement, to support adaptation not just as philanthropy, but as part of their climate commitments. Because the mechanism sits within the Paris framework, contributions to adaptation projects made through it can be formally recognized and reported as adaptation finance. That distinction matters: it means adaptation spending can be counted, tracked, and incorporated into national climate reporting, rather than treated as ad hoc or purely voluntary support. In effect, ABM offers a way to anchor adaptation finance within the same international system that governs climate action — giving it clearer rules, greater transparency, and a pathway to scale. How it works In practical terms, ABM links finance directly to verified adaptation outcomes. Project developers first identify an activity that delivers measurable resilience — such as climate-resilient agriculture, ecosystem restoration, or improved access to water — and calculate the specific financial gap preventing it from going ahead. That might include upfront investment, operating costs, or early-stage risk. Once agreed milestones are met, the mechanism issues certified adaptation benefits tied to those outcomes. Governments, companies, or foundations can then purchase those benefits, with the proceeds used to cover the project’s financing gap and allow it to move forward. Unlike carbon credits, the benefits are issued only to cover a project’s financing gap and are not intended for resale. Once purchased, they are recorded as a contribution to adaptation. Operating under Article 6.8 allows those contributions to be formally recognized as adaptation finance under the Paris climate agreement, giving governments and companies a clearer way to support resilience without turning it into a market commodity. The projects What this looks like in practice is now beginning to take shape. The most advanced pilot project is in Côte d’Ivoire, where rising temperatures and changing rainfall patterns are reducing the productive lifespan of cocoa trees grown in full sun. The project focuses on transitioning farmers to agroforestry systems, which are more climate-resilient but require upfront investment and several years before yields recover. Under ABM, adaptation benefits would be issued based on verified progress — such as the establishment of climate-resilient cocoa systems — but buyers have yet to be secured, meaning the mechanism is still in a testing phase. Another pilot, at an earlier stage, involves mangrove restoration for coastal protection in Benin. In that case, benefits would be linked to verified mangrove cover, using satellite data as an indicator of long-term resilience. What distinguishes ABM from carbon markets is how those benefits are structured. Unlike carbon credits, adaptation benefits are not designed to be traded or resold. They cannot be used to meet compliance obligations, and they are issued only in the amount needed to make a specific project viable. Once issued, they are recorded in a registry by ABM and reported as a voluntary contribution to adaptation. “Every dollar that you spend on buying a certified adaptation benefit goes to overcoming the financial barrier,” Phillips said. “That means the money is 100% additional.” For now, the mechanism remains in a testing phase. No adaptation benefits have yet been sold, and demand from buyers — who in Côte d’Ivoire Phillips hopes will include major global chocolate companies — is still being built. What comes next What happens next will determine whether ABM remains an interesting experiment or becomes something more durable. The African Development Bank has begun setting up a permanent secretariat, arguing that the mechanism will need an independent home if it is to operate globally and avoid conflicts of interest as activity scales up. For now, the idea remains unproven. But after years in which adaptation finance has relied largely on grants, pledges, and political goodwill, ABM represents a different proposition: an attempt to give resilience a clear structure, a common language, and a way to move money at scale. Whether it can do that — and whether buyers show up — is the next test.