Does World Bank Climate Adaptation Finance Go to the Most Vulnerable Countries?

Nancy Lee, Samuel Matthews and James Reid
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Nancy Lee: Center for Global Development
Samuel Matthews: Center for Global Development
James Reid: Center for Global Development

No 355, Policy Papers from Center for Global Development

Abstract: Global underinvestment in climate adaptation increases the importance of ensuring that such finance is well targeted and well spent. Multilateral development banks (MDBs) are the largest public source of adaptation finance for developing countries, and the World Bank accounts for about half of the MDB total. In this paper, we test the hypothesis that World Bank allocation of adaptation finance prioritizes countries that are more exposed to the effects of climate change and less able to adapt on their own. Using 10 years of World Bank projects and the ND-GAIN country index, we analyze the distribution of adaptation finance by grouping countries according to their vulnerability, defined by their exposure to climate change and capacity to adapt. The most vulnerable countries tend to be very poor, concentrated in sub-Saharan Africa, dependent on agriculture, more fragile and conflict-affected, and burdened by weaker governance. We find that the most vulnerable countries with low adaptive capacity received relatively less adaptation finance than countries with higher adaptive capacity over the period (2014-2023). World Bank adaptation finance meets only a small fraction of their needs. The finance mostly funds climate-resilient infrastructure, but surprisingly little climate-resilient agriculture. The World Bank has greatly ramped up adaptation finance for these countries over the period, but low-capacity countries still get relatively less. Four policy implications flow from this analysis: (1) an expanded IDA is vital as the most important source of adaptation finance for these countries; (2) countries that are both climate vulnerable and fragile/conflict-affected should receive special access to IDA resources: a “top-up” in their performance-based allocations; (3) a greater World Bank upstream project development effort is essential to make it possible to productively spend more IDA adaptation finance in these countries; and (4) increased support for climate-resilient agriculture would yield high economic, social, and security returns.

Pages: 34 pages
Date: 2025-04-10
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