Do the Most Climate-Vulnerable Countries Get More Adaptation Finance from the World Bank?

We know that global finance for climate adaptation and resilience falls far short of estimated needs. But what do we know about how these funds are currently spent? Not very much. That’s the wrong answer when every dollar has to count.

The Climate Policy Initiative tracked $76 billion in global adaptation finance in 2022. Most of this came from public sector sources in the form of project debt. Almost all global adaptation finance goes to emerging markets and developing economies (EMDEs), with relatively large shares for the least developed countries (20 percent). East Asia and the Pacific received the most global adaptation finance (45 percent) followed by Africa (20 percent).

MDBs are the largest public source of international adaptation finance for developing countries. In 2023, their collective adaptation finance volume was $25 billion—compared to annual needs estimated at $212 billion. The MDB data show that: the World Bank Group plays a major role (51 percent of total MDB adaptation finance), nearly all finance goes to the public sector (93 percent), and half of adaptation finance goes to sub-Saharan Africa and South Asia.

That does not tell us enough to enable us to judge whether scarce MDB finance is well allocated. So we set out to explore the evidence at the country level. We posed a simple question: Does World Bank adaptation finance target the most vulnerable countries?

The question is simple but answering it is not. We broke it down into five dimensions.

• What is the best way to assess country climate vulnerability for this purpose?
• What characteristics do the most vulnerable countries share?
• Do the most vulnerable countries get relatively more World Bank adaptation finance by various finance intensity measures?
• Is adaptation finance intensity growing over time?
• How is the finance allocated across different adaptation activities?

To objectively identify the most vulnerable countries, we used the Notre Dame Global Adaptation Initiative (ND-GAIN) country index, which has decades of observations and assesses different kinds of vulnerability. We chose two of the ND-GAIN dimensions of vulnerability: adaptive capacity and exposure. Adaptive capacity is a logical focus in assessing the allocation of World Bank adaptation finance because it focuses on areas that the World Bank can directly impact. It mostly captures whether a country has the infrastructure to respond effectively to climate change. World Bank infrastructure finance in the relevant sectors can therefore raise or lower a country’s adaptive capacity, and thereby its vulnerability.

We chose exposure as the other dimension of vulnerability: it quantifies projected physical changes driven by climate change. These are mostly not subject to World Bank adaptation interventions but rather identify countries’ risks from environmental changes affecting land and other natural capital, water availability, heat levels, and food production.

Next we created our country sample. Our task was to calculate the average annual amount of adaptation finance a country has received from the World Bank over our 10-year sample period, 2014 to 2023. With no database publicly available for country-level adaptation finance, we had to construct our own country-level data by aggregating adaptation finance for a given country project-by-project using the World Bank’s project database. We extracted project-level adaptation finance from 2,949 projects over this period and arrived at annual totals for 129 countries.

Our premise is that countries with high exposure and low adaptive capacity need the most external support to adapt to climate change and build resilience. So we used the ND-GAIN scoring to divide our country sample into four groups:

• Countries with low climate exposure—high adaptive capacity (eA)
• Countries with low climate exposure—low adaptive capacity (ea)
• Countries with high climate exposure—high adaptive capacity (EA)
• Countries with high climate exposure—low adaptive capacity (Ea)

In addition, we created a subset of Ea, the most vulnerable seven countries in the world, the V7. These are countries found in both the top 20 list for most vulnerable and the bottom 20 list for adaptive capacity. The “vulnerable 7” countries are Angola, Burkina Faso, Burundi, Chad, Mali, Niger, and Somalia.

Before looking at the World Bank finance allocation across these groups, we looked at their broader characteristics and found striking patterns. The most vulnerable countries (Ea, including the V7) are: very poor, concentrated in sub-Saharan Africa, reliant on IDA (the World Bank window for the poorest countries), dependent on agriculture for a significant share of country income, more exposed to extreme temperatures, more landlocked (especially the V7), more fragile and conflicted affected, and more burdened by weak governance. They are therefore beset by an array of intertwined challenges: their vulnerabilities extend in many directions and reinforce each other.

Vulnerable countries with low adaptive capacity get relatively less, not more, adaptation finance.

We focused on World Bank adaptation finance intensity: adaptation finance relative to various scaling factors. We measured finance intensity by comparing average annual adaptation finance in the five different country groups: as a share of population generally and of climate-exposed population specifically, and relative to arable land mass (given the economic importance of agriculture for climate-vulnerable countries).

Figure 1. World Bank adaptation finance per capita and per exposed population member by country group (FY2014–2023)

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Figure 2. World Bank adaptation finance per hectare of arable land by country group (FY2014–2023)

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As Figures 1 and 2 show, climate exposure matters in the allocation of World Bank adaptation finance. More exposed countries have higher adaptation finance intensity, with the exception of the V7.

But there is clear evidence that countries with inadequate infrastructure for adapting to climate change get much less World Bank adaptation finance per capita and relative to arable land than countries with more adaptive infrastructure.

That is a worrisome finding: the World Bank should be well positioned to support investments in resilient infrastructure in countries where it is most needed. This finding may be driven by overall constraints on the availability of IDA resources for these countries, prioritization (by countries or the Bank itself) of other priorities like social investments, a shortage of well-developed adaptation projects, or all of the above.

World Bank adaptation finance meets a small fraction of needs for the most vulnerable countries.

Figure 3. World Bank adaptation finance as a share of GDP by country group (FY2014–2023)

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The UN estimates that the poorest countries need to invest around 3 percent of GDP annually in adaptation, about twice the share for other developing countries. But the World Bank’s contribution to date is only a little more than 10 percent of adaptation needs for the most vulnerable countries, which have few alternative sources of finance, especially as aid flows shrink.

The World Bank is rapidly ramping up adaptation finance in the most vulnerable countries, but low-capacity countries still get less.

We split our sample period in half to compare patterns in 2014–2018 to those in 2019–2023.

Figure 4. World Bank adaptation finance per capita by country group over time (FY2014–2023)

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Figure 5. Adaptation shares of annual World Bank commitments by country group over time (FY2014–2023)

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We found that the most vulnerable countries benefited from the largest increases in adaptation finance per capita and as share of total World Bank commitments, though they still receive much less finance per capita than vulnerable countries with higher adaptive capacity.

Most World Bank adaptation finance for the most vulnerable countries funds climate-resilient infrastructure, but surprisingly little for climate-resilient agriculture.

Figure 6. Adaptation finance by sector for V7 project sample (percent)

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Agriculture on average accounts for a quarter of GDP in the V7, yet we found that the share of finance for climate-resilient agriculture in World Bank adaptation finance for a sample of projects for these countries is only 9 percent. We also found roughly the same resilient agriculture share for all developing countries. That raises the question of whether the Bank has enough operational flexibility to adjust its adaptation support to the needs of very poor, agriculture-dependent economies.

Conclusion: much more and better-allocated World Bank adaptation finance is needed for the most vulnerable countries.

Four policy implications flow from this analysis:

1. A bigger IDA: Given the reliance of these countries on IDA, there is no substitute for a much-expanded IDA if we are to see much larger adaptation finance flows to these countries, on the concessional terms they need and on a scale commensurate with the higher adaptation investment costs as a share of GDP in the poorest countries.
2. More IDA access for countries that are both climate-vulnerable and fragile/conflict-affected: The most vulnerable countries tend to also be the most fragile and conflict affected. That has important implications for World Bank strategy and finance allocation. Climate vulnerability should play a central role in shaping the forthcoming new World Bank strategy for countries in the FCV (fragility, conflict, and violence) category, just as fragility should play a central role in World Bank climate diagnostics for such countries. And we propose that countries that are both highly climate vulnerable and fragile should receive a “top-up” in their performance-based allocations from IDA.
3. Grant finance for adaptation project development: A core and oft-cited part of the problem is the shortage of well-developed adaptation projects in the most vulnerable countries. Expansion of IDA access is not enough. A greater World Bank upstream effort is essential to make it possible to actually spend more IDA adaptation finance in these countries. Targeting more donor funds, especially from climate financial intermediary funds, for adaptation project development in these countries would therefore have the added benefit of boosting the effectiveness and impact of their IDA contributions.
4. More finance for climate-resilient agriculture: Research shows underinvestment in innovations for climate-resilient agriculture, limited local research and development in poor countries, and limited transmission to smallholder farmers prevalent in vulnerable countries. Our work shows evidence of the effects of that underinvestment. The World Bank funds relatively little climate-resilient agriculture investment, even in countries that are both vulnerable and agriculture dependent. Increased World Bank support for productive investment in this sector in these countries—especially doubling down on efforts to help smallholder farmers take up new products and techniques—would yield high economic, social, and security returns.