How to accelerate financing the climate transition
Financing the climate transition: where do we stand and how can we accelerate today?
The climate transition has become a strategic priority for companies, investors and financial institutions. Yet a structural imbalance remains while funding for climate mitigation has made significant progress, financing for adaptation still falls far short of what is needed. These issues were discussed by Ines Galichon, Head of Financial Institutions at Blunomy, on the sidelines of the Climate Risk & Climate Stress Testing Europe – CEF PRO event. Drawing on insights from this discussion, this article provides a snapshot of the current state of climate transition finance and highlights practical levers that can be mobilised today to accelerate action.
What the full video interview
Adaptation: still largely publicly funded
Today, nearly 90% of adaptation financing comes from the public sector. Governments, local authorities, development banks and international institutions bear most of the burden, while private capital remains only marginally involved. Private sector participation is expected to grow from 9% today to 65% by 2035 That said, some corporates have started to invest in climate adaptation, particularly when physical climate risks have important financial impacts on strategic assets (power companies) and the resilience of their value chains (agri-food players). Others like water utilities are developing new offers to seize adaptation market opportunities.
Why private capital remains on the sidelines
The main obstacle lies in the limited quantification of the financial impacts of physical climate risks, and thus the calculation of return of investment of adaptation projects. As long as these risks are not clearly identified and monetised, it remains difficult for corporates and investors to justify investment decisions. In addition, not all adaptation projects generate direct revenues. Some still relate to pure conservation or protection efforts and therefore rely on public or philanthropic funding. However, a significant share of adaptation actions embedded in economic activities could be financed by private capital, provided their business models are clearly articulated.
Mitigation vs. adaptation: two different levels of maturity
Climate mitigation benefits from a more mature economic model. Carbon pricing and emissions measurement tools make it easier to assess transition risks and demonstrate associated value creation. Adaptation, by contrast, is less straightforward. A key shift in perspective is required: investment decisions should not be compared to a “zero-cost” baseline, but rather to the future cost of inaction, which is often significantly higher.
Levers already available to scale up financing
Despite these challenges, several levers can already be activated: •Public guarantees can be more effective from a public budget perspective than subsidies and direct funding. •Capital market instruments, such as bonds with clearly earmarked use of proceeds for adaptation. •Derisking contractual structure, notably long-term contracts used in renewable energy, which could be applied to adaptation projects, particularly in agricultural value chains.
Adaptation: a growing strategic priority for companies
Unlike CO₂ emissions, physical climate risks have immediate and non-compensable economic impacts. Floods, droughts or heatwaves can abruptly disrupt business operations and supply chains, with rippling effects across the globe. This high level of materiality explains why adaptation is rapidly climbing corporate agendas and may, in practice, accelerate faster than mitigation.
Towards an integrated transition approach
Finally, mitigation and adaptation can no longer be addressed separately. Transition risks and physical risks are deeply interconnected, and siloed approaches may lead to inefficient or even counterproductive strategies. An integrated perspective is essential to preserve the long-term value of assets and business activities. Moreover, nature-related issues are intrinsically linked to climate adaptation, as ecosystem resilience directly shapes physical risk exposure and long-term performance — making their integration not only necessary, but a strategic opportunity.
Conclusion
The solutions already exist. Many adaptation projects are simple, low-risk and quickly deployable. The challenge is no longer innovation, but rather mobilising the right financial tools, improving risk assessment, and strengthening coordination between public and private actors. Climate transition finance can accelerate now.
Get in touch with the author: Ines Galichon
