The countries most exposed to climate changes are often those least able to afford the cost of adapting to them. A new tool developed by Columbia University aims to help concessional finance providers, including development finance institutions, climate philanthropies and impact-first investors, identify what kind of adaptation finance is most impactful where.
The Climate Finance Vulnerability Index, funded by the Rockefeller Foundation, ranks 191 countries based on both climate risk and financial vulnerability. The index goes beyond standard metrics, like GDP or sovereign credit ratings, to analyze a country’s exposure to floods, droughts and heat alongside its financial health, like debt sustainability, access to finance and financial integration.
The researchers goal is to help redirect capital toward countries with the greatest adaptation needs and the weakest capacity to meet them.
“We wanted to build something that shows not just who’s vulnerable, but who’s vulnerable and can’t pay to fix it,” says Jeff Schlegelmilch, who led the research initiative at Columbia’s National Center for Disaster Preparedness.
Rather than looking at just “how poor a country is,” he says, “it’s about how much adaptation is needed – and how much financing capacity exists to meet that need.”
A governance lens is also included in the tool to help investors assess adaptation finance delivery mechanisms.
“If a country has weak institutions or high corruption, you may want to work through a multilateral or trusted intermediary,” explains Schlegelmilch.
Catalyzing adaptation capital
The Climate Finance Vulnerability Index was released this week against the backdrop of shrinking international development budgets and woefully inadequate adaptation finance flows. Climate Policy Initiative’s latest global adaptation funding tally stood at $65 billion – far short of the $222 billion in annual funding needs for emerging markets by 2030.
“We cannot outrun disasters by paying for it on the response and recovery side alone,” says Schlegelmilch. “We’re going to keep spending that unless we put more money into climate adaptation and disaster preparedness.”
Guinea-Bissau, Eritrea, Angola, Zambia and Palestine rank as the most vulnerable in the index’s high-risk, low-finance quadrant. These are nations facing both the highest exposure and the most constrained access to capital.
“In a small geography, one or two disasters can take a middle-income country and turn it into a poor country. Or in some extreme scenarios, wipe it completely off the map,” says Schlegelmilch.
Last year’s COP29 climate summit in Azerbaijan – dubbed the Finance COP – ended with international commitments of just $300 billion for the world’s most climate vulnerable countries. Far below the $1.3 trillion they sought.
New models of how to creatively leverage public and concessional finance are nevertheless percolating. Both Belize and Ecuador, in the index’s high-risk, low-finance quadrant, have participated in debt-for-nature swaps, an emerging financing tool that allows countries to refinance high-cost sovereign debt and redirect interest payment savings to nature restoration and conservation efforts.
The researchers designed the index to help inform how limited but critical concessional finance dollars are used. The starting point, says Schlegelmilch, was “If you’re in a position to provide concessional financing for climate adaptation, what is the information you need to do that?”
The index can also help funders decide not just where to direct capital, but what kind of capital is needed. Some countries may need funding for physical infrastructure. In others, funding to ease debt burdens or strengthen institutions may be more impactful.
That makes the tool relevant to actors across the financing continuum, from grantmakers to multilateral lenders to private sector investors.
“We want each dollar to have the most impact,” Schlegelmilch says. “That means understanding the full context. You don’t want to build sea walls in places that can’t keep them up.”
Rethinking risk
Many existing climate finance risk models for emerging markets are based on metrics like per capita GDP or sovereign credit ratings, which can obscure deeper structural vulnerabilities. Others try to correct for the contexts of small countries but end up distorting the financial or risk picture.
The Climate Finance Vulnerability Index is meant to complement other tools and highlight parts of the system that get overlooked.
“You need multiple views to see the full picture,” says Schlegelmilch. “There are unrecognized risks and unrecognized opportunities.”
Schlegelmilch hopes to see the index used to invest more early in adaptation to prevent bigger, more expensive losses later. Greater spending is needed, but that spending also needs to be done with greater intention.
“It’s more expensive at first to build a resilient system,” he says, “but it’s much cheaper than constantly responding to disasters.”
