Adaptation Finance Window

The funding needed globally for climate adaptation is estimated at five to ten times that of current flows, and the gap continues to widen, with less than 10 percent of total climate finance going toward adaptation. Private sector investment makes up only 3 percent of adaptation finance and continues to face many barriers and market failures, including the high cost of capital, project risks, and challenges related to data and metrics.

USAID, through its Climate Finance for Development Accelerator, launched the Adaptation Finance Window (AFW) in 2023 to help leverage additional private investment into adaptation through two types of support:

• Catalytic grant funding to de-risk the development and scaling of private sector-led adaptation approaches in the emerging markets and developing economies where USAID works
• Technical assistance to USAID Missions, strengthening their ability to support and scale efforts to mobilize private finance for climate adaptation priorities.

Support to Private Sector Enterprises: The first call for proposals under the AFW sought private sector enterprises focused on two areas: 1) parametric and other insurance mechanisms to protect farmers and businesses against extreme weather events and climate impact, and 2) solutions to manage and maintain water amidst climate extremes. To date, CFDA has awarded $1.5 million to four grantees:

• Floodbase: A technology company with an end-to-end flood data solution used by insurers and humanitarian organizations to design and deploy parametric flood insurance and risk reduction tools. With USAID support, Floodbase will design nationwide parametric flood insurance programs in Mozambique and Malawi to help reduce the impact of flooding on livelihoods and food security.​
• OKO Finance: A company that is designing and distributing affordable weather index insurance targeting smallholder farmers in Sub-Saharan Africa. With USAID support, OKO Finance aims to scale up climate insurance in Ivory Coast and will design five new products (maize, rice, rubber tree, cashew, and either banana or cassava) and expand its distribution network to cover the whole country.​
• Blue Marble: An impact insurtech (insurance technology) firm designing and implementing insurance programs across Africa, Latin America, and Asia. With USAID support, Blue Marble will expand and introduce a new parametric insurance product for coffee farmers in Kenya, protecting them against poor production and income instability caused by drought, excess rainfall, extreme temperatures, and other adverse climate events.​
• WTW: A leading global insurance company with decades of experience in climate, disaster, and resilience finance and policy. With USAID support, WTW will design a pilot facility to offer a parametric insurance solution (Resilience Wrapper) that protects development finance institutions’ direct loans to private enterprises from climate-related shocks.

Support to Adaptation Focused Funds:  In partnership with the Investment Mobilisation Collaboration Alliance (IMCA), a second call for proposals solicited fund concepts from experienced investment managers seeking both grants and credit guarantees to support the launch of innovative funds or investment vehicles that will deliver significant climate adaptation and resilience outcomes. Several awards are expected; more information will be announced soon.

Support to USAID Missions: CFDA is providing advisory services to help USAID Missions in Guatemala, Jamaica, Mali, Southern Africa, and Zambia identify and better understand opportunities to implement and scale approaches to mobilize private sector finance focused on climate adaptation. This support has included identifying priority climate finance opportunities, carrying out initial assessments, and facilitating learning events for targeted economic sectors.

The Adaptation Finance Window is an activity under USAID’s Climate Finance for Development Accelerator (CFDA), USAID’s flagship initiative to increase climate investment in emerging markets and developing economies.