Climate risk, resilience and adaptation

Quality and scope of project level climate risk management procedures

The ADB has several mechanisms in place to screen for and manage climate risks across its portfolio, including its:

• Environmental and Social Framework (ESF): The ADB approved an updated ESF in late 2024 which will apply from 1 January 2026 and contains ten Environmental and Social Standards (ESS). Among the standards, ESS1 is a broader, overarching standard that looks at the assessment and management of environmental and social risks and impacts. It applies to all projects and is used to determine the applicability of other ESSs, including climate-related considerations. ESS9 focuses specifically on climate change, setting out more detailed requirements to manage project-related climate risks and impacts. While ESS1 provides a general framework for environmental and social assessment, ESS9 requires specific actions such as climate risk assessments, estimation and reporting of greenhouse gas emissions, and the integration of climate change adaptation and resilience measures into project design and implementation. In line with best practice, the requirements of the ESF apply to all ADB projects, including projects funded through financial intermediaries (FIs).[1] For the latter kind of operations, the ADB will review the screening and risk classification undertaken by FIs, as well as monitor and report on all activities financed.
• Climate Risk Management Framework: All ADB projects are screened for climate risks as part of the updated ESF (see above). A Climate Risk Management Framework is in place to guide the assessments and management of risks for this purpose. Projects that are deemed to have a medium or high risk undergo further dedicated climate risk and adaptation assessments. During this process, dedicated climate risk assessment tools such as Acclimatise’s AWARE for Projects are used. [2] Once completed, a technical and economic evaluation of adaptation options is required, followed by identification of the most appropriate climate-proofing steps.
• Guidelines for climate-proofing ADB investments in key sectors: The ADB has developed a series of guidelines for climate-proofing operations in the following key investment sectors: Energy, Agriculture, Rural Development, and Food Security, Transport, and Water. These documents detail the potential impacts of climate change for each sector, and adaptation options available. The guidelines are focused on project level risks and mitigation options and are intended to support project managers with integrating climate risk management and adaptation measures throughout the project cycle. They provide a step-by-step guide to both screening projects for climate risk and implementing adaptation options, but are not considered mandatory. As these guidelines were drafted prior to the Paris Agreement in 2015 (aside from those for the water sector, released in 2016), considerations for Paris alignment were not incorporated.

It is unclear to what extent the ADB’s current climate risk screening procedures incorporate a Paris aligned climate scenario. More broadly, the climate risk procedures in place appear exclusively targeted at identifying and mitigating physical climate risks, with no indication that transition risks are also considered. This omission represents a significant potential gap in the ADB’s climate risk safeguards, as transition risks are a critical component. Indicatively, it also falls short of best practice among peer institutions. For example, IDB Invest’s Climate Risk Assessment Methodology incorporates screening for transition risk as part of the Environmental and Social due diligence requirements for proposed direct investment projects to identify its portfolio’s transition gaps.

Without due consideration and management of transition risks at the project or portfolio level, the ADB risks underestimating the full scope of climate-related risks facing their investments, potentially leading to misinformed funding decisions and unmitigated exposure to future climate policy and market changes.

Adaptation finance and enhancing client climate resilience

The ADB’s Climate Change Action Plan (CCAP) 2023–2030 includes a “client-centric” approach as one of its core principles for supporting low-carbon and climate-resilient trajectories through its interventions. This is to be integrated through the full suite of the Bank’s activities, including policy development, technical advisory, financing, and capacity building. It notably includes supporting building “community and institutional resilience”, as well as the implementation and updating of national adaptation plans (NAPs).

As an example of the implementation of this approach at the project level, to support the practical implementation of its Climate Risk Management Framework, the ADB has made available a series of technical guidance materials to help clients manage climate risks throughout the project cycle. This includes guidance notes for integrating climate change adaptation, and the economic analysis of adaptation projects.

Moreover, the ADB is making excellent use of its analytical capacity by conducting regional multi-hazard climate and disaster risk assessments. These assessments produce locally specific, geo-referenced data on projected climate change and disaster impacts, which can aid the design and implementation of adaptation plans among Developing Member Countries (DMCs). Moreover, the Bank’s Climate Adaptation Investment Planning (CAIP) programme is specifically targeted at supporting DMCs with translating the sectoral and national adaptation priorities (as outlined in NAPs and or nationally determined contributions (NDCs)) into adaptation investment plans. These plans are in turn intended to provide a basis for mobilising scaled-up financing for key adaptation investments.

In terms of adaptation finance levels, the ADB previously made a commitment to double its climate financing (from its own resources) to USD 6 billion annually by 2020, with USD 2 billion to be earmarked for adaptation. While the broader climate finance target of USD 6 billion annually was achieved in 2019, the Bank’s adaptation finance levels have only exceeded USD 2 billion since 2022. Since this initial pledge, the ADB subsequently made a dedicated adaptation commitment to deliver USD 9 billion in climate adaptation finance across the period 2019–2024. The Bank exceeded this target as of 2023, and ultimately committed USD 15.3 billion in cumulative adaptation financing from 2019 to 2024.^[3]

The ADB had since updated its adaptation target as part of the CCAP 2023–2030, which earmarked USD 34 billion out of USD 100 billion in climate finance between 2019 and 2030. As of 2024, over USD 15 billion has been committed, which suggests the ADB is on track to meet this target, provided it maintains the current level of annual adaptation finance commitments.

In terms of the latest annual figures, the Bank committed 40% of total climate finance (totalling USD 4.9 billion) towards adaptation in 2023. However, a 2024 report published by Oxfam raised concerns over the potential for ADB’s methodology to overestimate adaptation finance levels.[4]

With regard to dedicated efforts to scale up adaptation finance, under the new cycle of the Asian Development Fund (ADF), the Bank has notably established a new thematic window (amounting to approximately USD 430 million over four years) to provide additional grant financing to ADF-eligible countries to support adaptation investments. Furthermore, in 2023 the ADB also approved more concessional lending terms for Small Island Developing States (SIDS), in part to enable greater investment in pertinent climate adaptation and resilience needs in these contexts.

The ADB is working with other global climate funds to scale up adaptation finance, such as with the Global Environment Facility, the Green Climate Fund, and the Climate Investment Funds. The Bank also administers the Urban Climate Change Resilience Trust Fund, among other dedicated resilience and climate-related funds. The Bank established the Community Resilience Partnership Program in 2021 to help DMCs increase climate adaptation investments at the community level. The programme’s Trust Fund (established in 2022–2023) brings together support from partners (including other public financial institutions, governments, and global climate funds) to provide concessional resources to implement local adaptation solutions.

Notably, the ADB is collaborating with MDB peers on the Common Approach to Measuring Climate Results, which is intended to complement tracking and reporting on climate finance with a clearer, consistent view of climate results (including specifically on adaptation).

The ADB has also developed a dedicated Disaster Risk Management (DRM) Action Plan 2024–2030. This sets out a holistic approach to guide the ADB’s support for DRM, balancing a focus on risk reduction, preparedness, response, and recovery.[5] Critically, the action plan explicitly recognises the impact of climate change on rising disaster risk and vulnerability and provides an integrated approach for considering DRM in parallel with climate action.

Recommendations:

• The ADB should update its technical guidelines on climate risk management to incorporate dedicated consideration of transition risks, beyond only physical climate risk. The associated procedures adopted should be explicitly aligned with the methodology for implementing the Bank’s Paris alignment commitment, forming a comprehensive framework to plan for, manage and guard against transition risks in line with the Paris Agreement.
• The ADB exceeded its 2019–2024 adaptation target as of 2023, having also demonstrated promising progress in 2022 towards a more balanced distribution of mitigation and adaptation finance within its total climate finance commitments.[6] Building on this momentum, the ADB should consider adopting an updated and strengthened target for adaptation finance which reflects the specific financing needs for adaptation and resilience in its countries of operation.^[7] Any adaptation target should be complementary to the Bank’s climate finance target and avoid creating perverse incentives to limit mitigation financing.  
• The ADB should consider publishing updated guidance to supersede the “Guidelines for Climate Proofing ADB Investments” in view of the evolved understanding of climate change, its impacts, and effective system-level adaptation measures since these were drafted (prior to the Paris Agreement). Having done so, the Bank should consider making relevant parts of these guidelines mandatory for projects in covered sectors. This could both provide an additional layer of specificity to the ADB’s climate risk-proofing requirements, and streamline the assessment of compliance by serving as a benchmark against which projects can be assessed.
• The ADB should clarify its role in instances when the environmental and social management system (ESMS) of clients is not deemed sufficiently robust by the initial screening process. While potential shortcomings in a prospective client’s ESMS should rightly be the first-order consideration of this screening process, there is also an opportunity for the Bank to commit to jointly developing a revision strategy and supporting clients with tackling these gaps in order to enable future operations to go ahead. In this way, the ADB can work to ensure counterparty level alignment with the Bank’s environmental, social, and climate commitments and standards, going beyond a project-by-project approach. This is particularly relevant for operations financed through FIs, where a holistic approach to verifying the ability of counterparties to meet the Bank’s commitments and standards can help to safeguard their fulfilment across all use of proceeds.

[1] The requirements only apply to new financing by FIs and are not retroactive to existing portfolios.

[2] Discussions with the ADB have suggested that the Bank is in the process of developing its own dedicated tool for climate risk screening and assessment, which is expected to be launched by Q1 2026.

[3] For further coverage, see the “Non-fossil to fossil energy ratios and climate finance metric”.

[4] See the “Transparency of climate finance metric” for further analysis on this.

[5] Relevantly, the ADB’s Corporate Results Framework 2025-2030 also notably includes a dedicated indicator for “people with strengthened climate and disaster resilience”.

[6] See also the “Non-fossil to fossil energy ratios and climate finance” metric.

[7] For example, private sector involvement is more advanced for many mitigation sectors, providing greater opportunities for blended finance and successful use of debt instruments. For adaptation, grant and concessional finance must be prioritised.