Blog
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Adaptation & Resilience Lead, Sustainable Infrastructure Advisory, World Bank Group
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Sustainable Finance Lead, Infrastructure, World Bank Group
Sep 2, 2026
Ask Chief Financial Officers (CFOs) whether they want to protect 30 percent of their asset’s net value for a cost of less than 3 percent of that same value. The answer should be obvious. Yet, across the infrastructure sector, companies are not prioritizing adaptation—not out of irrationality, but because the risk has always felt hypothetical; something to plan for someday, not now. That’s changing. This season’s fires and droughts hit companies that assumed they had more time, and “someday” just became “now.”
A new report released by IFC, with support from AXA Climate and Scientific Climate Ratings, an EDHEC venture, Low Cost, High Yield: The Adaptation and Resilience Investment Opportunity for Infrastructure, puts hard numbers on what most infrastructure investors have long suspected but rarely quantified: climate risk is already destroying value, but targeted adaptation measures can deliver returns that most investment committees would envy—up to triple-digit internal rates of return on the adaption measure implemented.
The Financial Case, in Plain Numbers
The report modeled three infrastructure assets in Brazil: a power transmission line, a water reservoir, and a motorway corridor, under possible climate scenarios. The study quantified avoided losses on these assets, which can be exposed to real climate hazards. The results are striking. Across the three sectors, every dollar invested in well-selected adaptation measures protects between $2.20 and $8.60 in asset value.
For instance, along the Brazilian transmission line, wildfire risk alone was modelled to erode up to 30 percent of net asset value upon potential occurrence. Installing firebreaks, a relatively simple intervention, preserves about 22 percent of that potentially lost value, at only 3 percent of the cost. The return on the intervention: up to 886 percent!
The modeling puts a number on the real-world stakes: what is the financial impact on roads in flood-prone river valleys, power grids exposed to intensifying heat waves, or water treatment facilities in drought-stressed regions? Recent country specific evidence offers some answers: Pakistan’s 2022 floods cost an estimated $30 billion, wiping out roads, bridges, and power systems—and with them, the jobs and services those assets supported. Hurricane Dorian caused $3.4 billion in damage to physical assets in the Bahamas alone. Looking ahead, estimates suggest that by 2050, climate risks could devalue net infrastructure assets by an average of 4.4 percent and up to 26.7 percent in the worst-case climate scenarios.
And then there are the broader economic and human costs: unmitigated physical risks could eliminate 43 million jobs across 49 countries by 2050. Targeted adaptation investments can cut those job losses by more than half.
For CFOs, the point here is that physical climate risk is no longer a tail risk. Rather, it is present, material threat to business continuity, revenues, asset values, and credit profiles. But it’s also a risk that well-chosen, often low-cost measures can substantially mitigate.
However, despite the strong returns, private capital has yet to fully embrace the adaptation finance opportunity.
Sustainability-Linked Instruments: Tools to Catalyze Resilience
The new report highlights pathways to mobilize private capital in financing adaptation and resilience (A&R). One possible way is to use sustainability-linked finance (SLF), a well-established financial instrument. SLF ties a borrower’s cost of capital to its performance against measurable targets set for sustainability and adaptation indicators. However, emissions reduction metrics have historically dominated the SLF structures. A&R metrics account for less than 1 percent of key performance indicators (KPIs) embedded in SLF instruments globally.
Getting the A&R Metrics Right
Part of the problem is that unlike carbon emissions, which are calculated as per standardized accounting methods, A&R metrics are inherently context- and asset-specific, and therefore harder to standardize. A flood-risk KPI for a port in the Philippines looks very different from a heat-stress metric for a power plant in the Andes. There is no universal yardstick for measuring adaptation outcomes.
The market is starting to shift, with the World Bank Group among the institutions driving catalytic investment across emerging markets in water, power grids, and transportation. IFC’s $120 million sustainability-linked loan to ENGIE Energía Perú demonstrated that embedding A&R metrics in the KPIs is operationally feasible. Working through Peru’s specific climate risks affecting ENGIE’s generation assets, IFC helped structure a KPI that translated exposure to physical hazards into measurable, time-bound performance indicators and targets tied to the loan’s financial conditions.
The transaction is significant beyond its own merits. It sets a replicable precedent for how A&R can be embedded into mainstream financing structures. The ambition is that other operators, lenders, and regulators will follow. Interest from grid operators across emerging markets is already building up.
The case for adaptation is already there—for people, planet, and profits. What’s needed now is modeling that puts a number on the risk, investment that acts on it, and monitoring that proves the impact.
