Adaptation Fund (AF)

While the decision to establish the Adaptation Fund (AF) was made in 2001 during the seventh climate conference in Marrakech, the fund was not able to commence its work until 2008. It has been fully functional since 2009. The AF is managed by the Adaptation Fund Board (AFB), which consists of 16 members and their deputies. It is the only Fund with a developing country majority among Board members.

Objectives

The Fund finances concrete adaptation projects in developing countries that have signed the Kyoto Protocol and are particularly vulnerable to the adverse effects of climate change. Target countries have the opportunity for direct access to financial resources without going through multilateral institutions, an unparalleled feature in international climate change financing architecture to date. It is also the only fund that even has a maximum limit of 50% of resources for projects implemented by multilateral institutions.

Key developments

The Adaptation Fund has approved a total of $1,3 billion for 175 adaptation projects in over 70 countries. Thanks to the Readiness Programme launched in 2014, the fund has been able to steadily increase the number of implementing entities from developing countries as well as the total number of projects submitted via direct access. The Fund has now accredited 38 National Implementing Entities (NIE) with direct access. In addition, there are 9 regional implementing entities (RIE) and 15 multilateral implementing entities (MIE). The fund has also established an additional permanent funding window for regional projects and programs to support adaptation measures across national borders and sets aside a specific budget for this purpose each fiscal year.

In October 2022, the Adaptation Fund adopted an updated five-year strategy that builds on and advances the Fund’s successes as a promoter of local and regional adaptation projects in the international climate finance landscape. In addition, the strategy sets further priorities, such as localized adaptation, strengthening gender equality, and synergies through complementarity and coherence with other adaptation donors. At the 2018 Climate Summit, it was agreed that the Adaptation Fund would be anchored in both the Kyoto Protocol and the Paris Agreement from January 1, 2019. As soon as revenues from emissions trading, which is being reorganized under Article 6 of the Paris Climate Agreement, can be generated, the Adaptation Fund will be transferred entirely to the Paris Agreement. The finalization of the transfer of the fund from the Kyoto Protocol to the Paris Agreement will be negotiated at the annual climate conference in 2025.

In 2025, the Adaptation Fund decided on a change in its financing strategy. Instead of an annual financing target, the fund has now defined a resource mobilization floor of USD 300 million. This is intended to improve the financial stability of the fund. In addition, the upper limit for funds per country has been raised from USD 20 million to USD 40 million, as has the maximum project size. Single-country projects can now have a volume of $25 million (previously $10 million) and regional projects $30 million (previously $15 million). The fund aims to triple its disbursements by 2030, as required under the New Collective Quantitave Goal for climate finance (NCQG).

Funding volume and Germany’s contribution

The Adaptation Fund was originally financed by revenues from the trading of certified emission reductions (CERs) and voluntary contributions from donor countries. However, donor countries have been restrained with their contributions for a long time because of the innovative financing basis. In recent years the financial situation of the Adaptation Fund has been strained due to the ongoing poor state of emissions trading. The lack of revenue from the sale of CERs has made it almost entirely dependent on donations. Under the Paris Agreement, a mandatory share of 5% of the proceeds from Article 6.4 and possible voluntary contributions under Article 6.2 are to flow into the fund. However, these funds are not expected until the end of 2026 at the earliest and are subject to market volatility, fluctuating demand, and external shocks. As a result, the Adaptation Fund is to date almost entirely dependent on grants. These grants are usually provided as annual pledges by donor countries. In 2019, Sweden became the first donor to make a multi-year commitment to the fund. Other countries (e.g., Ireland, Iceland, Norway, Switzerland, and South Korea) have since adopted this practice. This allows for longer-term planning security for the Adaptation Fund.

In recent years, the Adaptation Fund has had great difficulty achieving its annual financing targets. At the end of 2024, only $133 million was pledged by international donors at COP29. Over the years, Germany has established itself as one of the fund’s biggest supporters, contributing a total of over $704 million to the fund between 2010 and 2024. (as of October 2025)