What is the Climate Finance Vulnerability Index (CliF-VI)? June 25, 2025 By: Amy Campbell, Student Researcher, National Center for Disaster Preparedness (NCDP) Adaptation finance is critically underfunded, with existing finance skewed toward mitigation and middle-income markets. Many countries facing the highest climate risk also carry significant debt burdens and have been repeatedly downgraded by credit rating agencies, thereby increasing their cost of capital and pushing adaptation out of reach. Adaptation financing must be deployed in ways that reflect not only climate risk but also the fiscal capacity of the recipient. The Climate Finance Vulnerability Index (CliF-VI), developed by the National Center for Disaster Preparedness with the financial support of The Rockefeller Foundation, is a tool for identifying where concessional adaptation finance is most urgently needed to have the greatest impact. The CliF-VI demonstrates that climate vulnerability is about the ability to adapt, not just the hazard itself. Access to capital is critical: countries may not be the poorest in GDP terms, but if they cannot access the capital needed for adaptation, they remain trapped in cycles of disaster and recovery. This insight has critical implications for how adaptation finance is prioritized and structured. View the Climate Finance Vulnerability Index (CliF-VI) Adaptation Finance A range of global climate funds has been established to channel adaptation finance, each with distinct mandates. The Global Environment Facility (GEF), launched in 1991, serves as the UNFCCC’s financial mechanism, supporting environmental initiatives across sectors. The Adaptation Fund, operational since 2007, finances community-based resilience in vulnerable regions via a levy on carbon offset projects. The Green Climate Fund (GCF), established in 2010, holds the largest adaptation portfolio and supports broad climate-resilient development. The Climate Investment Funds (CIFs), established in 2008, provide concessional financing for large-scale infrastructure projects in partnership with multilateral development banks. Most recently, the Loss and Damage Fund, agreed at COP27, aims to provide financial support for countries already experiencing climate-related impacts, though its operational details are still being defined. Despite these major climate finance institutions, there remains a severe adaptation financing gap. None of the current funds are adequately resourced to meet rising needs. According to UNEP (2024), adaptation costs in developing countries are likely to reach $215–387 billion annually by 2030, yet current adaptation finance flows are less than $27.5 billion. This shortfall widens every year. These institutions were designed to deliver concessional finance, but limited donor commitments, slow replenishment cycles, and high access barriers have constrained their ability to disburse funding at the necessary scale or speed. The CliF-VI aims to support better prioritization of this scarce finance by identifying countries most in need and least able to access funding. Financial Vulnerability: Debt A 2022 UNDP report found that more than half of the 54 most severely indebted developing nations also ranked among the most vulnerable to the effects of climate change (UNDP, 2022). Credit ratings are fundamental in climate-vulnerable countries’ ability to access finance, and many countries are structurally disadvantaged by current credit rating methodologies, in part due to their debt load. The current assessment and methodological variables to determine credit ratings focus on: per capita income, GDP growth, inflation, fiscal balance, external balance, external debt, economic development, and default history. Within this methodology, as developing economies borrow more to be able to finance public investment, they are downgraded. This perception of debt means that major investments in infrastructure, building resilience, and the energy transition are disregarded in the rating. The inherent bias is acute in the incorporation of climate risk and vulnerability, as climate-vulnerable countries are perceived as high risk without an impartial investigation into their ability to repay debt in the future as a result of climate risks. Continual downgrades lead to a negative spiral in access to capital. Downgrades will inhibit public investments in climate mitigation and adaptation, as these countries face high interest rates and limited access to credit due to their poor credit risk rating. A UNDP study in 2023 showed that if credit ratings accurately reflected economic realities, African countries could unlock an extra $74.5 billion in funds. Concessional, Blended, and Innovative Financing To provide urgent adaptation financing without exacerbating debt burdens, finance should be primarily grant-based, especially in countries where debt levels are already unsustainable, or provided at concessional terms, leveraging blended and innovative financing mechanisms. These resources must also prioritize the most vulnerable countries at risk of catastrophic climate disaster. Concessional finance tools such as guarantees, first-loss debt tranches, and grant-based capital are essential in this landscape (Table 1). These mechanisms help reduce risk for private investors and de-risk adaptation investments in countries with limited fiscal space. Yet, access to these tools is highly uneven. Innovative financing is a set of approaches that help allocate resources to address climate change, such as debt-for-nature swaps and sovereign climate bonds (Table 1). Innovative financing models can unlock returned income over the long-term finance from the private sector, and can reduce investment risk and create scalable financing models for resilience. Table 1. Concessional, blended, and innovative financial instruments that can be used in climate finance to re-risk investment without exacerbating debt burdens. Financial Instruments Definition Blended Finance Blended finance uses public or philanthropic capital to mobilize private capital flows to emerging and frontier markets. This approach aims to attract private investment by mitigating risks and enhancing returns, thereby supporting sustainable development and climate-related projects (Source: CPI). Guarantees A financial instrument that protects investors or lenders from the risk of default by covering part or all of the losses if a borrower cannot repay. Guarantees help reduce the perceived risk of investing in adaptation projects, especially in low-income or fragile countries. (Source: CPI, World Bank). As an example, the World Bank’s Climate Resilient Infrastructure Development Facility (CRIDF) in Southern Africa includes partial credit guarantees to de-risk private investment in water infrastructure. First-loss debt tranches A layer of investment in a blended finance structure designed to absorb initial losses, thus protecting more senior investors from risk. This instrument incentivizes private investment by reducing their exposure to early-stage or high-risk components of adaptation projects (CPI, Convergence Blended Finance). As an example, the Global Subnational Climate Fund (SnCF), co-managed by Pegasus Capital Advisors and the Green Climate Fund, uses first-loss equity to mobilize private finance for subnational adaptation projects (GCF, 2021). Grant-based capital Non-repayable funds are provided to support adaptation projects, often used for early-stage investments, technical assistance, or in contexts where loan financing is inappropriate due to high debt or low fiscal space. (Source: WRI, Green Climate Fund). For example, the Africa Adaptation Acceleration Program (AAAP) offers grant-based capital through the African Development Bank and Global Center on Adaptation to support adaptation projects across 33 African countries (GCA, 2023). Debt-for-nature swaps A financial agreement in which a portion of a country’s foreign debt is forgiven in exchange for local investments in environmental conservation or climate resilience projects. These swaps can free up resources for adaptation in debt-distressed countries. (Source: WRI, UNDP). For example, in 2023, Belize completed a second debt-for-nature swap, refinancing $364 million of sovereign debt in exchange for marine conservation commitments (Nature Conservancy, 2023). Sovereign climate bonds Debt securities issued by national governments to raise capital for climate-related projects, including adaptation. These bonds signal commitment to climate investment and can mobilize large-scale private capital. (Source: Climate Bonds Initiative, World Bank). For example, in 2023, Benin issued a sovereign sustainability bond worth €500 million, which includes financing for climate adaptation in agriculture and water access (CBI, 2023). Use Cases of the Climate Finance Vulnerability Index The CliF-VI is designed to provide a comprehensive understanding of climate vulnerability for nation states to improve the targeting and provision of climate change adaptation financing. In particular, the Index aims to enhance the efficacy of concessional climate loans, grants, and investments to help ensure sufficient capital is directed towards vulnerable regions to provide equitable opportunities to increase resilience in the face of a changing climate. The launch of the CliF-VI comes at a pivotal moment for global adaptation finance. Negotiations around the Global Goal on Adaptation (GGA), especially during the 2024 Bonn Intersessionals, have called for clearer frameworks to assess needs, track progress, and guide finance flows. The CliF-VI provides exactly this: a scalable, transparent, and multidimensional tool that can help operationalize the GGA by informing both the allocation and modalities of support. It strengthens the evidence base for grant-based adaptation finance, supports country-level prioritization, and equips multilateral funds and donors with a robust mechanism to target finance where it is most needed and least accessible. Other uses of the Index: For Multilateral Development Banks, the CliF-VI can help signal where concessional or grant-based instruments should be concentrated, particularly in countries that may be fiscally constrained but not technically ‘low-income’. For Ministries of Finance, the index supports efforts to advocate for fairer financing terms and tailor National Adaptation Plans to reflect financial vulnerabilities, not just climate exposure. For UN bodies and climate funds, this provides a replicable framework to align funding decisions with the GGA and supports more transparent targeting mechanisms. For development finance institutions (DFIs) and blended finance platforms, the CliF-VI helps identify geographies where de-risking tools like guarantees, first-loss capital, or technical assistance are most needed to crowd in private investment. For private investors, the index highlights regions where investment opportunities may remain overlooked due to distorted perceptions of sovereign risk. For philanthropy, this can be a targeting tool for catalytic grantmaking to unlock larger flows of public and private capital in countries where markets are unlikely to reach. More on the Climate Finance Vulnerability Index The CLIF-VI shows compounding risk across climate risk and financial vulnerability with a supplementary governance index. Drawing from INFORM Risk (2025) and INFORM Climate Change (2022), the Index is structured to illustrate climate and hazard risk exposure at present and under future climate scenarios. The financial vulnerability composite variable consists of 22 indicators across three dimensions: debt-sustainability, financial integration, and financial sophistication. It enables the identification of countries that are locked out of global capital markets, face high borrowing costs, or struggle to attract private finance, even when they urgently need investment for adaptation. The supplementary governance index provides an overview of governance considerations that may further impact lending modalities or conditions, such as the Rule of Law and Control of Corruption. The CLIF-VI and supporting documentation can be found here. References Cash, D., & Khan, S. (2024). Rating the globe: Reforming credit rating agencies for an equitable financial architecture. United Nations University Centre for Policy Research. https://collections.unu.edu/eserv/UNU:9832/rating_the_globe.pdf Climate Bonds Initiative. (2023). Sovereign green, social, and sustainability bond survey. https://www.climatebonds.net/resources/reports/sovereign-green-social-and-sustainability-bond-survey-2023 Climate Policy Initiative. (2018). Blended finance in climate investment. https://www.climatepolicyinitiative.org/publication/blended-finance-in-climate-investment/ Climate Policy Initiative. (2019). Blended finance in clean energy: Experiences and opportunities. https://www.climatepolicyinitiative.org/publication/blended-finance-in-clean-energy/ Convergence. (2021). Blended finance primer: Risk mitigation. https://www.convergence.finance/resource/4VfpDbbTcMecmuCqoQSyUE/view Green Climate Fund. (2021). Global Subnational Climate Fund (SnCF). https://www.greenclimate.fund/project/fp152 Green Climate Fund. (n.d.). Funding projects. https://www.greenclimate.fund/projects European Commission. (2024). INFORM Risk Index 2025: Results and data. Disaster Risk Management Knowledge Centre. https://drmkc.jrc.ec.europa.eu/inform-index/INFORM-Risk/Results-and-data/moduleId/1782/id/469/controller/Admin/action/Results European Commission. (2022). INFORM Climate Change Risk Index 2022: Results and data. Disaster Risk Management Knowledge Centre. https://drmkc.jrc.ec.europa.eu/inform-index/INFORM-Climate-Change/Results-and-data Institute for Energy Economics and Financial Analysis (IEEFA). (2024). Climate risks underplayed in recent credit rating actions. https://ieefa.org/resources/climate-risks-underplayed-recent-credit-rating-actions United Nations Development Programme. (2021). Nature for life: Debt-for-nature swaps and sustainability-linked sovereign debt. https://www.undp.org/publications/nature-life-debt-nature-swaps-and-sustainability-linked-sovereign-debt UNDP. (2023). Avoiding too little, too late: The case for international debt relief. United Nations Development Programme. https://www.undp.org/publications/dfs-avoiding-too-little-too-late-international-debt-relief UNDP. (2023, May 11). More objective credit ratings could save billions for African countries in development finance, UNDP finds [Press release]. https://www.undp.org/press-releases/more-objective-credit-ratings-could-save-billions-african-countries-development World Bank. (2021). Guarantees: Leveraging finance for development. https://www.worldbank.org/en/topic/financialsector/brief/guarantees World Bank. (2022). Climate Resilient Infrastructure Development Facility (CRIDF). https://projects.worldbank.org/en/projects-operations/project-detail/P175872 World Bank. (2022). Green bond impact report. https://thedocs.worldbank.org/en/doc/fecc83e46c59adbc75cc7a5195c39b2b-0280012022/original/Green-Bond-Impact-Report-2022.pdf World Resources Institute. (2020). Mobilizing climate finance for adaptation: Insights from GCF project data. https://www.wri.org/research/mobilizing-climate-finance-adaptation World Resources Institute. (2022). Debt for nature: A global solution for climate, biodiversity, and development. https://www.wri.org/insights/debt-for-nature-swaps-global Amy Campbell Student Researcher Tags: climate finance, vulnerability, climate risk Climate Change Vulnerable Populations Systems Readiness
