Grants, Not Debt: The Adaptation Fund and What Small Island States Are Owed

Every November the language of resilience returns to the negotiating halls, and with it an assumption that small island developing states will finance their own survival on borrowed money. These states have contested that assumption since 1991, when Vanuatu, speaking for the Alliance of Small Island States, proposed an international insurance pool to compensate those facing sea-level rise and was turned away.

For economies already carrying some of the heaviest debt burdens relative to their size, where a single hurricane season can erase years of growth, the question is not only how much adaptation finance exists but in what form it comes. A loan for a seawall is still a loan: it narrows fiscal space, competes with health and education in the national budget, and sends the country back to the markets after the next shock with a weaker balance sheet.

“Developing countries cannot adapt to escalating climate impacts on borrowed money.”

— A senior Bangladeshi negotiator, COP31 opening discussions

As COP31 in Antalya works through its first week, the distance between need and delivery is plain. Chris Bowen, presiding over the negotiations, has acknowledged that only 0.2 percent of global adaptation finance goes to SIDS, while UNEP estimates that developing countries will require around US$305 billion in adaptation finance by 2035, against roughly US$30 billion provided by rich nations in 2024.

The Adaptation Fund matters because it was built on a different premise. Established under the Kyoto Protocol, it is the only UNFCCC-linked fund dedicated exclusively to adaptation, and it provides full-cost grants rather than loans, so a country does not take on new liabilities to protect itself from a crisis it did not cause.

It was also the first climate fund to offer direct access, allowing accredited National Implementing Entities in developing countries to design, receive and manage finance themselves rather than routing every proposal through a multilateral development bank or UN agency.

For debt-distressed states this combination is significant. Grant finance preserves fiscal space and debt sustainability, while direct access moves ownership of what counts as resilience closer to the institutions and communities that will live with the outcome.

The model was designed to be independent as well as fair. Alongside voluntary contributions, the Fund was given a share of proceeds from carbon markets, originally 2 percent of credits issued under the Clean Development Mechanism and, since Glasgow, 5 percent of proceeds from the Paris Agreement's Article 6.4 mechanism, so that money would flow without depending on the generosity of donors each year.

In practice that independence has been held in procedure. Negotiators in Bonn in June could not resolve how those carbon-market proceeds are monetised and transferred, leaving the matter to COP31. Meanwhile, voluntary pledges have fallen short of the Fund's US$300 million resource mobilisation floor for three consecutive years, with COP30 yielding US$135 million from ten contributors.

“Fail to deliver adaptation finance today, and tomorrow’s humanitarian crisis may be worse.”

— Murat Kurum, COP31 President

The instrument that most closely matches what SIDS have long asked of the climate finance architecture is, therefore, also the one kept smallest, and that tells us a good deal about the politics of climate finance as a whole.

What we pay for in loss and damage is very often what we failed to finance in adaptation. The Loss and Damage Fund, a separate instrument designed to help vulnerable developing nations cope with climate-related destruction, shows the same pattern at the far end of the spectrum.

It has just approved its first disbursement in direct response to a climate disaster: US$20 million for Nepal after the 2026 floods that killed some 1,500 people. It is a symbolic first that covers less than one percent of Nepal's estimated US$2.69 billion in initial losses, and under half a percent of the nearly US$4.8 billion Nepali officials put on the flood and the recovery that followed. Meanwhile, the fund's first round holds roughly US$350 million against requests of US$2.8 billion from 119 countries.

Addressing the World Leaders Summit on 11 November, UN Secretary-General António Guterres noted that the nine largest oil companies made US$95 billion in profit last quarter, while the fund has received about US$600 million in total, roughly what those companies earned in fourteen hours. When recovery is financed at that ratio, the shortfall does not disappear but is transferred to national budgets and, for most small states, to new borrowing.

“Those who profit most from fossil fuels must help foot the bill for the damage they have caused.”

— António Guterres, UN Secretary-General, World Leaders Summit, 11 November 2026

Going forward, the questions worth asking of adaptation and resilience are less about announcements than about form, control and scale. Is finance grant-based or debt-creating, and is it counted toward headline goals at its face value or its grant equivalent?

Does it flow through direct access and regional instruments such as the Pacific Resilience Facility, or back through intermediaries that set the terms? And will COP31 release the Adaptation Fund's share of proceeds and give the Belém adaptation indicators a way of measuring what communities themselves define as resilience?

These are the threads I will be following through Antalya and beyond. They will determine whether resilience comes to mean the capacity of small states to shape their own futures, or simply the capacity to absorb the next shock on terms set elsewhere.

Sources

• PINA, Bowen on 0.2 percent of adaptation finance to SIDS
• UNEP Adaptation Gap Report 2026, via Sustainability Online
• Daily Sun, From Pledges to Practice (Bangladeshi negotiator)
• PACNEWS, 10 November 2026 (Murat Kurum)
• Women and Gender Constituency on the Adaptation Fund
• IIED on the multilateral climate funds
• Power Shift Africa on the Bonn stalemate
• Adaptation Fund Year-in-Review 2025
• Climate Home on missed targets
• Inside Climate News on Nepal
• Britannica, Nepal floods of 2026
• Common Dreams on the Secretary-General's address
• allAfrica on the Secretary-General's address