When aid dries up: alternative modalities of financing climate adaptation

The world is becoming more volatile, unpredictable, and uncertain, and there is a need for stability, foresight, and global coordination. This instability is seen in the international aid sector, which is contracting fast as the US, France, the Netherlands, Belgium, and the UK all roll back their commitments, with the ODA (Official Development Assistance) budget declining by 17% from 2023 to 2024 for sixteen countries that are major donors. The most shocking shift has come recently from the United States, where President Trump’s administration announced the suspension of all US foreign development assistance programmes for 90 days, terminating over 90% of USAID’s foreign aid contracts and amounting to approximately $60 billion in cuts. Following this, the United Kingdom slashed its overseas aid budget from 0.5% to 0.3% of its gross national income, amounting to approximately £6 billion in cuts. Other leading donors have followed these examples, sending shockwaves through the global development community and exacerbating the crisis.

Climate adaptation in an uncertain world

These drastic budget cuts, global instability, rising authoritarianism, and climate-related disasters are making climate adaptation more urgent than ever. As the development sector undergoes this seismic shift, the need for climate adaptation is not diminishing — it is accelerating. When the budget shrinks, decision-makers often prioritise immediate, tangible returns and one-off investments that look good in reports but usually fail in practice — such as physical infrastructure — while cutting the ‘soft’ aspects of development, such as knowledge-sharing, participatory governance, and capacity-building. Hardware without the right software is a recipe for failure.

Evidence shows that community development is far more sustainable than just pouring money into projects. Short-sighted approaches lead to short-sighted climate responses. Aid efforts risk becoming expensive failures without strategic investment in knowledge, capacity, and local resilience, the essential ‘soft’ elements. Cutting aid budgets is one thing; cutting the tools that make adaptation work is another. If donors continue to strip away the ‘software’ of development, they may save money in the short term, but at a devastating long-term cost.

Communities as driving forces in adaptation

A retraction in aid — harmful and damaging as it is — also creates space for countries to take greater ownership financially. Thus, in this rapidly changing world, communities will increasingly be responsible for leading adaptation. But to do so, local communities will need to learn from the experiences of others, adapting and appropriating ideas from elsewhere to fit their own contexts and strategies. What is the best way to do this? Investing in the learning and sharing cycle. This is not just about producing research; it is about making sure that knowledge reaches the right people in the right form at the right time. Done well, it builds local innovation, reduces dependency on the state and other donors, and strengthens resilience. Knowledge brokering helps bridge the gap between raw data and actionable strategies. It ensures that practitioners, policymakers, and communities are informed and equipped to respond to fast-changing realities. Without these knowledge systems in place, aid efforts risk becoming wasteful, outdated, or outright harmful.

Furthermore, the concept of Locally Led Adaptation (LLA) has gained recognition as a practical approach to climate resilience, referring to efforts led by communities, local governments, and civil society organisations. Local governments and communities are already taking the lead in many places; for example, in Nepal, Local Adaptation Plans of Action (LAPA) have been used to implement decentralised, bottom-up planning processes that consider local adaptation needs. Together with LAPA, Nepal’s commitment to allocating 80% of climate finance to the local level is articulated in its National Climate Change Policy, which set forth this directive to ensure that most climate-related funds directly benefit local communities. This commitment was reaffirmed in the updated 2019 policy, emphasising the government’s dedication to decentralised climate action.

LLA emphasises empowering local actors — communities, local governments, Indigenous Peoples, and civil society groups — to drive climate adaptation strategies. This approach acknowledges that those on the frontlines of climate impacts are best positioned to identify and implement contextually appropriate solutions.  However, they need proper support, not just in terms of funding but also in access to knowledge and capacity-building. The role of the donor and development sector should be to support and enhance this local adaptation, not only through shifting resources directly to the local level but also by creating flexibility for local partners to apply adaptive management. Equipping communities with information, evidence, and learning platforms builds long-term resilience and autonomy, reducing reliance on external aid over time.

The way forward

The old adage about how all crises contain the seeds of opportunity still stands. With traditional aid shrinking, the question is: who will step up? The private sector and social enterprises can play a critical role by providing finance and innovation in sustainable adaptation solutions. Companies investing in climate resilience through impact-driven initiatives should endeavour not only to support communities but also to protect their supply chains. Similarly, philanthropic organisations and climate funds must fill the financing gaps, ensuring that knowledge-sharing, research, and participatory adaptation remain at the forefront.

In a world where crises are becoming more frequent and aid resources are dwindling, localisation is not just important — it is essential for survival. Without it, adaptation efforts will be inefficient, ineffective, and ultimately unsustainable. If the global development sector wants to do more with less, investing in streamlining the pathway of funding delivery and promoting localised climate initiatives is the best way forward.

Tags: Climate, climate action, climate adaptation