CLIMATE RESILIENT

FISCAL PLANNING
A REVIEW OF GLOBAL GOOD PRACTICES
NOVEMBER

ASIAN DEVELOPMENT BANK

Foreword

Central finance and planning agencies such as ministries of finance and planning and independent central banks

for adaptation and mitigation.

Observed and projected scenarios for global warming indicate that the adverse impacts of climate change on human
and natural systems will continue to intensify across Asia and the Pacific. The World Metrological Organization

Change highlights that the impacts of climate change are putting ecosystems, the cryosphere, human settlements,
health, food, water, and energy systems across the region at risk of breaking down.

Gaps in adaptation planning exist even as progress has been made. And at current rates of implementation, the
gap between what is needed and is provided will continue to grow. Investment in adaptation will cost an estimated

This is in stark

Given the clear and present need to scale up spending, this report focuses on how climate resilient fiscal planning
can help mobilize and allocate public and private finance for investment adaptation and resilience.

gross domestic product. These ministries coordinate economic strategy and fiscal policy and regulate the financial
system. By integrating climate action into economic investments, fiscal policies, and budget management, finance
ministries can help ensure economy-wide investment in adaptation. They can also deploy policy and regulation to
leverage private investment in adaptation.

This report outlines evolving global good practices on climate resilient fiscal planning and identifies a three-step
framework to help decision-makers scale up and align fiscal flows with investment in adaptation and resilience.

The first step is to assess climate-related fiscal risks to identify, model, and disclose the impact of climate-induced
physical risks on fiscal sustainability. The second is in managing climate-related fiscal risks to guide risk assignment
and risk reduction, transfer, and retention strategies. And the third step is to optimize resources to mobilize and
manage public and private sources of finance for investment in adaptation.

With a focus on adaptation, this report complements the work of the Coalition of Finance Ministers for Climate
Action. As an evidence-based product, it supports the Paris Agreement goal on finance and the need to scale up
and align financial flows with climate adaptation.

Toru Kubo Tariq H. Niazi

Senior Director, Climate Change, Resilience, Senior Director, Public Sector Management
and Environment
Climate Change and Sustainable Development Department Sectors Group
Executive Summary

Climate-related physical risks are a significant and growing threat to fiscal sustainability. Acute and chronic
physical climate-related risks—such as changing precipitation patterns, rising temperatures, and floods—are
increasing in severity and frequency. These can damage infrastructure, displace vulnerable populations, disrupt
economies, and require significant investments to build resilience. As a result, climate-related risks can make it very

CFAs urgently need to systematically incorporate climate considerations in all fiscal decision-making. CFAs

outcomes. Using this information, CFAs can build fiscal resilience to climate-related risks by developing a strategy
for managing fiscal exposure and mobilizing enough resources for adaptation needs.

Many CFAs are building increasingly comprehensive approaches to deal with climate-related risks in the short
and long terms. They use a variety of approaches, models, and policy actions to manage and adapt to current
and future climate risks. While deploying these in various ways, depending on needs and capacities, good practice
approaches tend to be:

• Evidence-driven: Strategies, policies, and priorities are underpinned by a robust and clear understanding of

•
impact approaches to managing and adapting to climate-related risks.
• Forward-looking and dynamic: Climate risks require planning for uncertainty using flexible approaches that
can account for multiple scenarios and adapt to new information.
• Coordinated and collaborative: Leveraging the knowledge of ministries, nongovernmental organizations, and

• Addressing barriers: Using innovative instruments and policy incentives can encourage investment in risk
management in the short and long terms, de-risk private sector financing, and address barriers to mobilizing
resources at scale.

CFAs may face challenges in integrating climate-related risk information into decision-making and in
Assessing climate risks often involves
highly technical modeling. In many countries, CFAs are already resource-constrained and lack capacity to undertake
assessments. With many government agencies involved in designing and implementing climate-related policies,

This report details these good practice approaches and provides actionable insights for CFAs around the world to
use climate-related risk information in making decisions.

Examples include Armenia, Indonesia, the Philippines, and the United States. Case studies on these and other countries are included in this report.