Section 8 – Monitoring and reporting phase

Module 18 – Adaptation plan development and assessment

An adaptation plan is a forward-looking strategy that helps an organisation identify, assess, and manage the material risks and opportunities arising from current and future physical climate hazards. It outlines specific actions and investments to enhance the resilience of assets, business models, and communities, while ensuring progress is regularly monitored, disclosed and updated as conditions change.

This guidance has a dual purpose. It supports FIs in developing credible adaptation plans, as well as guiding their assessment of client plans. The same principles, criteria and evaluation questions apply to both institutional planning and client-level due diligence.

Engaging with client adaptation plans may soon become a critical component of climate risk management. Physical climate risks are often more acute and less diversified in emerging markets, affecting asset quality, business operations and financial stability. Without effective adaptation, some studies suggest significant economic impacts by 2050, alongside growing near-term disruption to supply chains and operations.

FIs can protect financial returns and support local economic resilience by understanding and influencing how clients prepare for physical climate risks. Institutions that proactively assess and support client adaptation are better positioned to:

• Access green finance flows and adaptation-linked incentives.
• Identify new business opportunities such as adaptation solutions, insurance and technical advisory services.
• Strengthen client relationships by acting as partners in resilience rather than simply as creditors.

FIs can play an active role in shaping client adaptation through their lending decisions. By integrating credible adaptation plans as part of loan covenants, they can encourage clients to reduce the risk of project or client failure due to climate stress. Forward-looking planning also helps prevent maladaptation, where short-term decision-making inadvertently increases long-term vulnerability.

Engaging with clients to undertake adaptation planning

Adaptation planning frameworks are evolving, sometimes targeting specific regions or sectors. Aligning with national or regional adaptation plans can also provide a credible foundation for collaboration.

Engagement should be proportionate to both the level of exposure and the capacity of the FI and its client. Start by raising awareness, building risk understanding and using simple checklists, then increase the level of detail and analysis over time. The aim is continuous improvement, rather than one-size-fits-all engagement.

Effective client engagement on adaptation focuses on constructive dialogue, best practice assessment, and targeted capacity-building. This approach can strengthen risk management while also supporting long-term value creation. Examples of effective engagement could include:

1. Raising adaptation issues during client due diligence, annual reviews and sector risk assessments. Particularly in climate-exposed sectors such as agriculture, infrastructure, real estate and utilities.
2. Positioning engagement as a value-adding partnership by offering guidance, sharing practical tools (such as physical climate risk assessment methodologies or localised diagnostic checklists), and highlight co-benefits like reduced insurance costs or stronger market reputation.
3. Setting phased expectations where adaptation planning is still developing. Starting with basis risk identification and resilience measures, before advancing towards more formal plans and disclosures.
4. See Module 12: Client climate risk maturity assessment.

Larger FIs may have greater leverage to integrate adaptation planning into credit decision-making processes and influence key clients or projects. MFIs, by contrast, can focus on supportive partnerships, technical assistance and financing affordable adaptation options.

IIGCC Climate Resilience Investment Framework (CRIF)

Frameworks such as the IIGCC Climate Resilience Investment Framework (CRIF) offer a robust starting point that can be adapted to reflect local realities, sector exposures and strategic objectives.

Best practices for adaptation planning

A credible adaptation plan should show how an organisation anticipates, prepares for and responds to physical climate risks in a structured and transparent way. It should include the following core components:

• Resilience objectives and adaptation ambition

  1. Clearly state the organisation’s adaptation and resilience goals, as well as its intended level of climate preparedness.
  2. Define the time horizon for adaptation planning and specify how objectives align with broader business strategy and climate commitments.
  3. Highlight alignment with NAPs, NDCs or industry-specific standards where applicable.

• Climate risk assessment and prioritisation

  1. Identify and assess both acute and chronic physical risks (see Module 5 and Module 8) most relevant to the organisation’s geography and operations.
  2. Combine historical data, forward-looking scenario projections (see Module 21) and expert judgement to evaluate exposure, sensitivity and adaptive capacity.
  3. Prioritise risks and opportunities based on their materiality to financial performance and operational continuity.

• Tailored adaption measures and resource allocation

  1. Outline specific measures for climate risk mitigation and resilience-building, such as infrastructure upgrades and water conservation systems.
  2. Allocate the financial and human resources to ensure such measures are practical, funded and time bound.
  3. Integrate adaptation measures into core business operations, capital planning and investment decisions.

• Governance, oversight and accountability

  1. Define clear governance structures for adaptation planning, including board and senior management oversight.
  2. Promote cross-departmental ownership, linking climate resilience to enterprise risk management (ERM), business continuity and operational risk frameworks.

• Monitoring and reporting

  1. Specify metrics and indicators to track implementation progress and real-world outcomes of adaptation measures.
  2. Include both qualitative and quantitative indicators as needed.
  3. Set up processes for internal review and annual reporting, referencing regulatory guidance and international disclosure standards for comparability and best practice alignment.

• Integration and continuous improvement

  1. Update the adaptation plan regularly to reflect new climate data, policy changes and lessons learned from implementation.
  2. Apply scenario analysis and stress testing to determine how adaptation measures perform under different climate scenarios.
  3. Encourage a culture of learning and accountability, by documenting what works and scaling up successful interventions.

Guidance 16: Key elements of an adaptation plan

Guidance 16 highlights the key elements of a credible and decision-useful adaptation plan, helping FIs and their clients turn climate risk insights into practical resilience strategies. Aligning with these elements helps organisations to demonstrate their preparedness for physical climate risks.

Assessing the credibility of client adaptation plans

These questions can form part of a high-level checklist for evaluating client adaptation plans:

• Questions to assess client adaptation plans

  1. Has the client set clear, time-bound adaptation or resilience objectives?
  2. Is the plan informed by a robust assessment of physical climate risks?
  3. Does it identify specific, actionable adaptation measures and investments?
  4. Is there a mechanism for monitoring, reporting and periodically updating the plan?
  5. Does governance include board or senior management oversight?
  6. Are social impacts, maladaptation risks and stakeholder engagement addressed?
  7. Is disclosure consistent with best practice and relevant regulatory standards?

Red flags to watch for:

• Red Flags to watch out for

  • Vague language or generic adaptation actions that express aspirations but without concrete near-term steps.
  • Plans focused only on future reviews or studies rather addressing material risks through immediate actions.
  • Failing to recognise or properly assess physical climate risks affecting key operations, assets or communities.
  • Lack of clear accountability for implementation, or absence of board or management oversight.
  • Limited or no progress reporting, impact tracking or defined triggers for escalation.
  • Not considering social and environment impacts, including maladaptation
  • Poor transparency with key assumptions, limitations and uncertainties not disclosed.

Tool 5: Client adaptation plan assessment checklist

Tool 5 offers a high-level framework for assessing client adaptation plans. It can be aggregated at the sector or portfolio level for more strategic analysis and benchmarking.

RETURN TO TOOLKIT MAP
PROCEED TO MODULE 19