The mobilization of effective private sector engagement is considered to be critical to address the adaptation challenge, but literature demonstrates that it has proven difficult. In the context of international climate finance, the focus has been on mobilizing private finance for adaptation and in addressing barriers that prevent investments from materializing. In contrast, this article identifies options to engage the private sector in adaptation beyond finance and focuses on market imperfections instead of barriers. This moves the focus away from simply mobilizing more private adaptation finance towards identifying market forces that innovate, engage, and direct investments towards adaptation. The Green Climate Fund (GCF) and its portfolio of 74 adaptation projects serve as a case study. Two of these projects are categorized as private sector projects and an additional nine mobilize private co-finance or non-financial private contributions. Beyond these two indicators, we demonstrate that an additional 60 projects engage the private sector in other ways, thus indicating the important broader role of the private sector in adaptation. Furthermore, our ordinal regression demonstrates that by addressing the market imperfections of positive externalities, imperfect financial markets, and incomplete and/or asymmetric information, all have a significant positive effect on private sector engagement in the GCF’s adaptation portfolio. Both findings indicate that there is a large potential for the GCF—and other climate finance providers—to increase private sector engagement in adaptation. It must be noted, however, that the mobilization of private sector engagement in adaptation is a means to an end, not an end in itself. The main aim should be to adapt society as a whole in an efficient manner, including the most vulnerable groups and people.

The mobilisation of private sector engagement is considered to be critical to address the adaptation challenge, but literature demonstrates that it has proven difficult. In the context of international climate finance, the focus has been on mobilising private finance for adaptation, and in addressing barriers that prevent investments from materialising. In contrast, this article identifies options to engage the private sector in adaptation beyond finance and focuses on market imperfections instead of barriers. This moves the focus away from simply mobilising more private adaptation finance towards identifying market forces that innovate, engage and direct investments towards adaptation. The Green Climate Fund (GCF) and its portfolio of 67 adaptation projects serve as a case study. We demonstrate that 79 per cent of the GCF projects engage the private sector in ways that go beyond co-finance or project development, thus indicating the important broader role of the private sector in adaptation. Furthermore, our ordinal regression demonstrates that addressing the market imperfections of positive externalities, imperfect capital markets, and incomplete and/or asymmetric information all have a significant positive effect on private sector engagement in the GCF’s adaptation portfolio. Both findings indicate that there is a big potential for the GCF - and other climate finance providers - to increase private sector engagement in adaptation. However, the mobilisation of private sector engagement in adaptation is a means to this end, not an end in itself. The main aim should be to adapt society as a whole in an efficient manner, including the most vulnerable people.

In the original publication, author P.P. Stoll was incorrectly linked to all the affiliations on the paper. The original publication has been corrected.Publisher's note Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.