Are Markets Interested in Financing Urban Climate Change Adaption?

This dissertation addresses the persistent underinvestment in urban climate change adaptation, despite the escalating exposure of cities to climate-related risks. As extreme events intensify, cities increasingly bear the brunt of the physical impacts of climate change, yet struggle to mobilise sufficient financial resources to adapt to these impacts. This is not simply a problem of limited funds but a deeper structural issue within the current financial system. In this dissertation, climate change mitigation is the activity to reduce carbon emissions and climate change adaptation is the activity to address the physical impact of climate change. The latter is the key focus of this dissertation.
Scholarly and practitioner work tells us that investors are mainly wary of a lack of bankable and profitable projects. At the same time, governments struggle to access and deploy finance for climate change adaptation projects due to a myriad of barriers. Together, these dynamics reveal not just financial scarcity but a misalignment between the supply of private capital and the demand for urban climate change adaptation financing for projects by governments.
The central research question for my dissertation is ‘Why is finance for urban climate change adaptation so scarce and how can cities and investors in finance regimes empower niche-innovation and transform financing?’ To investigate the financing gap, the dissertation draws on empirical research conducted in Copenhagen, London and Singapore. These cities serve as case studies for examining the perspectives of both governments and investors on the challenges they each face in financing urban climate change adaptation. A qualitative, explanatory and exploratory research design underpins this inquiry, incorporating a literature review, bibliometric analyses, interviews, focus groups and policy document analysis.
Theoretically, the dissertation employs two complementary theoretical frameworks to analyse these systemic issues across government and investor responses. The Multi-Level Perspective (MLP) is used to capture the bigger picture about why urban climate change adaptation financing is so scarce in cities and to conceptualise the macro-level conditions that restrict investment. Strategic Niche Management (SNM), on the other hand, provides a complementary lens through which to dive into how innovations in urban climate change adaptation can be empowered and scaled. Understanding the interplay between the niche-innovations and the finance regime/system using this theoretical outlook is critical for both scholars and practitioners. It shifts the discourse from attributing blame to either governments or investors alone, toward a more holistic view of how key conditions, industry structure, policy, markets, knowledge and technology interact within the finance regime to shape finance.
A visual abstract on the following page outlines the structure and key contributions of this dissertation. It comprises three academic papers, supported by additional research, five practitioner-orientated studies and additional unpublished analyses. Paper One presents a bibliometric study of the scholarly literature on urban climate change adaptation finance, identifying dominant themes and key gaps. Paper Two focusses on Copenhagen and applies the MLP framework to understand the dynamics and conditions of local climate change adaptation finance, as well as systemic constraints. Paper Three explores elite investor perspectives, highlighting the challenges posed by market imperfections and proposing an intervention model for assessing their transforming potential. These papers collectively demonstrate that piecemeal reforms are insufficient; instead, targeted and systemic interventions are needed to mobilise private finance at scale. The findings point to deep-rooted issues within the financial system. Market imperfections and legacy investment practices hinder investor and private sector engagement, while governments often lack the capabilities to stimulate innovation or attract capital. Overcoming these barriers requires systemic transformation, which this research refers to as ‘stretching’ of the finance regime. This includes policy and fiscal interventions aimed at correcting market failures, strengthening partnerships and fostering new tailored financial instruments.
The research concludes that niche-innovation in urban climate change adaptation finance must be empowered not only by government action but also by a broader restructuring of the financial system. Avoiding overly optimistic assumptions about private finance is essential, as is fostering regulatory, political and industry conditions that support long-term, collaborative change. This dissertation contributes to a growing body of work that seeks to understand how ‘stretching’ the finance regime can be imagined and implemented in response to the global challenge of climate change.