The data is clear: Investments in adaptation and resilience deliver high economic returns but remain insufficient and poorly targeted. Evidence shows that targeted, early investments in resilient infrastructure, climate-smart agriculture, and early warning systems can deliver strong economic and social returns and reduce losses, even under uncertain futures.

However, adaptation finance in Europe and Central Asia is the lowest among all regions as a share of GDP, despite being the world’s fastest-warming continent. In 2025, floods, droughts, and heatwaves cut an estimated US$50 billion from that year’s EU output. By 2029, the longer-term effects are projected to reach US$147 billion, with some countries facing losses approaching 3% of their gross value added.

How countries prepare makes a decisive difference. In Poland, years of investment in flood defenses and early warning systems shielded millions from the worst impacts when, in 2024, Storm Boris killed dozens and caused billions in damages across Central and Eastern Europe. This reflects a broader pattern: countries that invest in resilience before shocks fare better.

A new World Bank report, Building Resilience and Climate Adaptation in Europe and Central Asia, takes stock of where the region stands, what the business case for adaptation is, and what it would take to close the adaptation gap. The findings, compiling evidence from the World Bank Group’s Country Climate and Development Reports, are instructive.

The potential impact of smart investments is considerable. Across the region, World Bank modeling suggests that adaptation and resilience investments equivalent to approximately 1.7% of GDP through 2030 would offset, on average, more than one-third of projected climate-induced economic losses. At the project level, the public investment case for adaptation is also compelling, with most adaptation investments yielding benefits outweighing costs by a factor of 2-10, and some substantially higher. The cost of inaction is also significant. Without adequate adaptation, the short-term losses outlined above propagate into the long-term, leading to annual losses across ECA reaching nearly 6% of GDP by 2050. The transport sector, for example, already sustains damage from hotter temperatures and increasing instances of extreme weather at roughly three times the rate of other regions. For firms, a single-unit rise in temperature variability (that is, larger swings around normal seasonal patterns) is associated with a 9% drop in sales on average.

Across the region, extreme weather events are a direct threat to the jobs and livelihoods that underpin household welfare and economic stability. More than one in three people across ECA live in areas of high exposure to such risks, and substantially more in Bosnia and Herzegovina, Croatia, Moldova, and Romania. Poverty is the single largest driver, accounting for roughly 40% of households’ exposure across the region, rising 70%-90% in some countries. In Moldova, where agriculture supports more than 30% of all jobs, a single drought in 2020 pushed rural poverty up by more than 8 percentage points. In Tajikistan, continued inaction could push an additional 100,000 people into poverty by 2030.

Despite this evidence, Europe and Central Asia significantly under invests in adaptation. The best available data suggests that ECA received just US$3 billion in adaptation finance in 2023. This is the lowest share relative to its economy of any region, and well below the estimated annual needs, which could reach US$20 billion. Private finance, although probably underreported, accounts for barely 2% of that total.

While adaptation is often seen as a government responsibility, resilience is fundamentally built through private decisions by households and firms. But these need to be enabled by the right public information, incentives, and finance.

To close the adaptation gap and accelerate progress, the report identifies five areas where policy can make the biggest difference, including putting private actors in a position to adapt:

1. Accelerate income growth and close gaps in inclusion: Economic development remains the most powerful tool for building resilience. By focusing on inclusive growth, countries can empower households and firms to invest in their own protection and diversify their economies away from climate-sensitive sectors.
2. Improve access to information and finance: Governments, firms, and households need reliable climate data and risk information to make informed decisions. Expanding access to finance, especially for the most vulnerable, is crucial for unlocking private investment in adaptation.
3. Strengthen safety nets and insurance: Adaptive social protection systems and well-functioning insurance markets are essential to protect people and businesses from the financial fallout of increasingly extreme weather shocks, reducing the burden on public finances.
4. Build resilient infrastructure: Upgrading legacy infrastructure to withstand future climate impacts, mainstreaming adaptation standards in new investments, and promoting sustainable land and water management will reduce exposure and enhance resilience across sectors.
5. Establish robust macro-fiscal and financial sector policies: Governments must integrate climate risks into fiscal planning, strengthen public investment management, and create enabling environments for private sector participation in adaptation.

Addressing these priorities is not a radical departure from standard development practice – it extends what governments in the region already do. The adjustment required is to adopt a clearer view of how a changing climate alters the risk environment. Countries that make that shift stand to protect not only their populations, but also the jobs, investments, and fiscal positions on which their development depends. The World Bank Group’s work in Europe and Central Asia is increasingly helping countries make exactly that adjustment. The returns are proven and the approach is known; what’s needed now is sequenced execution.

Source : World Bank