• Physical climate risks are escalating and pose material threats to clients, value chains, and financial stability.

• Adaptation and resilience finance remains underdeveloped despite rising climate-related losses.

• Banks can play a critical role by embedding resilience into lending, product innovation, and client engagement.

• Adaptation differs from mitigation in that it is geographically specific and closely linked to business continuity.

As the financial impacts of physical climate risks become increasingly visible, adaptation and resilience are moving higher on the sustainable finance agenda. In the context of CeFPro’s Sustainable Finance Europe conference in London this February, Daiane Piva, Global Decarbonisation Lead at ING, shares her perspective on why mitigation alone is no longer sufficient.

As physical climate risks intensify, what strategies can the financial sector adopt to align its operations and investments with long-term climate resilience?

Physical climate risks such as floods, heatwaves, wildfires, and storms are undeniably intensifying and could significantly reduce global GDP by 2050, even if net-zero targets are achieved. These risks affect our clients and their assets in unpredictable ways due to their complex, non-linear, and systemic nature. This, in turn, impacts our own long-term resilience because the stability of our clients underpins ours. Yet financial flows toward adaptation and resilience have been reported as underdeveloped globally. At ING, we see this not only as a challenge but as a transformational opportunity.

For example, this opens new avenues for lending and product innovation in areas that build resilience such as home retrofit, and infrastructure reinforcement. What’s particularly interesting about resilience-building is that adapting to climate change is often closer to a business’s core compared to emission reduction. When a catastrophe strikes, the impact is immediate: balance sheets suffer, downtime reduces revenues, reconstruction consumes CAPEX that could have funded growth, and supply chains face disruptions. Even if a business itself is not directly affected, vulnerabilities in key suppliers located in high-risk areas can cascade across entire value chains.

How can adaptation and resilience be elevated to sit alongside mitigation within sustainable finance? 

The synergies between climate change mitigation and adaptation are an interesting subject and the connections are strong despite some fundamental differences. With our Terra approach, we aim to steer the most carbon-intensive parts of our portfolio towards reaching net zero by 2050. At the same time, we are exploring how to better integrate adaptation and resilience into our global strategy. Both mitigation and adaptation share long-term objectives, but managing physical risks can become an immediate necessity for people and businesses in high-risk areas. 

When it comes to our role as a bank, the underlying principle for adaptation mirrors that of mitigation: just as we finance the transition to a low-carbon economy by supporting clients in achieving meaningful emissions reductions, we can also play a role in helping clients build resilience to physical climate risks by providing the financing they need. Resilience is fundamental to business continuity. We expect that many large corporations already allocate CAPEX and OPEX to measures that enhance resilience, directly or indirectly. We can leverage existing engagement channels used for mitigation programs to start conversations while developing a tailored approach for adaptation.

For homeowners, mid-sized companies, and small businesses, our role may be even more critical in terms of capacity building and raising awareness. From a social perspective, smaller businesses often feel the impact of physical risks most acutely, even if their financial risk profile appears lower. Ultimately, adaptation and mitigation can complement and reinforce each other but attention to detail is key. While mitigation strategies focus on global sectors with the highest emissions, adaptation is inherently more geographic.

With climate losses rising, how should the financial sector respond to growing pressure on insurance markets? 

Banks can explore strategies to finance resilience. For example, existing lines of credit intended to foster higher energy efficiency in buildings can be expanded to integrate adaptation measures such as elevating electrical systems or retrofitting buildings with fire-resistant materials. Engaging in public-private partnerships is another way to leverage different resources towards more resilience. In the Netherlands, a relevant physical risk is subsidence caused by drought, where the foundations of residential buildings can be damaged by changes in the surrounding soil. For homeowners who cannot borrow the repair costs from their mortgage provider, the National Foundation Repair Fund helps homeowners overcome financial hurdles to repair their foundations. The fund is backed by the Dutch government, with banks like ING acting as guarantors. In the corporate lending space, our commercial teams have observed adaptation‑related financing channelled through export finance facilities, sovereign financing instruments, and corporate support, namely general-purpose lending to companies involved in adaptation projects. We also recognise that nature‑based solutions can play a significant role in mitigating physical climate risks.

Do we need new definitions, or standards, for adaptation finance and what would be the benefits of a more structured approach, or set of labelled instruments, for adaptation?

There are already several examples of taxonomies that incorporate adaptation & resilience considerations. More recently, the Principles for Responsible Banking (PRB) released Adaptation & Resilience Guidance in July 2025, which we have contributed to. There is not per se a shortage of taxonomies and guidance, but the real challenge lies in making sense of it, ensuring all stakeholders share a common understanding, and embedding adaptation deeply within organizations so it becomes part of a holistic sustainability approach alongside other initiatives. And we must do this without overwhelming teams with yet another “new topic”. Unlike mitigation, which has a clear global objective, i.e. net zero emissions, adaptation lacks a single quantified target. This makes integration more nuanced and requires careful alignment across frameworks, business strategies, and operational practices.