Recent geopolitical shocks have forced a fundamental reassessment of risk. War, supply chain disruptions, and rising fragmentation have shown that resilience can no longer be assumed but it must be built. While attention has focused on geopolitical risk, climate risk, equally consequential, is now converging with it.
Saudi Arabia sits at the center of this shift. One of the countries most exposed to extreme heat and water stress is also well positioned to lead on adaptation finance.
The Kingdom understands energy security. It holds abundant resources but given the global energy transition and growing demand there is a need to rethink resilience.
Energy is only part of the story. Heat is an underestimated vulnerability. Saudi Arabia is in one of the hottest regions globally. By mid-century, annual mean temperatures are projected to rise by more than 2°C. The Kingdom could face nearly 20 heat waves per year by the 2050s, each lasting around 10 days. Extreme heat could dominate more than half the year.
Saudi Arabia is not just getting hotter but warming faster. According to the Kingdom’s Climate Futures Report, a 3°C increase could translate into 4°C domestically. This exposes the Kingdom to disproportionately severe climate impacts and reinforces the urgency of strengthening heat adaptation.
This is not a distant environmental concern but a structural economic challenge. Rising heat has implications for labor, health, water demand and urban livability. In sectors reliant on outdoor labor, the effects are particularly acute. The International Labor Organization estimates that by 2030, heat stress could reduce total working hours in Saudi Arabia by around 0.5% or a loss of 69,300 jobs.
Construction will be hit the hardest. For Saudi Arabia, currently undertaking some of the world’s most ambitious construction and urban development programs, this has significant implications. The Kingdom already enforces a midday outdoor work ban during peak summer months. Rising temperatures could affect timelines and costs associated with major global events such as Expo 2030 and the World Cup.
Heat also drives a broader set of economic pressures. It increases electricity demand for cooling, raises operating costs across cities and industries, and affects the long-term viability of urban environments. For a country pursuing large-scale redevelopment and giga-projects under Vision 2030, these dynamics will shape whether those investments remain economically viable over time.
Water adds another layer of vulnerability. Saudi Arabia faces structural constraints, with limited renewable water resources and high dependence on desalination and groundwater. Total water use has doubled from roughly 10 billion cubic meters in 1980 to around 23 billion today. Yet, annual groundwater recharge remains below 1 billion cubic meters. Although desalination capacity has expanded significantly, it is insufficient to meet current demands. Rising temperatures will only increase pressure on already scarce resources.
Despite these realities, global climate finance remains focused on mitigation, reducing emissions, while adaptation remains underfunded. That imbalance is not sustainable. Investments in heat-resilient infrastructure, water systems, and climate-smart urban design account for less than 10% of total climate investment. According to the Climate Policy Initiative, global adaptation finance has risen modestly to around $65 billion in 2023 but is far short of the $200 billion estimated to be needed annually by 2030 for developing countries alone.
For Saudi Arabia, closing that gap is not optional but an economic imperative.
There are precedents. In the Netherlands, they have instituted a national, multi-decade strategy to provide adequate financing and urban planning for rising waters. In Singapore, integrated urban design has reduced heat stress and improved livability despite rising temperatures. These examples demonstrate that adaptation can be strategic.
The Kingdom has started building elements of this strategy. Its Nationally Determined Contribution includes measures such as early warning systems, integrated water management, and climate-resilient infrastructure. Initiatives such as Saudi Green Initiative targets planting 10 billion trees across the Kingdom to help reduce urban temperatures.
These are a start, but efforts remain fragmented. It is critical to design a coherent adaptation finance agenda that treats resilience as a distinct investment category and aligns capital accordingly.
Framed this way, adaptation is not only about managing risk. It is also about directing investment toward sectors that will define the next phase of growth: cooling technologies, water innovation, climate-resilient infrastructure, and urban design suited to extreme heat. Adaptation becomes not just defensive, but generative.
Saudi Arabia has a distinct advantage. With capital, scale, and an active diversification agenda, it is well positioned not only to build resilience domestically, but to develop and export solutions to other hot, arid economies facing similar challenges. Adaptation finance could become both an economic strategy and a form of national positioning.
This initiative will require more than capital. It depends on regulatory clarity, policy coordination, and long-term planning that integrates adaptation into economic strategy from the outset.
The broader lesson from recent global shocks is clear: waiting is costly, while resilience pays dividends when built in advance. The countries best positioned for the coming decades will be those that anticipate risk and invest accordingly.
Saudi Arabia has the resources, ambition, and strategic positioning to lead in this space. The question is whether adaptation finance becomes a priority now - before climate risk hardens into a structural economic constraint.
Related reading: Curious how circularity can become a driver of the adaptation economy? Read Resilience by Design: Circularity and the Adaptation Economy
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