South Asia is the most climate-vulnerable region among emerging market and developing economies. With governments having limited room to act due to fiscal constraints, the burden of climate adaptation will fall primarily on households and firms. Awareness of climate risks is high; more than three-quarters of households and firms expect a weather shock in the next 10 years. Climate adaptation is widespread, with 63 percent of firms and 80 percent of households having taken action. However, most rely on basic, low-cost solutions rather than leveraging advanced technologies and public infrastructure. Market imperfections and income constraints limit access to information, finance, and technologies needed for more effective adaptation. If these obstacles were removed, private sector adaptation could offset about one-third of the potential damage from rising global temperatures on South Asian economies. The policy priority for governments is therefore to facilitate private sector adaptation through a comprehensive policy package. The package includes climate-specific measures such as improving weather information access, promoting resilient technologies and weather insurance, and investing in protective infrastructure in a targeted manner. Equally important are broader developmental initiatives with resilience co-benefits: in other words, policies that generate double dividends. These include strengthening core public goods like transportation, water systems, and healthcare; addressing barriers to accessing markets, inputs, and finance without causing unintended responses that increase vulnerabilities; and supporting vulnerable groups through shock-responsive social protection.

Climate change is accelerating, and harmful weather events—such as extreme storms, droughts, heat waves, or wildfires—are becoming more frequent and severe. Lower-income countries suffer more deaths and lasting losses from disasters than richer countries. Climate shocks push vulnerable households into poverty and cause small businesses to fail, reversing development gains.

“Rethinking Resilience” urges developing countries to adopt policies that empower individuals, households, farms, and firms to take proactive measures. Current approaches rely too heavily on government programs and investments, such as subsidies and cash transfers, which are reactive rather than preventive. Developing economies lack the resources of high-income countries, making them more vulnerable.