The Afsluitdijk is a 32 kilometer causeway in the Netherlands that, since 1932, has been one of the country’s primary barriers against sea level rise. But after nearly a century of use it needed hundreds of millions of dollars in upgrades. So, about a decade ago, the government turned to a consortium of contractors to reinvigorate the bulwark. Instead of paying for the project up front, the agency leading it signed a 25-year contract that allowed it to make payments over time — a move that effectively amounted to private financing for a public project.

As climate risks intensify, cities around the world face a stark financial reality: Protecting themselves from rising seas and extreme weather will cost hundreds of billions of dollars — far more than many governments can afford.…