The Adaptation Fund has become a fully operational institution for international adaptation finance. We explore different aspects of political economy, addressing the international institutional competition which influenced the decision on operating modalities in the 2007 UN climate negotiations in Bali and which continues to be important for the future of the Fund in international climate finance. From the Adaptation Fund Board (AFB), the governing body of the Fund, this article examines the implications of interests represented by AFB members for key issues such as the prioritisation of countries and decisions on specific projects and programmes. Finally, power relationships around the concrete implementation of projects in developing countries are analysed. While the early stage of the Fund only allows for preliminary conclusions, the article points to some measures the AFB can undertake to address the challenges identified.