Climate Change

We cannot tackle climate change effectively without inclusive financial services

Poor and vulnerable people in developing countries, especially women, suffer disproportionate effects of climate change on their health and livelihoods. Although financial services are only part of the solution, they are vital for empowering vulnerable populations to build resilience to climate change and to benefit from a just green transition. Savings, insurance, credit, remittances, and social protection payments all have major roles to play in helping people prepare for and adapt to climate change.

CGAP has issued a call to action for stakeholders working to address climate change and those working to improve inclusive finance to work together and leverage inclusive finance to scale grassroots climate action.

CGAP research shows that most financial service providers don’t yet see climate adaptation as a top priority. Their efforts tend to focus on understanding their own climate risk, reducing their carbon footprint, or lending for renewable energy. These efforts are vital, but cannot substitute for bolstering the adaptation and resilience of climate-exposed clients. Similarly, few climate practitioners realize that inclusive financial services can be a powerful tool for increasing grass roots climate action.

Climate change is also increasingly threatening progress on financial inclusion, by making poor clients riskier and more expensive to serve. As the consequences of climate change grow rapidly, the financial inclusion community must learn to help both clients and providers better manage their climate risk to keep financial systems inclusive.

Considering compounding inequities and their major role in household resilience, women’s needs must take center stage. CGAP’s first dedicated publication on gender and climate, Bolstering Women’s Climate Resilience and Adaptation through Financial Services, provides illustrative examples of gendered impact when women face climate shocks and stresses that affect health, agricultural livelihoods, and women-owned businesses.

CGAP sees an increasingly urgent agenda for research and action at the crossroads of climate change and financial inclusion, and is working to find and test solutions that can help poor people manage and adapt to the changing world.