Research & Analysis

8 Billion Reasons: Inclusive Finance as a Catalyst for Climate Action


  • This paper is a call to action for climate practitioners and financial services stakeholders from across public, private, and philanthropic sectors to work together to unlock the full potential of financial inclusion for scaling grassroots climate action.
  • If they do this, inclusive financial services can:
    • Directly empower people living in low- and middle-income countries to adapt and grow resilient to climate change, as well as to participate in a just green transition.
    • Enable greater collective impact on the climate crisis by broadening the base of people able to take action.
    • Open new channels for climate finance to reach and support those who need it most.
    • Complement public sector-led climate efforts (e.g., facilitating climate-related social protection or subsidy programs, supporting a green transition in rural communities, etc.).
  • Climate change also poses risks to inclusive finance that are starting to undermine global progress on financial inclusion. Concerted action is urgently needed to help financial services providers keep serving climate exposed populations.
  • CGAP outlines five priority areas for collaborative action between climate stakeholders and the financial services sector.


"Inclusive finance has a unique and critical role to play in ensuring that climate finance makes its way into the hands of the most vulnerable and empowers them to act… Given the increasing scale and frequency of climate shocks, now is the time for united action to make inclusive finance a corner-stone of climate response, creating a more sustainable future for those most affected by climate change."

H.M. Queen Máxima of the Netherlands, United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, and Ajay Banga, President, World Bank Group


We cannot tackle poverty effectively without tackling climate change. As the climate crisis accelerates, the lives and livelihoods of billions of people are increasingly at risk. 3.3 billion people live in regions classified by the Intergovernmental Panel on Climate Change (IPCC) as “highly vulnerable” to climate change. In short, making progress on poverty and global development goals is now deeply intertwined with action on climate change: there can no longer be a separation between these agendas.  

Most of the global conversation on climate change centers around commitments, investments, and actions by national governments, multinational corporations, and industrial sectors. This is vitally important for tackling climate change and poverty—but also proving to be woefully insufficient. The hundreds of millions of people living in poverty rarely have the opportunity to benefit directly from national and regional efforts. This can exacerbate inequalities and leave low-income communities disempowered from taking action for themselves.  

Inclusive financial services are a crucial tool for bridging this gap and putting tools, resources, and opportunities into the hands of those who are most affected by climate change and who need them the most. It does this in four key ways: i) Directly empowering people to take grassroot climate action, ii) enabling greater collective impact, iii) channeling climate finance where it is most need, and iv) complementing public sector-led climate efforts.  

However, many opportunities have yet to be realized. Few financial services providers (FSPs) currently offer products tailored to climate resilience and adaptation for low-income customers. Beyond agricultural index insurance, there are relatively few examples of financial solutions that have been developed specifically to meet clients’ needs for climate adaptation and resilience. Most FSPs are currently uncertain about what the needs look like and therefore how to meet them through more tailored financial solutions.  

The private sector needs to increase its role in promoting inclusive finance for climate adaptation, resilience, and a green transition. The emergence of innovative financial services business models, coupled with the increasing cost competitiveness of green technologies, serves as an example of how the private sector can drive both climate impact and returns. 

Worryingly, climate change also poses risks to inclusive finance. Climate change is starting to undermine global progress on financial inclusion. As climate change steadily increases the risk of serving low-income people, FSPs face increasing pressure to pull back from climate-exposed areas and value chains – pressure which will only mount with time. Severe climate impacts can also have major implications for lenders’ balance sheets overnight, as demonstrated by recent disasters such as the devastating floods in Pakistan in 2022.

Private, public, and philanthropic sectors must all step up to the challenge. Overcoming barriers to private sector investment will be instrumental in developing and scaling inclusive finance that enables climate action. This will require resolve, focus, and resources from FSPs and investors. It will also require well-developed, inclusive, and thoughtfully regulated financial systems where FSPs have the capacity, incentives, data, funding, and risk tolerance to offer an array of suitable services to a broad customer base.  

Together we must embark on a new course that leverages inclusive finance to increase climate action. CGAP’s initial findings have identified the need for collaborative action in at least five distinct areas:  

  1. Understanding Customer Needs: Better understanding what customers, notably women, really need to bolster their climate resilience, adaptation, and participation in the just transition. 
  2. Scaling Up Markets: Developing financial products and services that respond well to these needs while also being commercially viable; building markets that can deliver them at scale; and generating the data and information investors need in order to identify and support inclusive green financial solutions, including the provision of more impact and patient capital.  
  3. Managing FSPs’ Climate Risk: Helping all financial services providers –including banks, MFIs, fintechs, and other emerging providers– manage their own climate risk to avoid having to withdraw from climate exposed sectors as shocks and stresses grow. 
  4. Creating Effective Enabling Environments: Creating enabling environments that unlock private investment for climate adaptation, resilience, and the just transition; at the same time, ensuring that policy and regulatory efforts do not create unintended exclusionary effects that undermine both financial inclusion and financial stability.  
  5. Establishing Adaptive Social Protection Systems: Evolving and expanding social protection systems, which offer an existing conduit for providing climate finance to the most vulnerable populations but are not yet fit for that purpose.  

Related Resources

Blog Series

This three-blog series shares findings from research by CGAP along with Decodis and MSC on how people living in poverty in Nigeria and Bangladesh are preparing for, coping with, and adapting to climate shocks, and what role financial services are playing in supporting them. The


New CGAP research suggests that voluntary carbon markets (VCMs) hold the potential to finance a green transition across low and middle-income countries.

This collaborative report by LeapFrog Investments, Temasek and CGAP shares new research that highlights the commercial impetus to accelerate a wave of green investment into emerging markets.

Rural women are critical to ensuring global food security but disproportionately vulnerable to climate change. In this working paper, CGAP and Mercy Corps AgriFin provide an overview of 10 opportunities for service providers, investors, and donors to improve rural women’s climate resilience and share examples of innovative business solutions.

In this Focus Note, CGAP calls for financial inclusion to be a cornerstone of action on climate adaptation, and proposes a new agenda for collaboration between financial inclusion and climate adaptation practitioners.

Typhoon Rai made landfall in the Philippines in December 2021, killing over 400 people and causing over US$1 billion in damage. With such extreme weather events becoming more common due to climate change, financial services can make households more resilient and adaptive. What is the role of insurance and other financial services in climate change mitigation and adaptation?