Financial inclusion key to green resilience building
While impacts of climate change deepen poverty, impacting disproportionately vulnerable groups such as women, financial inclusion can build the resilience of individuals to sudden and extreme climate events. Financial regulators across the AFI network are integrating climate change considerations in their larger financial sector plans by laying down roadmaps for sustainable development, speakers said at the RBF-AFI Joint Learning Program (JLP) on Inclusive Green Finance (IGF) implementation held from 19 to 21 October 2020.
“As central bankers and policy makers, the onus is on us to ensure that we lead this positive change within the financial industry that we regulate and oversee,” shared Governor Ariff Ali from the Reserve Bank of Fiji (RBF) in his opening remarks.
Similar to the current pandemic, the effects of climate change are far-reaching, Governor Ali explained, adding that the resulting impact on the most vulnerable and poorest segments of society becomes more significant as they face more-than-double the usual risks of poverty when scarce resources become over-stretched.
The governor highlighted that financial services designed specifically for the unbanked and vulnerable populations can increase the affordability of climate-friendly products and services, as well as improve access to adaptation tools.
“For central banks and supervisors, and especially for regulators in small island nations like Fiji, understanding the issue of climate change involves the recognition of structural changes that will affect the financial system and the economy in general,” he said
The challenge lies in the central banks’ fundamental mandate of ensuring financial and price stability, while enhancing financial inclusion and necessitating the implementation of policies, regulations, and national strategies to mitigate or build climate change resilience, Governor Ali added.
Women face disproportionate impact during climate disasters due to underlying gender inequalities and socio-cultural barriers, AFI Executive Director Dr. Alfred Hannig said and highlighted the need for gender sensitive inclusive green finance policies and interventions.
“Women’s livelihoods are dependent on sectors that are threatened by climate change, such as small holder agriculture and microbusinesses,” said Dr. Hannig, adding that AFI is developing a report on the intersection between IGF and gender inclusive finance which builds upon AFI’s 4Ps framework on IGF and the Denarau Action Plan.
Regulators incorporating sustainable development principles and integrating climate change considerations into larger financial sector plans are including sustainable banking principles, and financial sector specific environmental and social risk management (ESRM) frameworks, as well as environment, social and governance (ESG) standards.
According to Dr. Hannig member institutions, such as RBF, which are fore runners in the development and implementation of IGF polices, have paved the way in showing the complexity and magnitude of the problems caused by climate change from the perspective of emerging economies.
“It is important for us to have member institutions emerge as champions of and \advocates for IGF as a priority area,” said Dr. Hannig congratulating RBF for being one of AFI’s IGF pioneers. Emphasizing the JLP’s peer learning feature, Dr. Hannig said that it is an opportunity for participants to leap forward and to learn from experiences from Fiji and other countries.
Fiji was the first country in the world to ratify the Paris Agreement and has since committed to transitioning to a net zero emission economy by 2050. To achieve this ambition, Fiji became the first emerging market economy to issue sovereign Green Bonds and provide concessional funding for sustainable and renewable energy projects, with renewable energy loan ratios for commercial banks.
“Fiji has made considerable progress in ensuring that its climate response is well aligned with national and international commitments. This includes establishing a legal framework for planning, implementing, and monitoring Fiji’s national climate change response and its commitments under the United Nations Framework Convention on Climate Change (UNFCCC),” RBF’s Deputy Governor Esala Masitabua told participants.
Deputy Governor Masitabua also added that Fiji’s Draft Climate Change Bill aims to prompt innovation and foster greater collaboration between stakeholders including private sector, civil society, academia, government agencies.
“As central bankers and policymakers, we have an obligation to integrate climate change into our business and policy frameworks,” said the deputy governor, highlighting the importance of multi-stakeholder collaboration and securing private sector support towards bridging the financing gap.
Featuring discussions, case studies and presentations from the Reserve Bank of Fiji, the National Bank of Cambodia, the Bank of Ghana, Bangladesh Bank, the Fiji Ministry of Economy, Vodafone Fiji and Meyer Consulting, the three-day JLP adopted a back-to-basic approach to introduce inclusive green finance, and IGF considerations in designing IGF policies and initiatives.
The JLP also delved into AFI’s 4Ps framework for IGF, which comprises of provision, promotion, protection and prevention policies. The 4Ps framework offers financial regulators an intuitive way to think about the full range of policies that they can adopt in designing and implementing IGF in their respective jurisdictions.
Included in the JLP was the AFI’s first ‘virtual study tour’ developed by RBF and AFI, in collaboration with the Fiji Development Bank (FDB). The series of three videos featured the Ovalau Agrophotovoltaic Project, enabling policies by the central bank, and its intended impacts onto the local community. The project, which aims at reducing the island’s diesel consumption for power generation by half, will also reduce the island’s greenhouse gas emissions, increase food production, and create jobs among the local communities.
A total of 67 participants from 27 AFI member institutions tuned in to the three-day JLP, designed specifically for AFI member institutions who are currently considering or already working on IGF related policies or initiatives.
AFI's Inclusive Green Finance (IGF) workstream is part of the International Climate Initiative (IKI) supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), based on a decision of the German Bundestag.