By Akata Taito, Senior Analyst at Reserve Bank of Fiji and AFI FIDWG First Co-Chair and Laura Ramos, Policy Manager AFI IGFWG
The increasing frequency and severity of extreme weather events are making a significant impact on livelihoods, natural resources and ultimately on the financial system, with the world’s most vulnerable populations affected the most. There is an urgent need for global solidarity between developed and developing economies, along with increasing international calls to take immediate collective action against climate impacts.
With inclusive green finance (IGF) policies evolving, regulators are calling for more green finance-related data to avoid financial institutions being sluggish in their response. Green data is a very broad term that can be addressed from different angles and classified either from supply-side or demand-side as a source of information.
In 2020, the Reserve Bank of Fiji (RBF) included climate-related components in its financial services Demand-Side Survey (DSS) to provide better understanding on Fiji’s level of resilience to climate change events, especially by women. As one of the first countries in the AFI network to place green finance as one of its core objectives in a DSS, the survey was designed around understanding past experiences, effectiveness of coping strategies, awareness, future preferences, and willingness to spend on IGF products and services.
The RBF also recognized that for IGF policies to be effective, it needed to target the right segment. Key to the overall process included a stakeholder approach to the overall survey design, and an active focus on awareness and training, particularly for those administering the survey to obtain for quality data. This was especially important as IGF was still a new concept to stakeholders in the financial sector.
Leveraging on RBF’s experience, Guideline Note on Demand-Side Approach to Inclusive Green Finance Data Collection was recently launched by AFI’s Financial Inclusion Data Working Group (FIDWG) in collaboration with the Inclusive Green Finance Working Group (IGFWG). This publication provides a guide for financial regulators looking to collect IGF related data from the demand side, as well as meaningful data and insights from the users and potential users or beneficiaries of these policies or interventions. The policy interventions are evidence-based, but allow financial service providers (FSPs) to customize their green products and services to meet individual needs, context and even perceptions.
Understanding that IGF can intersect with other financial inclusion dimensions and segments for broader and better targeted policies, this Guideline Note recommends a financial inclusion DSS that includes both green and inclusive components. Key steps for DSS implementation have been outlined and sample questions provided. However, it is important to note that these elements are suggestive and will need to be contextualized by each country for relevance.
Better decision making is galvanized with available information, while being aware of challenges can allow for potential solutions. This is the first step to scaling up actions on climate-related risks and as part of their further endeavours, both working groups are committed to continue collaborating and addressing this data gap from the supply side.
We hope that this knowledge product serves as an important tool for AFI members and their effective IGF policy interventions. By extension, this Guideline Note also offers an insight into understanding the gender gap in this policy area, assisting in implementation of gender-sensitive IGF policies, and providing reliable information to facilitate the climate-related risk assessment.
Building on this Guideline Note we encourage all the interested policymakers and regulators to also benefit from different array of related publications that the AFI network has recently developed on inclusive green finance including framework on Promoting Inclusive Green Finance Initiative and Policies, the reflection paper on Inclusive Green Finance from concept to practice and related case studies such as the one recently published on Climate Risk Insurance for the Agriculture sector in Armenia.
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.