Solar energy panel in an African village / iStock

23 April 2020

Executive Director: Enabling policies key to climate resilience

“This on-going global COVID-19 emergency is a reminder of how important the role of regulators and policymakers is in ensuring that the most vulnerable populations have the tools needed to build resilience to shocks like this one, or to the effects of climate change,” said AFI Executive Director Dr. Alfred Hannig.

In his opening remarks at the Inclusive Green Finance Working Group (IGFWG) Technical Webinar on 22 April 2020, Dr. Hannig underscored the important role of financial regulators in providing leadership to develop sustainable policies. These include regulation to enable micro-loans for reducing the vulnerability of small agricultural producers to climate change, as well as solutions for insurance policy management in remote areas to unbanked farmers.

“Understanding and acquiring initiatives for improving productive practices, increasing income and protecting ecosystems is crucial, since agriculture contributes a significant portion of GDP in many countries globally,” Dr. Hannig said.

The third and fourth IGFWG webinars focused on the topic of building and strengthening climate resilience among those who are most susceptible to the impacts of climate change.

Drawing from his experience with the Ghana National Insurance Commission (NIC), Kofi Andoh, Deputy Commissioner of Insurance explained  that the formulation of a climate insurance scheme needs to take several elements into consideration.

“The insurance needs to be both affordable to consumers and sustainable to suppliers,” said Andoh, adding that it should also be comprehensive and include an insurance awareness strategy.

According to Access to Insurance Initiative (A2ii) Advisor Teresa Pelanda, insurance is only a piece of the puzzle and building resilience though financial inclusion needs to take into consideration a range of risk management initiatives that can be undertaken before and after the shock happens.

“Risk mitigation and disaster resilience is a collective action by all stakeholders,” said Pelanda.

Microfinance for Ecosystem-Based Adaptation (MEbA) Advisor Jacinto Buenfil agreed with this sentiment. Financial regulators play a key role in creating enabling policies which sets the wheels in motion for other stakeholders to succeed.

Among these stakeholders are development finance institutions, microfinance institutions, ecosystems that provide sustainable management, partners that offer technical assistance to clients and farmers who are the beneficiaries of sustainable adaptation and climate resilience measures.

“There are steps that regulators can take to make it easier for products to launch and for customers to access,” said the winner of AFI’s first FinTech showcase, OKO founder and CEO Simon Schwall, who recommended the regulatory sandbox approach to alleviate intimidating regulatory fears and support innovation.

Emphasizing the importance of enabling policies, OKO’s Schwall explained that in some cases, when farmers have insurance, they are able to gain access to loans, which in turn allows them to grow their production and businesses.

Highlighting the similarities between the COVID-19 pandemic and the climate crisis, Dr. Hannig underscored the importance of building resilience for future crisis and risks.

“This can be achieved by investing in a low-carbon economy and in the wellbeing and resilience of those that are the most vulnerable. Intensified efforts to advance financial inclusion, as well as green investments, are crucial pillars of this resilience building,” AFI’s Executive Director said.

Climate risk insurance and other risk sharing strategies are considered as Protection policies under AFI’s 4P framework, and form an integral part of the IGFWG work.

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.

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