Digital Finance for Climate Resilience

Catalyzing an Ecosystem
Co-authored by: Jacob Winiecki and Bethany Kanten
June 21, 2021 - 8 mins read
BFA Global digital finance for climate resilience UN Race 2 Resilience

The UN-backed Race to Resilience campaign has committed to strengthening the climate resilience of 4 billion climate vulnerable people globally by 2030.  Alongside the environmental risks that will inevitably come with climate change, there are additional risks that stem from the social, economic, and policy response to climate change – as well as calls for a “climate transition” (the transition to a greener economy). These will be compounded for those most vulnerable, who will need access to solutions that can help them build resilience in the face of such risks. However, this transition will simultaneously open up potential opportunities for these populations in the form of new income streams, products and services, and business models. 

Solutions exist that can help vulnerable people to build resilience against the impact of climate change and take advantage of associated opportunities. But these solutions are not reaching those who need them most due to challenges with high upfront costs, distribution, risk perception by both users and providers, and limited data on end users. We believe digital finance and fintech can act as a critical enabler for climate resilience solutions, to help them overcome barriers to uptake related to affordability, access, and appropriateness for vulnerable populations. We’ve already seen the ways in which digital finance has enhanced the scale, depth, and reach of many other technologies targeting these populations, through similar industries like inclusive fintech and PayGo solar, and we believe they could play a similar role in the climate resilience space.

 

Catalyzing the innovation ecosystem

Few solutions exist today that combine innovation in digital finance and climate resilience. We believe a core reason for this is that the innovation ecosystem needed to enable the growth and development of these solutions remains fragmented and underdeveloped. 

Innovation ecosystems include the people, processes, and systems necessary to deliver on the creation and scaling of new business models, products, and ideas. There are five key actors in an innovation ecosystem who are critical to its successful creation and development:

  1. Entrepreneurs and innovators
  2. Investors, funders, supporters
  3. Private sector incumbents and intrapreneurs
  4. Knowledge centers and universities
  5. Governments and policy makers

 

The current digital finance for climate resilience ecosystem, across five key actors

 


Entrepreneurs


In an initial search for pre-seed stage (Nigeria, South Africa, Kenya, India, and Mexico) we found:

 


Investors, funders, supporters


 


Private sector incumbents and intrapreneurs


 


Knowledge centers and universities


 


Governments and policy makers


 


 

The opportunity in this space is significant, and its urgency is only growing as the impact of climate change on vulnerable populations becomes increasingly evident. We’ve already seen this growth trajectory play out in other impact sectors – including inclusive fintech, PAYGo solar, mobile money, and microfinance. Armed with these lessons and proof points, and given the right enablers and substantial commitments from key players, this ecosystem has the power to develop quickly and catalyze real and impactful innovation. 

The common enablers and critical interventions we found when evaluating other ecosystems and the early stages of their development include:

BFA Global is leading the process to develop a Framework for Action, designed in collaboration with key stakeholders, that will be critical to the development of this ecosystem. We are setting out to:

The framework will be launched at COP26, in collaboration with the UN-backed Race to Resilience campaign, along with commitments to act in accordance with the roadmap by organizations across the five key actors described above.  

In the coming months, we will continue to unveil elements of our work via blog posts and events.  We are looking for contributors, supporters, and collaborators — such as investors and funders interested in digital finance for climate resilience as a thesis, digital finance innovators curious about how they could impact climate resilience, or think-tanks interested in co-exploration — to join our process and co-lead the creation of a sector that we believe can substantially move the needle on access to climate resilience solutions for the world’s most vulnerable populations.

Join our session during London Climate Week to meet some of our collaborators and hear more about our work.

For more information about this work or to get involved please contact us:

Jacob Winiecki   |  jwiniecki@bfaglobal.com 

Bethany Kanten  |  bkanten@bfaglobal.com


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