… to a green economy must put people at its centre. Maria Teresa Zappia*
If we are to achieve a just transition to a lower carbon, more resource-efficient, and more socially inclusive economy, governments and businesses need to take more action to realise their commitments. And not only build a green economy, but also put people and human rights at the centre. They must help ensure that the people who are most impacted by climate change are equipped to protect themselves. Investors must commit to climate adaptation strategies, or what the Glasgow Climate Pact defines as “helping those already impacted by climate change,” not just reducing emissions. They must also work to improve financial and insurance products designed for people at risk, and measure their impact through community feedback.
Strategies
Innovative climate adaptation strategies can manifest in many ways, including through the development of more resilient crops and new irrigation systems. One very effective strategy we have focused on is the creation of a new climate insurance market. Impact investing specialising in emerging markets provides access to tailored climate insurance for micro, small, and medium enterprises, as well as low-income households, that covers extreme weather events. Insurance is key to the livelihood and resilience of many smallholder farmers, as the crop or cattle they insure is their only source of household income. Climate adaptation strategies are now a pillar of most of many climate finance offerings.
Impact
Collectively, emerging markets are poised to become the most influential on Earth. In some ways, they already are. They encompass most of the world’s population, produce the bulk of global GDP, and are growing faster than developed economies. Ensuring the long-term resilience of vulnerable communities to a changing climate puts people at the centre of the transition to a green economy. And at this point, even as action on climate change still lags our global ambition, equipping the most susceptible to better cope with climate uncertainty is essential.
How
BlueOrchard has focused on the protection of low-income communities through climate insurance for eight years. During that time, we’ve supported the distribution of climate insurance via local financial institutions that have an end-client base of entrepreneurs. We’ve also invested along the value chain of insurance companies and brokers, as well as insuretech companies, which create new technologies for the insurance sector, including weather data forecasting tools that better assess climate-related risks.
One example is Skymet Weather Services Private Ltd, which provides weather and crop-yield related information services to the insurance sector in India via more than 4,000 automatic weather stations across the country. Our investment helped the company expand its network of stations, and secure new contracts in both weather data and crop yield measurement. It now reaches more than 20,000,000 farmers, allowing them to better manage the impact of climate and weather events on harvests through smartphone-available, index-based, livestock and crop insurance.
Another example is Royal Exchange General Insurance Company Ltd, an insurance company in Nigeria with more than 100 years of experience in the national insurance market and a significant portfolio in the agricultural sector. The company offers a full range of general and specialist risk-insurance products, and our investment will extend their reach to low-income farmers particularly vulnerable to climate change.
We have also partnered with Kashf Foundation, a non-banking, microfinance organisation in South Asia that has become the largest distributor of micro-insurance solutions in Pakistan. It also provides micro insurance policies to more than three million customers, primarily for health and life. Kashf used our financing to launch its first rural product in 2017, a livestock loan called Kashf Mahweshi Karza. The product includes insurance for dairy cattle in Pakistan to cover the cost of repayments should the cow fall sick or die. The pay-outs enable farmers who lose animals to purchase new ones, and prevents them from default and accruing a poor credit rating. This type of safety net is especially important in the face of climate change, as increases in impacts such as drought, flooding, and disease affect livestock mortality rates.
*Deputy CEO at BlueOrchard and Head of Sustainability and Impact at Schroders Capital