"We want to enable vulnerable populations to become more resilient to climate change but also to participate in the ecological transition"

This interview is part of the ‘ADA takes up the challenge’ series, which shows how ADA integrates three key topics into its programmes: gender equality, climate change and biodiversity, and the use of digital technologies.

Part 2: Interview with Mathilde Bauwin, Head of Knowledge Management and Climate Change and Biodiversity Lead 

ADA believes it can no longer be active in inclusive finance without addressing climate change and biodiversity issues. How does ADA integrate these issues into its activities?  

ADA has decided to consider these issues because they directly affect the communities we support. For example, small-scale farmers, who make up most of our beneficiaries, are suffering from increasingly severe droughts damaging their productivity. Therefore, it is necessary to introduce production practices which are more resistant to climate shocks. Our beneficiaries in Southeast Asia and Central America live in areas prone to extreme climatic events directly affecting their living conditions. In these regions, for example, we are running projects to make housing more resilient to extreme events. 

Integrating the issue of climate change into our projects has also become a criterion for ensuring their effectiveness and this has changed the way we work. For example, if we set up projects to support farmers by developing services with financial institutions to finance their crops, we must think about the viability of these crops in the medium and long term, as the income of both the farmers and the financial institution depends on this viability. 

In addition to climate change, we are trying to address the issue of biodiversity because the two are interdependent. However, the consequences of biodiversity loss are more difficult for our partners and beneficiaries to grasp because they are less visible in the short term. 

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In concrete terms, for each new project, we must consider the country's level of vulnerability to climate change and the risks faced by local populations. We then need to consider the consequences of climate change or biodiversity loss on the project's activities and results, and the possible negative effects that the project could have on the environment, climate, and biodiversity. On this basis, if risks are identified in either direction, we must take steps to address and avoid them. 

We are currently seeing two main trends regarding the integration of climate change and biodiversity into our projects. 

Firstly, vulnerable people's adaptation to climate change is becoming the main objective of a growing number of our projects, particularly in agriculture. This seems normal as these populations are the first to be affected by the consequences of climate change.
 
However, to be consistent with the principles of sustainable development to which we wish to contribute, ADA is also carrying out an increasing number of projects that seek to promote low-carbon economic development. For example, the “Green Energy for Rural Development” programme seeks to secure access to solar energy for rural populations. Another of our programmes, “Young people and green jobs”, aims to enable young people to seize the job opportunities generated by the ecological transition. In agriculture, the various objectives are similar, with projects that aim to set up farming systems that are resilient to climate change while being powered by renewable energy. 

While adapting to climate change remains the primary objective for the target populations, we must not forget that environmental issues are complex and interdependent. Therefore, it is vital to maintain a holistic vision and consider the problems of greenhouse gas emissions and biodiversity loss.

Furthermore, we believe that climate change should not be seen solely as a risk but also as an opportunity to develop new economic activities in which vulnerable populations can also participate. It is therefore in the interests of financial institutions to develop a range of financial services for players who will contribute to the ecological transition, and we encourage our partners to follow this path. 

How do ADA partners and beneficiaries in developing countries perceive the integration of these approaches? What are the challenges? 

The challenges are great because even though most beneficiaries, particularly agricultural producers, are aware of the consequences of climate change on their activity, they are not always convinced that changing their practices could make them more resilient. It is often difficult to change well-established practices, especially if the expected results can only be achieved in the medium or long term. There is often a lack of proof to convince people to commit to this type of transition, which risks reducing their yield. 

As far as our partner financial institutions are concerned, the first to put in place real climate risk management practices are those that are already concretely affected by climate change. For others, it will take longer, as some are not yet fully aware of the risks, they or their customers face. 

The latest Financial Inclusion Compass from the European Microfinance Platform is very enlightening in this respect: while donors consider climate change as a priority, financial institutions give it the lowest importance score out of 10 topics. So, there is still a need for awareness-raising at several levels. 

How can taking climate change and biodiversity into account help to improve the living conditions of ADA beneficiaries - vulnerable households, smallholder farmers and young entrepreneurs in developing countries? 

For agricultural and forestry producers, integrating these issues into our programmes should make it possible in the long term to sustain their economic activity and continue to generate income even if the climate changes. As far as vulnerable households are concerned, developing financial and non-financial solutions to enable them to have secure access to water in a context where water is becoming increasingly scarce or to make their homes more resilient to climate shocks should help to improve their living conditions. 

Finally, in the case of young entrepreneurs, the aim is to enable them to seize the economic opportunities generated by the green transition. For example, in the agricultural sector, the transition to sustainability requires specific seeds and equipment to better manage irrigation or to use a renewable energy source. The production and/or distribution of these inputs and equipment is an economic activity, which can be carried out by young entrepreneurs. Similarly, in our energy-related projects, we not only promote the use of renewable energy at the household level but also encourage the development of small intermediary businesses that distribute renewable energy equipment. 

Our partners, for their part, can support them by developing financial services to finance these activities. With this type of approach, in which ADA intervenes at several levels, we are not only trying to strengthen resilience and improve the living conditions of the most vulnerable populations, but we are also supporting the development of a local ecosystem of partners who can contribute to this. This is one way of ensuring the sustainability of our initiatives.