29 April 2024

Why action on climate finance must center on inclusion

By Jwala Rambarran, Distinguished Fellow of the Sustainable Finance Program at ClimateWorks Foundation and former governor of the Central Bank of Trinidad and Tobago (CBTT)

As a former central bank governor from the Global South, I know central banks have the potential to protect economies and communities from climate change risks. That’s why I wholeheartedly support AFI’s work to link climate finance with inclusion.

It is critical that actors focussed on climate finance seek to protect low-income communities, households and small businesses at the bottom of the economic pyramid against climate shocks. And to do it successfully, we are going to need the support of the AFI network – the Global South’s central banks and regulators.

Rising sea levels, severe flooding, droughts, tropical storms and hurricanes, lack of clean drinking water, and famine are already drastically affecting countries like Chad, Dominica, Haiti, Somalia, Nigeria, Ethiopia, Syria, and Bangladesh. These countries are at the frontlines of the climate crisis, yet they had very little to do with creating it in the first place. These frontline nations are trying to find ways to protect their communities and economies from climate impacts, while also adapting to a wave of new global sustainable finance standards and regulations.

The AFI network gives the Global South a voice – ensuring that the world considers their perspectives on global climate adaptation and regulation. But it also provides tools like Inclusive Green Finance to help guide central banks and regulators through climate adaptation and mitigation.

As a former financial regulator, I know that without the help of central banks and regulators, our efforts to support vulnerable communities against climate change are in vain. Central banks sit at the center of their countries’ financial ecosystems and can play a significant role in their economies’ transition to low-carbon development pathways. As the fiscal advisors to governments, regulators of banks and other financial institutions, and the guardians of payment systems across the developing world, central banks have the power to:

adapt supervision and regulation to accommodate a broader selection of green products and services;
implement innovative Fintech and digital payment services to support the most vulnerable through climate shocks; and
provide governments with the needed expertise and advocacy to move towards low-carbon economies.

We are all affected by climate change. But some are more affected and less prepared for it than others. Inclusivity is key to combatting climate change and partnerships and initiatives on climate finance should be developed to that end.