Blog by Martin Hiller: Climate Finance and the Importance of Equitable Development

At KPC's Austrian Climate Change Workshop, held last week in Vienna, I spoke on a panel about ‘Fostering Low-Carbon Development and Climate Resilience’. The Green Climate Fund and the European Investment Bank, among others, were represented on that panel, and given the nature of these two players, the presentations and most of the discussion revolved around large amounts of money.

Money always begets more money. Speak about a thousand dollars and you will start to think about ten times that. Imagine having a hundred thousand in the bank and try to avoid the thought of ten times that! There seems to be an automatism, which drives thoughts and actions – and our discussion – towards ever-larger amounts of money.

This is in itself not necessarily bad – we need large amounts of investment in climate action, there is no doubt about that. But the automatism prevents the discussion from focusing on the second topic that is incredibly important in the climate debate: equitable development.

Why should that be important? Poor people don't emit much CO2, after all…?

Let´s think again. The changes in the world´s weather patterns are already affecting us; they drive change that becomes most difficult to handle for those who can afford the least. An estimated half a billion small holder farmers around the world belong to that group. They need to adapt to longer droughts, torrential rain when it comes, and new pests spreading.  How are they going to do this when they have no access to tools and products, no access to finance, and neither the knowhow nor the markets?

We need to bring these farmers into an economic system that can support them, make them more affluent, and help them produce more. They need small amounts of money, microfinance, a few hundred or thousand dollars. We can no longer hide behind excuses such as ‘the transaction costs are too high’ - we have to find means to scale up microfinance in order to create modern infrastructure for smallholder farmers.

REEEP is taking this forward in its work in Eastern and Southern Africa, as well as with Nexus in Cambodia, where we have a revolving fund that currently can grant loans as small as 8,000 USD. It is important for the large development finance institutions to start focusing on this side of the climate equation with great effort.