Tailoring Inclusive Solutions to Climate Finance: The Role of Individual and Collective Inclusion

Nov 17, 2022 | Manuel Bueno and Stephanie Landers Silva
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Climate finance can and should be more inclusive of marginalized and underserved groups, including women, youth, Indigenous Peoples, low-income people, and people in remote areas. For example, Indigenous Peoples receive less than 1% of direct climate mitigation finance. To that end, we believe it is essential for private investors to distinguish between two types of inclusion when designing climate investments: Individual inclusion, which engages individual members of a marginalized group, and collective inclusion, which engages a marginalized group as a whole.

Why the distinction? A climate investment may yield higher financial returns or enjoy lower downside risks by strategically incentivizing individual or collective inclusion. The choice depends on who will implement or enable the climate investment, as well as who will capture the financial returns that the investment generates.

For instance, to improve resilience against extreme weather events in an area owned collectively by an Indigenous community, an inclusive climate investment (e.g., nature-based solutions) should engage the community as a group. On the other hand, to improve climate resilience on farms owned by individuals belonging to a marginalized community, an inclusive climate investment (e.g., water management equipment) should engage individual members of that community. As explained below, donors, including USAID, may play pivotal advisory roles to help climate financiers determine which type of inclusion to pursue. Additionally, donors can provide grants to support relevant climate finance mechanisms for inclusion, potentially offsetting any additional costs to support inclusion.