We cannot tackle global warming without addressing poverty. That’s why measures to promote digital and financial inclusion—providing internet access to underserved communities, bank accounts to workers, and digital tools to entrepreneurs—must be integrated into climate action plans.
Earlier this year, a group of economists completed the largest analysis to date on the economic effects of hurricanes in the United States. One striking finding was that businesses operating solely through brick-and-mortar locations suffered a 56% drop in sales for about three weeks after a hurricane, while those with an online presence experienced a far smaller decline—just 23%.
This finding underscores a clear point: businesses, from hardware stores in North Carolina to corner shops in Nairobi, can bolster their resilience to climate change by participating in the digital economy.
In recent years, global efforts to counteract climate change have accelerated. Industries like energy and automotive are overhauling supply chains to promote clean technologies, and governments are adopting policies to expedite the green transition. Notable examples include the European Union’s Carbon Border Adjustment Mechanism and the United States’ Inflation Reduction Act.
Yet, measures promoting digital and financial inclusion are often absent from climate action plans. This oversight is significant. A report on hurricane impacts, conducted by the World Bank, the Sustainable and Green Finance Institute, and the Mastercard Economics Institute, highlights why integrating these measures could be transformative.
More than one billion unbanked individuals live in the world’s most climate-vulnerable regions. Improving their access to digital banking and payment services would enhance their ability to withstand both economic and climate-related shocks. For instance, digital money transfers can facilitate rapid relief fund distribution after natural disasters, while businesses can maintain operations by selling online.
This presents an opportunity for fintech companies and nonprofits to create solutions at the intersection of climate resilience and digital inclusion. One notable example is Abalobi, an Earthshot Prize finalist in 2023. Abalobi developed an app that enables small-scale fishers to log their catches, providing data on sustainable fishing practices.
The app solves two critical problems. First, it provides governments and scientists with valuable data on sustainable fishing. Second, it allows fishers to bypass middlemen and sell directly to restaurants and buyers, securing higher prices. This reduces the incentive to overfish, lessening the strain on marine ecosystems.
Similarly, Yo! Pay Agric, powered by Mastercard Community Pass, connects smallholder farmers with regional buyers through cooperative organizations. By cutting out middlemen, farmers earn more for their crops. Transaction data from these sales also helps farmers establish creditworthiness, enabling them to access loans for essentials like seeds, fertilizers, and clean-energy technologies such as solar-powered equipment.
Digital and financial inclusion must become a cornerstone of future climate efforts, with a focus on reducing the number of unbanked individuals and building digital infrastructure in climate-vulnerable areas. Achieving this goal will require collaboration between private companies, governments, and nonprofits to develop innovative solutions like Abalobi and Yo! Pay Agric. These tools not only enhance financial health for local users but also promote resilience in the face of climate challenges.
Climate change and poverty are deeply intertwined, and we cannot effectively address one without tackling the other. While digital tools and financial services cannot prevent climate-related disasters, they can significantly ease recovery efforts. Strengthening the financial resilience of the most vulnerable communities benefits both local populations and the global economy as a whole. -PS
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