Human, ecological and climate systems are deeply connected. Our jobs, health, and even cultural values all stem from our natural surroundings. As a result, climate change has emerged as the most significant challenge of our lifetime and is fast becoming the new paradigm for global development.
Governments, multilateral banks, and other major development actors have all stepped up financial commitments for climate change. However, many of these commitments still miss a key ingredient — a distinct focus on the poor and vulnerable. Currently, 90 percent of climate finance goes towards climate mitigation including clean energy and sustainable transport. While these investments are critical in slowing down the pace of climate change, often, they do not solve the persistent challenges that the poor face.
The world’s poorest people typically lack resources — money, physical assets, and knowledge — to cope and adapt to climate shocks. They often respond in ways that further degrade their surrounding environment, creating a vicious cycle of poverty and environmental deterioration. Women are particularly vulnerable and are at a greater risk of losing their livelihoods due to a climate shock than men. Governments must work hard to include the poorest, particularly women, in climate initiatives, ensuring they have the resources to cope with immediate shocks, adapt to long-term climate impacts, and benefit from the budding green revolution. If the poor are left to handle the climate crisis alone, the consequences are clear: migration, civil disruption, and famine—all of which are already beginning to unfold.
Governments must work hard to include the poorest, particularly women, in climate initiatives, ensuring they have the resources to cope with immediate shocks, adapt to long-term climate impacts, and benefit from the budding green revolution.
As climate impacts become increasingly visible, governments recognize the need to adopt Climate Resilient Development strategies that holistically address the intertwined challenges of poverty and climate change. It is important to note that tackling both challenges simultaneously cannot be achieved through one-off interventions. Reforesting vast landscapes alone does not guarantee improved outcomes for the poor, just as cash transfers, while essential in times of climate disasters, do not ensure enhanced biodiversity. Ideally, programs should provide an integrated approach that combines poverty and climate objectives, involving various sectors and actors, including social protection, environment, and agriculture.
A cost-effective solution in economic inclusion programs
A prime example of an integrated approach are economic inclusion programs (also known as productive inclusion programs). Built on a strong evidence base, these programs have surged in recent years. So, what is an economic inclusion program? These programs are defined as a bundle of multidimensional interventions that support extremely poor and vulnerable households and communities to sustainably increase their incomes and assets. They lift people out of poverty using a combination of interventions such as cash transfers, skills training, business capital, coaching, and market access. While these programs vary in the number of interventions and scale, they all facilitate the dual goal of strengthening resilience and opportunities for individuals and households who are poor. When implemented through government systems, these programs can be highly cost-effective and yield high returns on investment.
For the past five years, the Partnership for Economic Inclusion (PEI) at the World Bank has supported governments in adopting and scaling up government-led economic inclusion programs. Since PEI first started to track these programs through its bi-annual State of Economic Inclusion Survey, there has been a growing recognition of the significant opportunities to align climate action with economic inclusion. Based on the latest survey results, over two-thirds of these programs incorporate interventions that build climate resilience. Building on this strong foundation, economic inclusion programs have the potential to become powerful drivers in addressing the complex intersection between climate change, gender inequality, and poverty.
Building on this strong foundation, economic inclusion programs have the potential to become powerful drivers in addressing the complex intersection between climate change, gender inequality, and poverty.
Taking action: a strategic approach to the climate and poverty nexus
Driven by a call to action from COP27, PEI partnered with experts in social protection, climate, agriculture, and natural resource management to develop a framework for how economic inclusion programs could strategically address the climate change and poverty nexus. The potential is huge. Flexible and multi-sectoral in design, programs have the ability to operate across three key areas: adaptive safety nets, food and ecological systems, and green jobs and the just transition.
Today, both governments and their development partners are searching for cost-effective approaches that deliver for both people and the planet. Economic inclusion programs are seen as a strong investment. Backed by its funding partners, PEI recently awarded catalytic grants to inform six government economic inclusion programs in Ethiopia, India, Senegal, Kenya, Togo, and Uzbekistan, aimed to benefit over 3.7 million poor people. Over a two-year period, these grants will support program innovation to achieve greater climate, gender, and poverty outcomes. Such innovations include identifying green value chains and off-farm opportunities particularly for women, offering knowledge and training in climate-smart agricultural technologies, and demystifying global carbon markets and disaster insurance for the poor. Understanding that success hinges on the flow of knowledge across sectors, each grant will finance efforts to promote cooperation among ministries, NGOs, and private sector agencies. Collaboration is essential to the climate change and poverty agenda – and cannot happen without proper resourcing.
Climate finance needs to focus on the poorest and economic inclusion programs are exceptionally well-positioned to do so. In the coming years, PEI will share insights from this cohort of grantees across the development community and contribute to the climate change and poverty outcomes of economic inclusion programs.
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