ADA to consider the effects of climate change for all activities
Under ADA’s strategic plan 2022-2025, climate change, gender issues and the use of digital technologies will be taken into account in all projects and programmes as overarching targets.
The consideration of climate risks is especially important for ensuring the sustainability of development policies and programmes. ADA will therefore ensure its activities have a low carbon footprint and will always strive to increase the resilience of the target population to climate change in addition to more specific programme objectives.
Issues related to climate change are particularly relevant in projects which target agricultural and forestry value chain actors, as agricultural productivity is particularly affected by climate change while a significant portion of greenhouse gas emissions stems from land overexploitation. ADA will therefore promote climate-smart agricultural practices and sustainable land management to mitigate the effects of climate change and to boost the resilience of smallholders.
In addition, ADA will promote the sustainable management of landscapes, farmland and forests, encourage the generation of renewables and promote energy-efficient housing, machinery and domestic equipment.
Green microcredit: lessons learnt
While ADA has been supporting Microfinance Institutions (MFIs) to develop green microcredit products since 2011, the insight that launching green products requires larger investments than other financial product diversification measures led it to reconsider and broaden its approach.
Before developing the product, many external factors such as public environmental and agricultural policies as well as electrification plans need to be taken into account (not just in rural areas) to ensure the relevance and potential viability of the products in the medium term. In addition, developing such products requires a broad range of partnerships with technology providers and capacity-building organisations.
Once developed, green financing products require a specific promotional approach as customers tend to prioritise their economic needs over environmental benefits. Peer exchanges and demonstrations of new equipment and solutions were proven most effective in past projects. Finally, field staff need to be trained to understand and raise awareness of the additional economic and environmental benefits of the new products and they need to be compensated for their additional effort.
Towards climate-smart, inclusive finance
Based on this experience, ADA will take a more holistic approach under its current strategic plan and will strive to develop climate-smart, inclusive financial solutions instead of focusing exclusively on green microcredit:
- In addition to facilitating access to financial services, ADA’s local partners will train end-users in sustainable domestic and productive practices and encourage the use of energy-efficient equipment and technology.
- Whereas ADA mainly relied on MFIs in the past, a broader range of actors will be included from now on to ensure a more holistic support of beneficiaries.
- Instead of focusing exclusively on agriculture, ADA will consider all aspects of a landscape, such as forests and biodiversity, to account for the complexity of climate change and environmental issues.
- A broader range of financing mechanisms such as climate investing and carbon finance will be considered in addition to green microcredit to offer more targeted financing solutions to specific climate challenges.