April 28, 2023

Digitally Enabled Climate Finance Can Help LMICs Reduce Emissions and Adapt to the Impacts of Climate Change

Having engaged in the climate finance and technology sectors over the past several years, I agree with the GSMA that "Climate finance has increasingly taken center stage in debates about the future of climate action. For low- and middle-income countries (LMICs) to reduce emissions, significant financial support is needed to transition to low-carbon economies and adapt to the impacts of climate change." The UK-based organization notes in a new report that provides an overview of how mobile and digital technology can be used to facilitate and accelerate climate finance, "While disruptive technologies offer great promise, they require an enabling ecosystem and robust financing to be successful."

The report's Executive Summary importantly points out: "The use of mobile and digital technologies in delivering climate finance to underserved communities shows excellent promise. Emerging solutions moving climate finance forward include frontier technologies, such as the Internet of Things (IoT) and blockchain, as well as the voluntary carbon market (VCM).

The report's other main conclusions include:

Defining climate finance: "The research highlighted that the public and private sectors define climate finance differently. This has an impact on the level, quality and priority of investment in climate change. Understanding the various definitions of climate finance is also key to creating an inclusive ecosystem in which all actors can execute their mandates, including the mobile and digital technology community. The knowledge and technical expertise required for climate finance can be enhanced based on agreed definitions, and will help to develop tailored products, services and capacity building tools."

Building knowledge and technical expertise in digitally enabled climate finance: "Climate finance is a new, complex and contested field. Digitally enabled climate finance has added a layer of complexity because it incorporates technology in both climate action and climate financing. As a result, there is a gap in knowledge and technical expertise, which are key to developing solutions and accelerating climate finance for those most impacted by climate change."

Developing digital infrastructure and ecosystems in LMICs: "The deployment and delivery of climate finance via mobile and digital technologies depends on strong digital infrastructure. However, there are numerous barriers to the development of this infrastructure."

Improving access to quality data: "Digital technology needs to be integrated in climate finance to ensure quality data. However, in LMICs, there are data-related barriers that make it difficult to attract investment and compete for access to climate financing."

Reaching underserved populations: "Underserved groups in LMICs, especially women, are the least likely to access and use mobile technology. This is due to a variety of reasons, including the affordability of handsets and data, a lack of digital skills and social norms. Since these groups tend to be the most vulnerable to the impacts of climate change, solutions need to be tailored specifically to their needs and access to technology."

The development of carbon markets: "[T]he adoption of Article 6 and Article 6.4 of the Paris Agreement, which outline the development of a VCM, has sparked interest in this innovative climate financing mechanism. However, there are persistent implementation challenges, largely due to complex and immature markets."

I appreciate how the report showcases models and best practices for how mobile and digital technologies can ensure vital funds reach the most vulnerable people and communities. In doing so, it demonstrates the opportunities for transformative technologies to help counter the climate crisis. While climate finance is relatively new, research presented in the report "shows that mobile and digital technology are uniquely positioned to provide tools that catalyze and strengthen how it is delivered." The report also "offers a preliminary assessment of digitally enabled climate finance to guide public and private sector actors, including financial institutions and mobile network operators (MNOs). In doing so, it seeks to support the delivery of innovative solutions and partnerships that serve communities most affected by climate change."

The GSMA also produced a webinar that discussed the future of climate action and the role of mobile and digital technology in delivering climate finance in LMICs.

If finance is at the heart of tackling the climate change crisis, then what are your recommendations of how to use mobile and digital technologies to ensure vital funds reach the most vulnerable people and communities?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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