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GenderSmart

Climate finance must center frontline, underrepresented and underserved communities

Frontline communities have been underrepresented and underserved in climate resiliency efforts to date, mirroring their underinvestment in the investment field as a whole.

Koolboks

Investments by Aruwa, a Lagos-based, Black female-founded equity fund, include Koolboks, a company that creates solar-enabled freezers for people without access to electricity,

More and more investors are waking up to the urgency of the climate crisis, using their capital to invest in climate mitigation, adaptation, resilience and biodiversity.

But too much of this investment continues to address climate in isolation, separate to and distinct from the world around it. The truth is that the climate crisis is a human crisis: both in the sense that humans created it, and that its impacts mirror and reinforce existing patterns of inequality.

Already, 3.6 billion people around the world live in contexts that are highly vulnerable to climate change, with low-income people in the Global South, along with Indigenous communities and low-income communities of color in developed markets, hit first and worst. Gender is a key factor in how the impacts of climate change are distributed, too, with women comprising 80 percent of climate refugees, and Indigenous women, in particular, playing a vital role as stewards and solution-creators in the natural environments in which they work and live.

Despite this, frontline communities have been underrepresented and underserved in climate resiliency efforts to date, mirroring their underinvestment in the investment field as a whole.

If we want to effectively address the climate crisis, we need the insights and intelligence of the people most affected: as community leaders, decision makers, entrepreneurs, customers, investors and investees. To do this, we need to start bringing a more sophisticated and inclusive lens to climate investment — one that fuses together climate with gender and a broader justice, equity, diversity and inclusion lens.

Getting inclusive

In February, 2X Global, a new global membership and field-building organization for investors across the capital spectrum, formed out of GenderSmart and 2X Collaborative, released a guide illustrating how investing in this way can look in practice. The guide highlights the urgency and opportunity of investing in what we call "inclusive gender and climate finance," as well as offering concrete examples of how different types of investors are applying this set of lenses, and resources you can use to bring this approach to your own investment portfolio.

To identify inclusive gender and climate finance opportunities, we looked for investments that met criteria across three umbrellas: gender (entrepreneurship, leadership, employment, consumption and investing in financial intermediaries); climate (mitigation, adaptation, resilience and biodiversity); and justice (repairs existing social injustices, provides voice, agency and ownership of solutions, contributes to a just transition, and addresses racial and ethnic inequity at the intersection of gender and climate).

Although this criteria is extensive, we found a number of forward-thinking vehicles and businesses that are approaching these lenses in different ways, spanning debt finance, angel funding, private markets investments, grant making and direct investments across both developed and emerging markets.

Addressing root causes

The Matriarch Revolutionary Fund, for example, is an Indigenous-owned integrated capital investment fund managed by and for Indigenous women across the United States. The fund invests in Native women entrepreneurs by providing access to patient capital in ways that align with the fund’s five Rs: relational, rooted, restorative, regenerative and revolutionary.

Current investees include Itality Plant Based Foods, a woman-owned restaurant that provides sustainable plant-based, locally sourced food to underserved communities. Owner Tina Archuleta understands the challenges of living in a food desert and has been determined to increase food sovereignty while addressing nutritional deficiencies and disease caused by a modern food diet and an inefficient food supply chain system to rural and tribal communities.

Family foundation KL Felicitas (KLF) has made gender, climate and social justice considerations central to its portfolio since its inception. KLF’s investees include Aruwa, a Lagos-based, Black female-founded equity fund whose own investments include a company that creates solar-enabled freezers for people without access to electricity, and EWA, a female-founded and led general partner (GP) that invests in businesses using technology to solve socioeconomic and environmental problems, and uses a gender lens as part of its due diligence.

If we want to effectively address the climate crisis, we need the insights and intelligence of the people most affected: as community leaders, decision makers, entrepreneurs, customers, investors and investees.

The Solar and Energy Loan Fund (SELF), meanwhile, is a certified community development financial institution operating in the southeast of the United States, providing small, low-cost loans to homeowners in underserved communities to make their properties more energy efficient and climate resilient. It also provides larger financing for affordable housing landlords and developers. In 2022, CNote invested $2 million in SELF as part of a broader $15 million investment in community finance institutions supporting racial equity and people with disabilities and their families.

Other case studies highlighted in our guide include Juhudi Kilimo, a leading Kenyan microfinance institution, which provides rural farmers with green energy financing; Upaya Social Ventures, an Indian impact investor that works with early-stage entrepreneurs to provide dignified jobs while supporting the transition to a green economy; and Mākhers Studio, a Black woman-founded, Atlanta-based green manufacturing firm that designs affordable, sustainable commercial and residential real estate solutions for underserved communities, with a growing emphasis on developing affordable and climate-friendly multifamily housing. We were so fortunate to find this through the Coralus network, which is focused on spotlighting entrepreneurs of color in the climate and resilience arena.

Centering what matters

Investors should engage with opportunities in this space with the return profile or business case that is right for them. But wherever you fall on that spectrum, these investments should be an essential part of your portfolio’s impact center.  

We can’t address climate change unless we also address its human impacts. And we won’t adequately address its human impact unless we make sure the people most affected by the climate crisis are centered in and have ownership over its solutions.

If you’re serious about using your investments to address the climate crisis, I urge you to consider integrating these vehicles, and others like them, into your portfolio. I also encourage you to be intentional about how you can make your existing climate finance portfolio more inclusive: How can you use your power as an investor to make your investments more climate-just and gender-smart?

And if you’re already investing in this way, how can you amplify what you’re doing to normalize this approach in the investment community and celebrate successes with your investee partners?

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