The 6th edition of African Microfinance Week, organized by ADA Microfinance in Togo last October, provided a platform for experts and institutions to engage in insightful discussions on climate investing. UNCDF actively participated in two panels: "Investing in Nature: How Inclusive Finance Can Help Preserve Biodiversity" and "Transparency and Impact: measuring the Real Effect of Sustainable, Inclusive Finance to Avoid Greenwashing." This article highlights the key takeaways of the discussion that are of interest as COP28 unfolds: the importance of data measurement in climate projects, emphasizing its role in promoting transparency, impact assessment, and the scalability of green solutions.

Women watching the automatic irrigation system in their dry land, at Dosso ©️ UNCDF Peace Carmen Ahouissou

Understanding Climate Investing

Climate investing refers to the practice of directing financial resources towards companies and projects that place a high priority on sustainability and environmental responsibility. This investment approach goes beyond seeking financial returns; it strives to attain tangible environmental impacts. By motivating companies to embrace environmentally friendly practices, climate investing actively promotes the shift towards a low-carbon economy and helps mitigate the risks associated with climate change.

Data Measurement in Climate Projects and Microfinance

Accurate and reliable data measurement is the linchpin of effective climate investing. It gives investors insights into a company's environmental impact, risk exposure, and sustainability efforts. Data measurement allows investors to assess key performance indicators and identify areas where companies can improve their environmental practices. Additionally, it empowers investors to differentiate genuine climate leaders from those merely paying lip service to sustainability.

Yves Zawadi, speaking on behalf of the UNCDF Energy programme, highlighted the type of investments UNCDF carries out in 14 countries. “By providing grants, loans, and technical support to microfinance institutions and small and medium enterprises (SMEs), our programme has successfully disseminated clean energy solutions to over 10 million people, reducing their carbon footprint by over 2 million tons.”

This achievement was made possible by constantly gathering data to assess performance, enabling in-depth analyses to adjust and enhance interventions.

Christoph Jungfleisch from YAPU Solutions emphasized that “the key to financing biodiversity lies in the operationalization of initiatives. Microfinance Institutions (MFIs) require appropriate tools to assess climate risks, streamline processes, and learn about the economic benefits of nature-based solutions.” Accurate data measurement enables MFIs to make informed decisions and develop effective strategies that contribute to the preservation of ecosystems.

During the discussions, ADA Microfinance announced its ADA Strategy 2022-2025, which focuses on preserving ecosystems and supporting the digital finance sector in this endeavour. The organization recognizes the significance of measuring financial institutions' environmental and social impact to avoid greenwashing, a practice that can mislead stakeholders.

Data Measurement for Fundraising and Scalability

Jane Kuteli from Fortune Credit highlighted the relevance of data not only for investors but also for the transparency it brings to the microfinance sector's green solutions. Accurate and reliable data enable MFIs to demonstrate the impact of their projects, raising funds and fostering the scalability of green initiatives. Investors, donors, and other stakeholders are more likely to support projects that can provide clear evidence of their environmental and social benefits.

Olivier Habimana of the International Union for Conservation of Nature (IUCN) shed light on the critical issue of the absence of a national biodiversity framework. Despite designing exceptional green products, microfinance initiatives face challenges in securing funding without a clear framework in place. Data measurement plays a crucial role in highlighting the impacts and unmet needs of green projects, thereby advocating for the establishment of comprehensive frameworks that can facilitate investment.

Collaboration and Digitization for Effective Data Measurement

As the demand for microfinance to prioritize environmental projects is growing, so does the need for robust data measurement and reporting. Data will play a critical catalyst role for effective climate-investing. Accurate and comprehensive data will enable investors to evaluate companies' environmental impact, measure risk exposure, and identify sustainable innovators.

The Energy initiative of UNCDF in DRC partnered with Hedera to digitize result measurement processes, ensuring the collection of accurate and comprehensive data that effectively showcases results. By leveraging data effectively, financial institutions can contribute to preserving biodiversity and facilitate the transition to a more sustainable future. Standardized frameworks and advanced technology tools are key to navigating the data reporting challenges.

Natalia Realpe Carrillo emphasized the role of their digital framework in collecting data also to avoid greenwashing and promote transparency for informed decision making in the sector.

The discussions at the 6th edition of the African Microfinance Week underscored the significance of data measurement in climate investing. Accurate and reliable data enable stakeholders to assess performance, promote transparency, measure impact, raise funds, and address unmet needs. By leveraging data effectively, financial institutions can contribute to the preservation of biodiversity and facilitate the transition to a more sustainable future.

The African Microfinance Week concluded on October 20th with an invitation to the 7th edition, dedicated to advancing financial inclusion in Africa.