DWM Seeks to Drive Inclusive Climate Action through Financial Inclusion

Pioneering new tool and report provides insights for financial institutions in emerging markets to develop climate action strategies and manage risks associated with climate change.

NEW YORK--(BUSINESS WIRE)--In an effort to drive meaningful progress on climate action in financial inclusion, Developing World Markets (“DWM”), a U.S.-based impact investing fund manager with more than two decades of experience, has examined how providers of capital to low-income and underserved communities can accelerate their response to climate change, both in terms of managing the risks and financing a more inclusive and equitable transition.

In partnership with MicroSave Consulting, a global consulting firm active in financial, social and economic inclusion, DWM created the Climate Opportunity and Risk Assessment Ledger (“CORAL”), a self-assessment tool to allow financial institutions to evaluate how effectively they have integrated climate risks into their operations and to identify opportunities to reduce emissions and strengthen adaptive capacity of clients. DWM then used the tool to assess its own private equity portfolio companies, with the goal of surfacing insights that can be applied throughout the inclusive finance space.

Among DWM’s key findings, which were released today in a new report, entitled Climate Change and Inclusive Finance: Insights from Developing World Markets’ Portfolio:

• A clear delineation and articulation of responsibilities at the board level and across relevant board committees, outside of ESG, is needed to ensure integrated and sustained attention to climate risks and opportunities.
• The foundation for any efficient climate action strategy is to track and measure carbon emissions with accuracy. For financed emissions, this requires adopting a common taxonomy embedded into information systems.
• In spite of historical data suggesting annual increases in asset loss attributed to climate hazards, the biggest challenge today is that the majority of financial institutions consider operational risks, but do not include climate risk considerations in the evaluation of new credit customers.

“Access to finance for mitigation, adaptation, and resilience is critical to ensuring an equitable transition to an inclusive, green global economy, but the inclusive finance sector needs stronger and more relevant tools to help achieve this,” said Hannah Schiff, DWM’s Director of Impact. "This report shows how financial institutions can integrate a climate risk and opportunity lens into their day-to-day practices. We’re leveraging these findings to enhance climate action within our own portfolio right away.”

“Financial inclusion is the largest impact sector in emerging markets and local financial institutions are suited to drive substantial private capital to address the climate finance gap,” said Aleem Remtula, DWM Partner and Co-Head of Private Equity. “Financial institutions are uniquely positioned to scale low-carbon pathways and build adaptive capacity for vulnerable clients but require better integration of climate risk considerations in the evaluation of customers and the appropriate tools and taxonomies to measure client-level impact.”

“DWM is grateful to MicroSave Consulting for its partnership in executing this research and shaping this report,” said Remtula. “The report’s findings and practical recommendations would not have been possible without MSC’s sector expertise and nuanced insight.”

About DWM

Founded in 1994, Developing World Markets (DWM) seeks investible solutions that sustainably address the social, environmental, and economic needs of the developing world. DWM began impact investing in 1999 and shifted exclusively to impact in 2007. DWM has over two decades of experience in emerging and frontier markets. Through DWM Asset Management, LLC, the firm’s SEC-registered investment adviser, DWM has originated and managed over $2.2 billion of private debt and private equity in impact-oriented enterprises, including over 900 loan disbursements and 25 private equity stakes in more than 70 emerging and frontier countries.

For more information, see www.dwmarkets.com