Every system shift we track and target should reflect equity considerations, but economic and financial inclusion represents an important shift in itself that enables all systems to become more just.
A just transition toward a decarbonized, sustainable economy will result in more inclusivity and fairness than the high-carbon, unsustainable economy it leaves behind. It will give underserved and/or marginalized groups new economic opportunities for high-quality employment and enable their participation in the benefits of thriving, sustainable industries.
A just transition will also offer further options to expand financial inclusion. This will include extending financial services to all people, especially underserved and/or marginalized groups. Financial inclusion is an important development goal in its own right, and can allow all people to further share in the benefits of the transition to a low-carbon economy and the protection of nature.
Populations can be excluded from financial services due to a range of factors, including race, gender, age, income, occupation and geography. This inequity is found in lower-income countries as well as higher-income countries. Though many of these communities contribute comparatively little to global greenhouse gas (GHG) emissions, they are likely to be hit hardest by the effects of climate change and biodiversity loss.
When people have access to financial resources like bank accounts and well-regulated lending, it helps them build financial security and makes them more resilient to economic shocks, including those caused by climate change impacts, biodiversity loss or other failures of natural systems. They may also be more capable of taking advantage of low-carbon technologies. However, if the path to decrease emissions and safeguard the global commons is not managed equitably, vulnerable communities will suffer disproportionate hardship.
Financial services can’t replace the natural systems on which people rely, but families and communities can use such services to rebuild damaged properties, migrate to a stable area, prepare for the next extreme weather event, switch to cleaner energy sources, adopt climate-resistant agricultural practices, or otherwise adapt to a changing environment. Increasing the share of the global population that is included in the regulated financial system will require efforts from both the private and public sectors.
Private financial institutions will need to expand their presence in remote and rural areas and broaden lower-cost services, such as mobile money. Public financial institutions will need to adopt financial inclusion strategies, help finance infrastructure (such as internet services), and directly provide financial services themselves. Financial services must also be carefully regulated to avoid predatory financing.