Financial Inclusivity, Social Justice and Climate Change

In our recent articles we have explored how financial inclusion is in part the solution to many of the greatest socioeconomic issues our planet faces, evidence shows that financial inclusivity is a key step in curing poverty and this can go a long way to solving the greatest threat our planet has ever faced, climate change.

The fight against climate change and poverty are intertwined. Investments made to mitigate or adapt to climate change will inevitably reduce poverty, and investments made to reduce poverty will better protect people against the growing environmental crisis. Increasing economic prosperity in developed countries can have an impact globally, because greater wealth gives greater choice. For example, reducing poverty and improving opportunities for local communities, people will be able to buy sustainably produced locally grown food dramatically reducing food miles and the carbon footprint of their food. Likewise, it will reduce the need for cheap fast fashion and reduce the impact of an industry that exploits, pollutes and consumes vast amounts of vital natural resources.

By far the greatest gains are to be made in the developing world. It is a universal truth that those who did the least to create the climate crisis will suffer the most from its consequences. The regions that are already hot, for example, will find it more difficult to cope with global warming. Fragile ecosystems in tropical areas will also suffer more damage. These hot, or tropical zones are more likely to be poorer countries that pollute far less than Europe, the United States or China. Simply put, a country like Bangladesh, despite polluting relatively less compared to a country like The United Kingdom, will suffer more from the negative consequences of global warming.

Whilst the impact of climate change is deeply unfair for those who did little to cause it, there are steps in place to address it. In the Kyoto Protocol and then in the Paris Agreement, world leaders have agreed to establish the principle of “common but differentiated responsibility”. Essentially each country is responsible for the fight against global warming – but those who have contributed the most to the problem must contribute with more means to the cause.

Realising the economic and social rights of all members of society and reducing inequalities are therefore important elements of an effective strategy to mitigate the effect of climate change.

A study in Ghana examined the link between financial inclusion and children’s learning outcomes, it found that financial inclusion enhances learning and schooling outcomes more for girls and urban children.

Why is this so important in the fight against climate change? Project Drawdown brought together a broad coalition of researchers, scientists, business leaders and policymakers to look for ways to not just halt rising emissions, but to cause an annual decline or “drawdown”. Project Drawdown came up with the top 100 activities that would contribute most to this goal – and at number three is family planning and education.

Education is ranked as a more effective climate solution than electric cars, various types of solar, offshore wind, wave and tidal power, yet gets typically overlooked in favour of renewable energy implementation.

In particular, educating girls brings broad benefits to wider society as well as improving efforts to tackle the climate emergency. This is because educating girls has an impact beyond the individual, cascading into her family and her community. Almost universally, research since the 1980s shows that when women have higher levels of good quality education they marry later and have fewer and healthier children, live longer and enjoy greater economic prosperity. For example, in Mali, women with secondary education or higher have an average of three children, while those with no education have an average of seven children.

The United Nations currently projects that the world’s population will grow from 7.3 billion today to 9.7 billion by 2050, this is pushing the limits on what is sustainable for human life. Most of that growth will be in developing countries, including regions such as sub-Saharan Africa. But recent research shows that if girls’ education continues to expand, that number would total 2 billion fewer people by 2045.

Poverty remains the key barrier to school enrolment. This is why in 2021, G7 leaders pledged $2.75 billion to support the education of 40 million girls over the next five years. The Global Partnership for Education has declared 12 years of education for girls as one of its main priorities.

Governments, NGO’s and charities are testing a wide range of innovative approaches to address barriers to school participation for girls, but what it really comes down to is getting the best return on investment in the money spent. This is where financial inclusivity plays a huge role.

One of the most common ways to enable families to pay for the education of their daughters is to provide the households with subsidies, with access to a quality banking product, families are able to save this money so it can be spent on their daughters’ education. Enforcing restrictions on what the money  can be spent on, can be dehumanising, and research shows it is not necessary. A program in Morocco found that labelling a small cash transfer for parents of school-aged children in poor rural communities as an “education support program” improved enrolment and attendance without needing to enforce conditionality by checking children’s attendance, having a banking product that allows people to create pots of money for specific services would help make this even easier.

Timing transfers around term start dates may also help ensure that the money is used for school fees. Regular payments are more effective than lump sum payments but without a bank account this just isn’t possible.

Using robust financial reporting will make it possible to assess how efficiently the money is spent. For example in Malawi, researchers tested the effects of a range of cash transfer amounts on school enrolment. In this case, smaller transfers were more cost-effective than the larger transfers as the results showed that $5 per month prompted a similar increase in school enrolment as $15 per month.

Finally, retention of female students can also be increased by 16% with something as simple as providing sixth-grade girls with free school uniforms for two years with an equivalent to a total value of US$12.

Family planning and girls’ education are effective long-term climate adaptation strategies. Both have to be integrated into climate deliberations, funding priorities, and country-level actions and can be greatly enhanced when coupled with a strong financial inclusivity strategy.

Financial inclusivity is central to provision of these initiatives and the resulting measurement of their success. Both home and abroad, financial inclusivity can have a huge knock on effect, creating the ability for people to save, plan and make choices about their spending and how it impacts the planet. If every person on this planet has access to a quality banking product we could be the generation that ends poverty forever. One transaction at a time.