Natalia REALPE from Hedera opened the session by welcoming all participants and panel members. She presented the e-MFP Green Inclusive and Climate Smart Finance Action Group (GICSF AG), a think-tank for environmentally responsible inclusive finance. In the session this action group would present the Green Index 3.0, to be launched in 2021. This tool can be used to raise awareness among MFIs for environmental performance, but also plan activities, improve, and monitor progress of an MFI.
The moderator introduced Davide FORCELLA from YAPU Solutions who presented the Green Index 3.0 tool. Forcella explained its key concepts; 1) Vulnerability, how clients and institutions are affected by the environment; 2) Adverse Impacts, how clients and institutions affect the environment; and 3) Economic opportunities, how green can satisfy demand and increase revenues. He added that the Green Index operationalises the connection between these concepts, aiming to reduce vulnerability and adverse impacts while supporting potential economic opportunities. He presented how the tool was upgraded since its first launch in 2014. The main changes to the Green Index 3.0 are based on lessons learned from over 1,000 assessments and inputs from over 300 stakeholders. The tool now includes (climate) vulnerability, is aligned with 70 international initiatives as well as with Dimension 7, the Universal Standards on Environmental Performance developed with SPTF and CERISE.
The Green Index 3.0 consists of four main standards: The Environmental Strategy, Identification of Environmental risks and opportunities, Management of Environmental risks and opportunities, and Green products and services, both financial and non-financial. For each standard, the tool includes detailed essential practices. Forcella added that the tool assesses an MFI’s existing processes and determines whether it has the capacity and tools to implement it. By using quantitative indicators, the tool helps to understand the potential outreach of an MFI. After an MFI completes the Green Index 3.0, the tool generates a report on the MFIs Green Inclusive Finance Performance based on the four standards in the tool. This report can be used as a model of improvement and offers a process for risk and opportunity management. The next steps for Green Index 3.0 are to provide various trainings, launch the tool in presentations, and prepare for certification of auditors and FSPs.
Marion ALLET from CERISE next introduced the Dimension 7 in the Universal Standards. She shared the process in which CERISE and SPTF revised the Universal Standards for Social -and now also Environmental- Performance Management. Allet explained that as the sector was becoming more mature, there was a growing interest in a dedicated environmental performance standard. This Dimension 7 is in line with the Green Index 3.0, where the Green Index provides a detailed view and Dimension 7 a global view. It is a starting point for MFIs newly interested in environmental performance, while more advanced institutions can use Green Index 3.0. Allet demonstrated how Dimension 7 allows MFIs to integrate environmental performance management as part of their broader social performance strategy, for example in committed leadership, responsible HR, and client-centred products. CERISE and SPTF plan to develop specific resources and offer training in the coming months to strengthen the capacities of their SPM Professional Network on environmental performance management.
The moderator gave the floor to Yves KOMACLO, Investment Manager at Oikocredit, to provide an investor’s perspective. Komaclo indicated that the investor faces similar challenges as were described by the panel. The clients of Oikocredit’s FSP partners are in the most vulnerable populations that face increasing climate change risks and have adverse impacts on the local environment. He added that these trends are exacerbated by COVID-19 and related governmental measures. He explained that with the Green Index 3.0 tool, the investor engaged its partners to conduct environmental and social performance assessments. Due to the challenges stemming from COVID-19, Oikocredit realised the need to evaluate both vulnerability and adverse impact, as these affect the capacity of its partner FSPs to roll out their programmes and improve financial inclusion in developing countries.
Komaclo stated that the sector needs coordinated scaled up impact investment, as climate change and vulnerability issues are transversal and global. This could also leverage existing work and provide support for FSPs by going beyond awareness building towards implementing practices. He invited investors to join Oikocredit in strengthening the standards and roll them out.
The final panel member Allan PEREZ from REDCAMIF presented the REDCAMIF regional network and its Green Finance Approach. He explained that the regional network covers 7 countries in Central America and includes 133 MFIs. He added that REDCAMIF is the reference in Central America to promote social performance, having supported institutions to implement among others SPI4 Social Audits, Client Protection Assessments and Social ratings. Perez added that using the Green Index 3.0 offered REDCAMIF the opportunity to intensify its green finance approach, by evaluating the performance of their MFIs and promoting social performance in the region. He added that the tool is a powerful instrument to identify gaps with MFIs and to assign a starting point to develop projects and programmes that increase their internal capacity.
Realpe then opened the floor for discussion. Jurgen Hammer from SPTF appreciated the contributions from the panel members and the recent coordination and cooperation in the sector. He looked forward to implementing the tools presented. Forcella agreed, adding that he welcomed the approach to combine environmental and social performance. He appreciated working with Komaclo from Oikocredit in rolling out the Green Index 3.0 tool as the next steps are to implement the tools designed, helping MFIs to make the transition to green inclusive finance.
Isabelle Barres added that it was great to see the work trickling down to the investors and local and regional networks. She stated that the experience of SPTF, CERISE and The Smart Campaign has benefited from this collective approach. She looked forward to seeing how green is going to be embedded everywhere, going from inclusive finance to responsible green inclusive finance.
Lucia Spaggiari from MFR congratulated all panel members, exclaiming that the sector has come a long way in the last 10 years ago when the prevailing view was that MFIs could not be asked to do green too. She appreciated that things have evolved and welcomed how priority items are being integrated.