When applied to droughts, wildfires, hurricanes, floods, or other extreme weather events, the term “unprecedented” is repeated ad nauseam. In August, when the Intergovernmental Panel on Climate Change released its latest report on the dire realities we face, a drought exacerbated by global warming had already plagued much of southern Africa for years.
It finally appears that world leaders are ready to take meaningful action; However, there is a critically important group that is routinely absent from major climate meetings, such as was not present at the recent United Nations Climate Change Conference (COP26) in Glasgow: this group is formed for small, local, climate-focused businesses that are already making a difference in their communities. Small and medium-sized enterprises (SMEs) working on climate change adaptation and mitigation are very important partners (although they are being underestimated) in the fight to reduce emissions.
Even though climate finance options are increasing, the role of SMEs in sustainable development continues to be ignored. Its plight is shared by more than 200 million SMEs of all kinds in developing countries, which cannot obtain the funds they need to grow, and face an annual financing deficit estimated at 5.2 trillion dollars (4.6 trillion euros). International investors focus on placing their funds through larger deals, while local capitals are kept out of the reach of early-stage companies due to their high collateral requirements and unmanageable interest rates.
According to the World Bank, SMEs represent 90% of companies and provide more than 50% of jobs worldwide
According to the World Bank, SMEs account for 90% of businesses and provide more than 50% of jobs worldwide, so they have a key role to play in creating opportunities in struggling economies. recover from the covid-19 pandemic. Examples like SELCO India, a pioneering off-grid solar company, and Husk Power, an innovative pay-per-use renewable energy provider operating in Asia and Africa, show that with the amount and type of financing The right tools, as well as the right technical support, small businesses can improve lives through access to energy, a key international goal. Off-grid renewable energies also help drive sustainable mobility, in both rural and urban settings.
Small businesses also have an important role to play in greening agriculture. Land use for agricultural and livestock production accounts for 24% of global greenhouse gas emissions, and farms are vulnerable to droughts, floods and rising temperatures. Financing climate-smart agricultural entrepreneurs is essential to making our food systems more resilient. At this point also renewable energy without connection to the electricity grid has become indispensable, since it provides energy for irrigation, grain processing and operates the cold rooms and refrigerators that are necessary to store dairy products, fresh seafood, as well as fruits and vegetables. In India, Technoserve helps small businesses withstand and adapt to the climate crisis, and also increase their productivity without increasing emissions.
As these examples demonstrate, when small businesses have the financing and support they need, they can drive economic growth while mitigating emissions and supporting adaptation to climate change. This is because they are more agile and adaptable, and respond to local needs much more quickly and efficiently, compared to large organizations. They also offer governments and legislators the opportunity to test new ideas, which bring out both pitfalls and best practices, before initiatives are scaled up to the regional or national level.
Meeting the global goal of net zero emissions requires that policymakers, investors, banks and others serve the needs of SMEs much more effectively than in the past. To begin with, the world needs many more financial mechanisms and instruments that are adapted to those working in the green economy. That means a lower-cost, long-term mix of capital, blended forms of financing, and easier access to such capital.
Investors should not overlook women who produce up to 80% of food in the Global South
The world also needs more business accelerators focused on adapting to climate change. There are only 25 such green accelerators located in non-OECD countries. Funding research and establishing professional networks will boost support for initiatives with strong growth potential.
Better metrics will be needed to evaluate success. That does not mean lowering environmental, social and governance standards. Rather, it means devising specific indicators for green businesses in the SME sector to help them demonstrate their effectiveness and attract more investment.
Finally, investors should not overlook women who produce up to 80% of the food in the Global South. Women are also the most vulnerable to the effects of climate change. Investing in those who are climate entrepreneurs benefits the climate, food production and overall prosperity.
Small businesses are an integral part of climate change mitigation, resilience and adaptation to it. Providing them with the funding and support they need to help them be successful is everyone’s business.
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