Engaging Local Financial Institutions to Integrate Climate Finance Best Practices

The Sustainable Banking Alliance (SBA) is a USAID initiative launched in 2022 to partner with banks and microfinanciers (financial institutions, or FIs) to increase access to climate finance, promote the integration of climate finance best practices into FI operations, and increase the number of FIs making climate investments. This involved strengthening FIs’ capacity to: ● Measure, report, and mitigate their exposure to climate-related risks ● Take advantage of new market opportunities ● Decrease their financed greenhouse gas (GHG) emissions ● Incorporate climate change into their governance systems ● Develop targets, services, and products to increase climate investments As a first wave, USAID initiated SBA activities in three countries as parts of larger projects: in Colombia, Egypt, and Rwanda. They were implemented by DAI in collaboration with local partners and with enabling organisations such the Egyptian Banking Institute (EBI) and Asobancaria in Colombia. On the back on these first activities, USAID and Dai Global published “how-to guide” to serve as a foundational resource providing guidance to USAID and other capacity building providers on how to engage with FIs to integrate climate finance best practices. This guide was developed building from the lessons learned from the SBA initiatives in Colombia and Egypt. This document contains a step-by-step process to partner with FIs to support the integration of climate finance best practice: 1. Landscape analysis and prospective partner selection 2. Diagnostic of FI needs and opportunities 3. Engagement pathway development 4. Capacity strengthening and technical assistance / Climate finance tools 5. Encourage adoption of climate targets The SBA activity in Colombia took place between October 2022 and December 2023. It included a rapid diagnostic assessment on climate finance practices for six Colombian FIs, group capacity strengthening for 22 FIs, the development of a financed emissions calculator available to national FIs, and individual technical assistance (TA) for six FIs to support the adoption of the calculator. The activity in Egypt started on March 2023 and, as of September 2024, is still ongoing. Group capacity strengthening to FIs has reached 28 FIs and concluded in March 2024. Currently, Business Egypt is designing individual TA pathways with seven banks that are tailored to address their specific capacity strengthening and TA needs.