Post by Klaus Pfeiffer

One thought has been on my mind during the current heatwave in Europe. Over the years, I have sat in several Investment Committees, Advisory Committees, Boards etc. We spend a lot of time discussing credit risk and of course we also discuss impact (or more accurately more often "outcome"). Sometimes we even try to measure changes in the financial resilience of the businesses we finance (but this is something for a different post). But I sometimes wonder whether we are asking the wrong climate question. Much of the discussion is about outside-in risk: How will climate change affect our portfolio? Will droughts increase defaults? Will extreme weather affect valuations? These are important questions. But shouldn't Development Finance Institutions spend at least as much time on the inside-out perspective? How can we structure investments so that agricultural businesses are better able to survive the next drought, flood or heatwave? That may involve better irrigation, more resilient production systems, technical assistance—or perhaps even parametric or indemnity insurance. I don't know what the right balance is. But I do think climate resilience deserves a place in investment structuring, not only in portfolio risk management. I'm curious how others see this. #DevelopmentFinance #AgriculturalFinance #ClimateRisk #ImpactInvesting #BlendedFinance Photo: by me. Somewhere in The Horn of Africa..