Incofin Climate-Smart Microfinance Fund (ICMF)

ICMF addresses the challenge of the USD 50.5 billion climate adaptation financing gap for low-income countries. The poorest half of the planet is responsible for barely 10% of the global carbon emissions but are burdened with the harshest consequences in the form of threat to their food and water access, livelihoods, forced displacement and other related risks. Microfinance institutions serve as effective partners to help reverse the social inequalities exacerbated by climate change and build resilience of low-income communities through the provision of financial services that drives climate adaptation, transition, mitigation and supports climate-related disaster management.  
 
However, Microfinance Institutions need adapted financial support directed towards climate-smart practices to be able to build their internal capacities to understand the new realities faced by their end-clients and develop new solutions and processes that will support their end clients build resilience and adapt to climate change. 

The fund sets an ambitious impact strategy and aims to reach to invest USD 550 million in climate-smart activities, improving the climate change resilience of 1.5 million people in emerging markets in 5 years. We have defined a climate-smart taxonomy with six target sectors: resilient habitat, sustainable agriculture, clean drinking water and sanitation, green practices and technologies for "circular economy" or other green activities, energy efficient technologies, and renewable energy technologies. The Fund makes senior and subordinated debt investments in climate-smart MFIs, which have an explicit climate strategy, an explicit process to identify, assess and manage climate risks, climate opportunities or climate performance, or offer climate-smart financial or non-financial products or services, across global emerging markets.

We’ve seen a shift: the climate-smart loan portfolio of investees grew from USD 195 million to USD 1.4 billion - a transformation driven not just by capital, but by clarity and commitment. This growth wasn’t solely from our direct financing (our ICMF fund contributed USD 15 million), but from something just as powerful: building awareness. By helping partners see the value of tagging and tracking loans that support climate resilience— aligned with our internal taxonomy— we’ve increased transparency and sparked meaningful conversations about what truly counts as climate-smart. It’s a reminder that impact isn’t only about the dollars deployed