When it comes to climate-smart initiatives, capital is often concentrated at the top and rarely reaches the microenterprises that need it most. It frequently breaks down at the last mile due to misaligned product design, risk allocation, and delivery mechanisms.
The ClimaFii Alliance was formed to address this gap. Launched in January 2025, it is supported by Shell Foundation through its partnership with the UK government’s Transforming Energy Access platform, and delivered by Accion, BFA Global, and Upaya Social Ventures. The program is designed to enable microenterprises across low-income communities in India and sub-Saharan Africa to access affordable financing for productive use energy and mobility assets — such as solar-powered tools or electric mobility solutions — that grow businesses and increase incomes.
In its first year, ClimaFii engaged 30 financial service providers, supported 20 climate-focused enterprises, and facilitated eight partnerships between these groups. The partnerships created tailored asset financing options that directly and indirectly impacted 4,000 microentrepreneurs, including women and smallholder farmers.
Accion’s extensive experience working with financial ecosystem actors has positioned us well to enable partnerships between financial service providers and climate enterprises. As an anchor program partner, our role is to help turn climate innovations into financial models that providers can feasibly adopt, deploy, and scale for microenterprise customers.
As this work progressed, several clear lessons emerged.
Key learnings from year one
Climate enterprise readiness is critical
A key component of the program is to support innovative companies in accelerating and scaling locally relevant, climate-friendly productive assets. However, many are not yet equipped to effectively partner with financial service providers.
These companies also face a persistent challenge: they need scale to attract financing, but financing is needed to achieve scale. And, although they recognize the lack of tailored financing for their end customers, they do not always see a clear business case for facilitating that financing themselves. Companies that do lend using their own funds usually do so out of necessity to build traction in the early years.
Our work highlighted several priority areas for strengthening enterprise readiness:
- Financial awareness: Improving climate-focused enterprises’ understanding of financial instruments and their role in catalyzing support for scaling the adoption of productive use energy assets by end users.
- Business operations: Enhancing their ability to deploy or integrate financial services and customer support touchpoints within existing operations.
- Technology and compliance capacity: Many of these companies lack digital platforms, a robust tech stack, or enterprise resource planning (ERP) solutions that can integrate smoothly with financial services providers. Building technical and regulatory compliance capacity will enhance their ability to effectively participate in digital financial ecosystems.
- Fragmented supply chains and data gaps: These companies need support from multiple stakeholders to address the data gap. Creating credible data points remains a key challenge.
- Decentralizing the regional approach: In sub-Saharan Africa, energy use patterns, payment behaviors, financial ecosystems, regulations, and operating models vary widely. These variations shape how microenterprise customers adopt technology, generate cash flows, and engage with financing solutions. No single “regional” climate-focused enterprise or financing approach can fully capture this diversity and should be acknowledged.
Financial service providers must view productive use energy and mobility asset finance through a different lens
While many financial service providers are increasingly engaging with climate finance, the partnerships we supported in year one were often motivated by a more immediate question: whether productive use of energy and mobility assets are a viable way to help microenterprises grow income. When providers view these assets as core to microenterprise productivity (not just a short-term social impact effort), they are more likely to invest for the long term. This requires changing how risk, incentives, and partnerships are structured across the value chain.
It is important to incentivize investment capital across the value chain, not only at the macro level. Financial service providers also need a stronger push to invest in systems and resources that ensure capital reaches end users sustainably.
We learned that greater participation among financial service providers and shifting climate finance perceptions and practices can be driven by:
- Adapted underwriting models: Financial service providers often fail to distinguish climate financing from their usual lending models. As a result, they apply conventional frameworks that tend to systematically overestimate risk and limit investment — especially for women borrowers, who are typically assessed against criteria that do not reflect their realities. Providers cite portfolio risk and operational feasibility as constraints, but these are often evaluated without recognizing that climate finance is structurally different and requires adapted underwriting models.
- End-user-first approach: For climate-smart portfolios to succeed, financial service providers should design products around the end user first, rather than around capital costs, operational feasibility, and associated credit or insurance risks.
- Stronger partnerships: Collaborating with innovative companies creates opportunities to test new models.
- Aligned incentives and risk allocation: Many financial service providers remain hesitant to diversify beyond conventional instruments, often due to limited understanding of the value chain, perceived risks, and operational constraints. Credit guarantees or concessional capital can de-risk pilot portfolios and provide a catalytic boost.
- A clear business case: Framing climate finance as a commercially viable opportunity is essential for mobilizing and scaling private capital into the system.
What worked well
- Strong participation across the public and private sectors: For example, during product building, we structured a second-loss default guarantee provided by the Small Industries Development Bank of India (SIDBI) through the Empower Nanopreneurs for Green Transition Risk Sharing Facility (EN-Trans RSF), supported by Shell Foundation. This was offered alongside coverage for catastrophic risks from low-sun days, to pilot with Aphelion Finance and Rudra Solar Energy. These risk-sharing mechanisms enabled lenders to offer lower interest rates to end users.
- Cross-sector and cross-functional collaboration: The program was designed for collaboration from the outset, aligning Accion with our funding and venture-building partners to work with financial service providers and climate enterprises.
- Unified ecosystem approach for tackling the challenge: The program also saw government-affiliated entities, startups, insurance providers, microfinance institutions, and fintechs participating in developing innovative financial products.
- Increased awareness and improved stakeholder readiness across the value chain. Startups enabling productive use of energy and mobility assets have matured and better understand the nuanced requirements of financial providers, while financial providers have become more willing to serve these less established entities and their end users.
What we can build on
- Continuing to align expectations among stakeholders.
- Balancing impact with viability.
- Adopting timelines that reflect multi-stakeholder complexity.
- Ecosystem building that translates intent into systems work at the ground level.
The way forward: Year two outlook
As the program continues in its second year, Accion and our partners will apply these learnings to advance climate innovation and financial sector partnerships, with a renewed emphasis on commercial viability as the foundation for sustained productive asset financing and adoption.
While the first year focused on access to finance and technology, the program now aims to increase microentrepreneurs’ income through expanded technology adoption and to strengthen income resilience through tailored financial instruments that protect against climate losses. A new ClimaFii Resilience Lab will support this work by testing product and process innovations and implementing these financial instruments.
The program also recently announced a new cohort of 30 innovators who will receive support to scale their climate solutions for microentrepreneurs. We look forward to working with them alongside financial service providers and ecosystem enablers to be part of this journey.
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