Green Remittances: A novel form of sustainability finance

Abstract

Lack of finance is a key barrier to sustainable development. Formal aid and private investment are insufficient and vulnerable to inefficient government-to-government interactions and fail to reach some populations. Remittances from 280 million migrant workers to families at home represent enormous complementary monetary inflows to low- and middle-income countries, and, at $600 billion globally, are three-times greater than “top-down” Official Development Assistance. While commonly intended to alleviate poverty, remittances are rarely targeted towards sustainable development, and can even lead to environmental degradation. There is significant potential to align remittances with sustainability goals, assisted by emerging technologies and digital-finance platforms. Proactive “green remittances” can take the form of cash, goods, or services. They can be targeted to households, transportation, agriculture, entrepreneurial purposes, or community-level infrastructure projects. Applications include renewable energy, energy-efficiency, and a range of climate change resilience and adaptation activities. The article provides a unique synthesis of the existing literature, highlighting the lack of focus on proactively directing remittances toward sustainability, and identifies and assesses early targeting efforts in eight countries. Key policy challenges include awareness-building among remittance providers and recipients, identifying and pooling applicable locally-available goods and services, assuring quality, reducing transaction costs, and scale-up.