Module 16 – Client engagement on climate risk management

Engaging clients and broader stakeholders on climate risk can be challenging, especially when constrained by resources, data, and nascent regulatory requirements. The following best practice approaches can help foster constructive conversations with clients on climate action.

  • Start with awareness and capacity building

    1. Train internal teams, particularly front-line lending teams, to understand climate risk concepts, international standards and stakeholder expectations. Knowledgeable front-line employees are better able to identify opportunities and risks from client conversations.
    2. Explore opportunities to have targeted sessions, in collaboration with other institutions, with higher-risk clients, using real-life case studies to show how addressing climate risks can strengthen their business and open up new pathways to action.
    3. Focus efforts on high physical risk projects or high-emitting sectors and seek input from subject-matter experts where needed to ensure best practice.

  • Emphasise dialogue and partnership

    1. Tailor discussions to each client’s context, drawing on local market realities, sector-specific knowledge and an understanding of their capacity and risk appetite.
    2. Engage clients collaboratively, using regular conversations to explain the institution’s approach to climate risk and how credible climate action can strengthen their resilience and improve their access to capital.
    3. Present the institution as a partner supporting a climate-smart transition, not as an external authority focused on performance metrics.

  • Tailor expectations and processes to client capacity

    1. Adopt a risk-based tiered approach that prioritises high-risk (Red flag) clients, while using simplified assessment templates for SMEs or lower-risk clients.
    2. (Commercial banks) Consider a ‘comply or explain’ model that recognises capacity constraints and sectoral differences. Clearly outline in advance the implications of non-compliance or material underperformance, such as enhanced monitoring or in exceptional cases, changes to financing terms.

  • Co-create practical tools and templates

    1. Share user-friendly checklists, sector guidance and examples of best practice to streamline and standardise client responses and to meet minimum requirements (see Module 12).
    2. Update templates and guidance regularly based on client feedback and regulatory developments.
    3. Encourage peer learning by connecting clients to share experiences and practical insights on managing climate risk.

  • Integrate climate engagement into existing workflows

    1. Include climate-related topics in regular credit reviews, due diligence and portfolio monitoring as part of overall risk management (see Module 20).
    2. Align climate engagement with existing E&S Action Plan processes, using CAPs as a structured extension where relevant (see Module 14).

Guidance 14a: Illustrative phases of FI-client engagement

Effective client engagement on climate risk is an ongoing, context-specific process built on partnership. The University of Cambridge Institute for Sustainability Leadership (CISL) offers a comprehensive reference for FIs looking to engage with their clients. We provide training and resources for FIs, including the ESG Toolkit to support client engagement. Climate Action 100+ also has a regularly updated list of cross-sectoral case studies showcasing companies taking decisive climate action.

Practical tips for MFIs operating in underserved communities

  • Use non-technical language and provide context-relevant examples: Explain climate risks in ways that connect to clients’ everyday experiences. Avoid technical jargon and refer to tangible local issues that affect their business interests, such as irregular rainfall, flooding, drought, hot working conditions, or increased pest activity.
  • Leverage trusted channels and community intermediaries: Engagement is often more effective when delivered through established local channels, such as cooperatives, extension workers or community leaders, rather than directed by FI representatives. Partner with local organisations to hold group sessions or use local media, such as radio segments in local dialects, to raise awareness on adaptation measures.
  • Focus on practical solutions: Keep discussions grounded in observable impacts, such as declining yields or water shortages, and focus on actionable responses like switching to drought-resistant crops or basic water-harvesting methods. Avoid technical detail or complex data demands that may discourage client participation.
  • Deliver short, action-oriented educational trainings: Provide brief, visually engaging materials or community-based workshops on basic adaptation and risk management, such as crop diversification, efficient irrigation or business continuity planning. Schedule training to coincide with key seasonal activities, for example, agroforestry workshops before the planting season.
  • Integrate climate risk into existing client touchpoints: Include simple climate-related questions into current loan application or renewal processes, keeping data collection incremental and non-intrusive.

 

CLICK TO VIEW GUIDANCE 14a: Illustrative phases of FI-client engagement.

Guidance 14b: Illustrative client engagement opportunities for MFIs

(MFIs) effective client engagement is the cornerstone of building climate resilience in local communities. Many clients in underserved communities may already be experiencing climate impacts but lack the resources to respond effectively. Guidance 14b highlights products and services that MFIs can offer to clients to support climate resilience outcomes. This Climate Investment Funds research brief offers best practices and case studies for designing climate adaptation products.

 

CLICK TO VIEW GUIDANCE 14b: Illustrative client engagement opportunities for MFIs.

 

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