Micro, small and medium enterprises (MSMEs) are the economic backbone of the more than 70 countries in the Global South that make up the Vulnerable Twenty Group of Ministers of Finance (V20)—supporting livelihoods, employment and local economic stability—yet remain disproportionately exposed to climate shocks and underserved by financial systems.

Climate shocks affect MSMEs twice: first through direct physical and operational losses, and then through reduced access to finance, limiting their ability to recover, adapt and invest in resilience. Repeated climate shocks and constrained financing create a self-reinforcing cycle of vulnerability, increasing exposure to future losses.

This pioneering landscape study by the V20 Sustainable Insurance Facility (V20-SIF), implemented under the Principles for Sustainable Insurance (PSI), draws on surveys and interviews with financial institutions across V20 economies to develop a pragmatic and replicable approach to strengthening MSME resilience.  This includes working through the credit ecosystem of banks and microfinance institutions (MFIs) that already engage with MSMEs, using insurance risk management capabilities to better assess and manage physical climate risk, and designing adaptation measures and resilience finance and insurance solutions that can be implemented across a fragmented financial ecosystem and brought to scale.

Moving from assessment to implementation, the report outlines the V20-SIF’s approach to managing the structural constraints limiting the ability of financial systems to support MSME climate resilience.