As US aid cuts gut the climate ecosystem, here’s how we respond

It’s time for organisations working in the climate ecosystem to move beyond the US hegemony.

The dismantling of USAID has sent shock waves through the global aid world. The funding freeze on U.S. aid, which in the 2023 fiscal year amounted to $72 billion in assistance worldwide, has left organisations wondering how to continue their important work of supporting some of the world’s most vulnerable. As Elon Musk smugly posted on his social media platform X: “Spent the weekend feeding USAID into the wood chipper,” organisations scrambled to understand how they would pay their staff members, fill orders for lifesaving medications, or even survive past 90 days.

While legal action and political backlash in the United States offer some hope that the funds may resume, the limbo is already having huge negative effects on those who worked for, or were recipients of, U.S. aid assistance. And for those of us in the climate and/or diversity, equity, and inclusion space, we are left wondering if these projects will ever be funded again.

At Climate KIC, we’ve been speaking with our partners across Africa, Latin America and the Caribbean, and Asia who work on climate entrepreneurship and with diverse entrepreneurs, to understand the current and longer-term impact this freeze will have.

What we are seeing in the climate ecosystem

Beyond the shock and lack of clarity over what the order would mean, the initial impact was that many of our partners had to let go of valuable staffers who are integral to running their organisation. Many highlighted that USAID funding was often used for staff who keep organisations running, such as admin or business development staffers. These responsibilities have now often shifted to program staff, compounding the work needed to keep their programs running.

In addition, the abruptness at which USAID wants organisations to let staff go fails to take into consideration the legal rights of workers in different countries to fair compensation for dismissal. So far, no clarity has been given to our partners on how to navigate this and many are worried about potential legal backlashes to unfair dismissals.

 In another instance, one of our partners in Kenya highlighted that USAID owes them $5,000 in back payment and there are no structures in place to recoup this. This organisation is looking at ways to fill this financial hole but may have to let go of staff without this rightly owed funding.

With the immediate issues of paying and retaining staff, there are also issues around co-funding of other programs where reliance on USAID funding to support overheads puts the sustainability of continuing to deliver work into jeopardy.

Despite some legal victories, implementing partners may not see a dime if the Trump administration refuses to pay the government’s bills.
Many of our programs also work with marginalised entrepreneurs, such as women, young people, or people with disabilities, to support them in building their climate businesses to make a living from this. Ending these programs would have huge consequences for the economic mobility of these groups, further entrenching inequalities and the potential economic growth that comes from thriving startups.

Building resilience as an ecosystem

While the funding gap is colossal to fill, those in the ecosystem still with access to funding must begin to build resiliency and support organisations impacted by this. At Climate KIC, we are focusing on supporting our partner organisations by looking again at funding resources and seeing if we can shift any funds to cover losses; helping our partners explore new revenue streams through social entrepreneurship models; and challenging private investors and partners in the ecosystem to step up and invest in these valuable programs to allow climate entrepreneurship to thrive.

 Other organisations, such as Catalyst 2030, have given clear short-term recommendations to affected organisations, such as monetising existing data and research, looking for consultancy opportunities that utilise the skills you already have, and exploring bespoke opportunities for businesses or investors with your products.

And while we deal with the short-term fallout from this aggressive policy shift, it’s time for the climate ecosystem to move beyond the reliance on U.S. hegemony in this space.

This means creating more partnerships with the private sector and investors who stand to gain from a thriving climate innovation sector; moving towards collaborative philanthropic collectives, such as The Collaborative, to see real long-term commitment on these issues; and a commitment from other governmental foreign aid departments that they will counter the ignorant Trump administration proposals by reinstating their commitments to climate action.

That way, climate innovation from all walks of life can thrive and won’t be threatened the next time an aspirational oligarch comes knocking.

This opinion piece by Wallis Grant was originally published on Devex.