Blending Climate and Agriculture Finance to Support Climate-Smart Landscapes

Overview

The climate-smart agriculture financing disconnect

This brief analyzes the implications for the development of climate-smart agriculture and suggests steps towards more effective integration of climate and agriculture finance. Agricultural landscapes must provide food, fiber and energy to a growing global population in a changing climate, while potentially serving as instruments for climate change mitigation. However, there is a disconnect between the ways that climate-smart landscapes will need to be managed and the current financing systems available to support them.

Funds for agricultural development, food security, climate mitigation and climate adaptation generally come from different sources even though these goals are inextricably linked in agricultural systems. The consequences of this separation are inefficiency and insufficient access to financing for climate-smart agricultural development.

The status of climate and agriculture financing

Climate finance in the form of official development assistance (ODA) from multilateral and bilateral sources provides support through a variety of mechanisms. Private sources of capital for climate mitigation can be split into flows towards the regulated carbon markets or to the Voluntary Carbon Markets (VCMs). However, the lines between private and public investment funds blur within carbon markets, because public institutions can be buyers of credits. Private companies may also invest in projects that could be considered ‘low carbon’ outside of carbon markets, through their Corporate Social Responsibility (CSR) programs or supply chain sustainability efforts.

A growing cohort of private foundations and international NGOs, such as Rockefeller, CARE, Oxfam and Conservation International are joining with national NGOs and farmer organizations to invest in climate-smart agriculture. Most agricultural investment for smallholder agriculture comes from the farmers themselves. It also comes through private domestic sources including banks, microfinance institutions, and domestic agri-business throughout the agricultural supply chain.