THE Inter-American Development Bank (IDB) has announced that approval has been granted the $5M Climate-Smart Agriculture Fund (CSAF) for the Caribbean and Latin America to encourage private sector companies in the region to invest in projects that increase farmers’ incomes while addressing climate change.Created in partnership with the Global Environment Facility (GEF), the goal of the CSAF is to unlock greater private-sector investment in sustainable land-use and climate-resilient agribusiness.
“Our efforts thus far have produced solid results on climate mitigation,” said Kelle Bevine, Head of Strategy in the Structured and Corporate Finance Department of the IDB.
“This new initiative complements those achievements with a first-of-its-kind fund to pursue equally ambitious results on climate adaptation,” she said, adding:
“Concessional financing tools like this help to unleash the innovation of first mover projects and shift from business as usual.”
Climate-smart agriculture is a business model that increases agricultural output, while maintaining or lowering amounts of inputs, such as land, water or fertiliser.
It also increases total productivity, while reducing environmental impacts and building resilience to threats to production induced by the effects of climate change.
Climate-smart agriculture investments, however, face a number of hurdles in the access of finance, including lengthy payback periods, as well as significant barriers to information on sustainable practices.
As a result of these challenges, climate-smart investments may be put off indefinitely, perpetuating poor land-use management, additional greenhouse gas emissions, increased vulnerability to climate change, and lower incomes for small producers.
The Fund addresses these barriers by offering risk-tolerant capital with long tenors to catalyse private investment by cushioning early losses, and providing a concessional tranche of resources that can transform projects into sustainable business investments.
Associated technical assistance will enable the IDB to build the necessary capacity for project implementation, and to disseminate lessons to other private-sector investors.
The Fund’s investments will focus on the restoration of degraded lands through reforestation and other measures to increase productivity and profitability, and enhance carbon stocks.
They will also improve agricultural management, including sustainability certification of agricultural products and water efficiency investments.
Across the region, the forestry and agriculture sectors are already affected by climate change.