Making Climate Finance Work in Agriculture
Key Messages from Our Recent Webinar
Alberto Millan and Tobias Baedeker of the World Bank’s Global Practice presented a lively and informative discussion focused on the opportunities for financial institutions in developing countries to benefit from accessing financing and services from Climate Finance providers.
The presenters gave a short overview of the challenges facing the agricultural sectors in developing countries, and the need for farmers and SMEs to access financing from banks so as to utilize new and improved technologies and practices that improve productivity, increase resilience and better manage risks while also reducing emissions.
Key messages from the webinar included:
Climate Smart Agriculture (CSA) is a priority for the World Bank. Yet for CSA to be adopted by farmers and SMEs in developing countries, they need much better access to finance if they are to be able to make the necessary investments.
CSA adoption and implementation is essential for developing countries. Agriculture generates up to 29% of total global greenhouse gas (GHG) emission and will come under increasing pressure to reduce these emissions given its potential to mitigate a rising global climate. At the same time, agriculture is extremely vulnerable to climate change, and farmers and SMEs need to adopt CSA to improve their productivity, increase their resilience and reduce the potential negative impacts of climate change. However, increasing CSA adoption and implementation will require not only additional capital but also individually tailored financial products and services.
Financial Institutions in Developing Countries have an opportunity to expand their services to agricultural sectors aiming to implement CSA. However, FI’s will face challenges regarding designing new lending products to meet the needs of CSA investments; finding ways to lend that effectively manage risk and utilizing alternative delivery channels so as to reduce transaction costs when dealing with rural populations.
Linking FIs to Climate Finance provides a unique opportunity to enable FIs to expand their lending to CSA. There is an excellent opportunity for FIs to access finance and resources from Climate Finance providers, both public and private, so as to support their expansion of lending to CSA. To date, only a small fraction of climate finance globally has flowed into agriculture. However, building linkages between FIs and Climate Finance are already offering the potential to change this.
Products and Services from Climate Finance to Financial Institutions include additional liquidity, concessional financing, risk sharing instruments, grants and technical assistance among others. Such services offer the chance for FIs to overcome their constraints in expanding lending to agricultural actors for the purpose of CSA, while also providing Climate Finance with a way of supporting climate change mitigation and adaptation in agricultural sectors.
To learn more about how Climate Finance works and how it can be used to leverage additional capital and strengthen the links between climate finance, financial institutions, and smallholder farmers and agribusinesses, we recommend reading the World Bank’s report “Making Climate Finance Work for Agriculture.”
AgriFin will be holding its annual conference in September 2017, which will focus on this topic, join us at the event to learn more about this critical subject. The conference will bring together climate financiers, including public and private investors, commercial banks, and international and domestic lending institutions. Conference details will be forthcoming shortly.