First-of-its-kind fund will support investments that increase rural livelihoods, reduce greenhouse gas emissions and enhance biodiversity
The Inter-American Development Bank (IDB) announced the approval of the $5 million Climate-Smart Agriculture Fund for Latin America and the Caribbean (CSAF) to incentivize 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 CSAF aims 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. This new initiative complements those achievements with a first-of-its-kind fund to pursue equally ambitious results on climate adaptation,” said Kelle Bevine, Head of Strategy in the Structured and Corporate Finance Department of the IDB. “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 fertilizer. It 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 to access finance, including lengthy payback periods, as well as significant barriers to information on sustainable practices. As a result, 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 catalyze 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 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 restoration of degraded lands through reforestation and other measures to increase productivity and profitability and enhance carbon stocks. They will 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. Coffee plantations in Central and South America are increasingly vulnerable to leaf rust fungus (la roya), for example, requiring investment for replanting and technical assistance. Reducing emissions from the land-use sectors and making them more resilient to the effects of climate change has become a critical development challenge given the importance of agriculture to the region.
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source oflong-term financing for economic, social and institutional development in Latin America and the Caribbean.The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
- John Ferriter