Addressing Risk, Financing Resilience was a rare, candid discussion held at COP20 in Lima today, where panellists elevated their rhetoric to have a genuine discussion on the challenging issues surrounding how to raise more climate finance for initiatives that are critical to building resilience for smallholder farmers.
Yamil Bonduki of the United Nations Development Programme (UNDP) led off the talks by raising the importance of attracting diverse sources of finance in support of national low-emission strategies and sustainable development priorities. His work with the low-emission capacity building programme looks at how to incentivize the private sector to get involved with mitigation and adaptation activities by developing bankable, risk for return investment opportunities.
Pablo Ramirez of Starbucks brought a private sector perspective into the discussions. With over 21,000 stores worldwide, there are enormous pressures on the supply chain to source their brand of specialty coffee, he stated. He referenced a CIAT study on the Colombia coffee sector, which forecasts that a 1.5 degree rise in temperature would wipe out 65-70 percent of coffee production by 2050 if nothing is done to adapt production methods.
In response they are implementing pilot projects to engage their coffee exporters as direct lenders to smallholders, enabling them to offer low interest rate loans so that their producers can afford to invest in climate-smart techniques. Furthermore, the pilot relies on a robust extension system, with over four visits to small farms a year. In this way producers get used to communicating with extension agents as well as making regular payments on their loans. This approach enables them to run their farms as effective small enterprises.
Speaking on what’s needed for country level readiness for climate finance, IFAD’s Gernot Laganda explained that in small-scale agriculture, the technologies to adapt to climate change are generally known, however due to barriers such public policy disincentives, lack of commercial lending, political economy and elite capture, these technologies often do not take hold.
Kathryn Milliken of the UN’s World Food Programme stated that many smallholders critically lack access to risk financing instruments such as insurance products that can help them cope when extreme climate events do occur. The R4 Rural Resilience Initiative is another pilot intended to help meet smallholder demand for insurance, structured so that beneficiaries can purchase policies by contributing their labour toward climate-smart infrastructure works, such as water harvesting tanks, cisterns and roads.
Panellists were challenged to provide a framework for moving from innovative pilots like the ones described, to large scale implementation, which is often a constraining factor that precludes projects from achieving sustainable results. Here each speaker pivoted from real-world barriers to pragmatic solutions. Laganda identified several scale mechanisms that are being leveraged by IFAD’s Adaptation for Smallholder Agriculture Programme (ASAP).
These include using climate finance to 1) influence public policy processes; 2) produce partnership spaces between government ministries and national meteorological services ; 3) crowd in commercial lending; 4) create new financial spaces such as small funds at the community level; and 5) build human capital through farmer field schools and other learning institutions. If we keep piloting without thinking about how to achieve scale, then we will not be able to affect lasting change, he said.