Catalyzing Climate Finance for Low-Carbon Ag-Tech

Despite minimal contributions to causing climate change, rural households working in the agriculture sector are disproportionately impacted by climate-related shocks and see it as one of the biggest risks to their livelihoods.

Climate finance presents a critical opportunity to bring investment and innovations that can drive the growth of new low-carbon development pathways and improve household and community resilience in agricultural settings. However, climate investment is currently not at the levels required to support the clean energy enterprises serving this sector, especially in terms of adaptation finance.

The Paris Agreement calls for an even balance between mitigation and adaptation finance provided by developed countries, but adaptation finance is lagging significantly. Channelling adaptation investment to the populations most vulnerable to climate threats is proving even more challenging, with just 3% of global climate finance flowing to Africa. Additionally, women-led enterprises face many of the same barriers in accessing climate finance as they do in accessing other forms of finance, which can stymy efforts by climate investors to incorporate an explicit gender lens into their efforts.

The Energy Access Project at Duke University and RMI, with support from the Shell Foundation, are studying the climate adaptation impact of DRE solutions in agriculture and assessing the case for investment in this sector for climate-first investors. As part of this project, we spoke with executives from 32 SMEs in these sectors and climate-first investors. Climate mitigation impact, while relatively more suited for private financing to date, is less compelling for clean energy solutions in agriculture because the GHG emission reductions may be relatively small. The adaption benefits the sector could provide in terms of improved food security and enhanced community resilience to climate shocks are potentially of much greater value from the perspective of climate finance.

Graph showing carbon mitigation potential of agricultural value chains

The objective of this project is to help answer the following research questions—and ultimately help catalyse climate finance into energy enterprises serving smallholder farmers in the agricultural value chain:

  1. What is the potential contribution to climate adaptation and mitigation that can be delivered through increased support to renewable energy businesses serving small-holder farmers and the agriculture value chain?
  2. What investment opportunity does this market present to climate-first investors? What climate finance vehicles, mechanisms and instruments are most suitable to increase investment into renewable energy businesses serving this market?

This forthcoming report aims to more clearly define the financing needs of energy businesses serving the agricultural value chain and the evolving landscape of climate finance vehicles, mechanisms and instruments available to SMEs in Sub-Saharan Africa and India, including new innovations in this area (eg: SDG co-benefits) and metrics/criteria for adaptation impact, including gendered impact, that would be acceptable to these providers.

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