5th July 24

Climate Adaptation and Financing in Agriculture

The impact of climate change has been a common topic among public, private and development partners across the globe. The concern surrounding the adverse effects of climate change and the amount of support put towards adaptation and resilience measures continue to be worrying conversations among experts.

According to climate models, smallholder farmers from Africa and Asia who rely on their farms for food as well as income continue to be the most impacted by food and water shortages catalysed by climate change. The increase in intensity and occurrence of extreme weather conditions such as floods and droughts has led to decrease in food production, loss of livestock that subsequently affects food prices and contributes to food insecurity. In spite of studies showing only 4% of the global greenhouse emission originate from Sub-Saharan Africa, production losses on African farms is almost twice the global average and climate financing required is billions below the yearly threshold.

Climatic changes have been an ongoing conversation throughout the world, with “raising awareness” being one of the key instruments used to drive the agenda on climate adaptation forward. Despite a lot of effort being put into awareness, majority of the people do not understand half of the climate jargons used yet the decisions made and actions not taken will have a drastic effect on their future wellbeing.

Why climate adaptation and resilience?

Climate adaptation is any measure taken to protect a society and its natural ecosystem from the negative effects of climate change in a way that is both sustainable and resilient.

Adaptation may take many forms and can at times be unsettling, such as; land acquisition and resettling of inhabitants to allow for tree planting programs and water catchment areas or in more innovative forms; such as creating climate smart technologies that help farmers rely less on rainfall and improve on their yields.

Climate adaptation may be viewed as the converse to mitigation. Mitigation involves measures taken to reduce or prevent greenhouse emission as a result of human activities while adaptation seeks to provide a viable solution to an ever-changing world.

Adaptation builds a system that is resilient, capable of anticipating, absorbing, accommodating or recovering from the negative effects of climate change in timely manner. According to the gate’s foundation, food security can only be improved from innovations that promote resilience to changing weather patterns.

The ever-increasing temperatures and worsening weather patterns that affect food security will continue to have devastating effects on our global food supply and make it more challenging to meet the Sustainable Development Goals (SDGs) on food security.

It will be difficult to execute and actualize adaptation measures if the amount of climate financing flowing in agriculture continues to be less than what is required, primarily in the developing countries. According to a 2022 UN Adaptation Gap Report, the amount of international financing inflows towards adaptation in developing countries is 5-10 times below the required amount and the gap is ever growing. By 2030, annual adaptation needs will reach north of USD 160 – 340 billion.

The Global Goal on Adaptation (GGA) established during the UN Paris Agreement in 2015 became a positive step in promoting a globally unified front for capacity building toward adaptation and resilience. Though this was progress in the right direction, the UAE Framework for Global Climate Resilience plays a critical role in ensuring there’s a framework globally agreed on towards climate adaptation.

The framework encourages international investment geared towards meeting the climate adaption goals while taking note of the financing gap that exists. The framework encourages more financing commitment to reduce this gap, though it lacks a tangible financial parameter in place that can be measured against.

The upcoming COP29 to be held in Baku, Azerbaijan will primarily focus on climate finance, discussing aspects such as New Collective Quantified Goal (NCQG), the Loss and Damage fund among others. It will be crucial for the financing goal to give a high level of priority to developing countries to not only lessen the gap, but acknowledge the negative impact felt by these low-income countries that had less responsibility towards climate change compared to high income countries. According to the UN estimates, developing countries will require up to $70 billion annually for climate adaptation and by 2030, this figure is likely to rise to $300 billion.

Climate finance towards agriculture

According to the US government, 2.5 billion people in developing countries depend on climate related activities such as agriculture to survive. The global population continues to rise and will require at least 60% increase in food production to feed people. The staggering figure is only enraged by the decreasing food capacity experienced due to drought and famine as a result of rise in temperature levels and changing weather patterns.

Adaptation will require raising awareness, providing political space for engagement, sharing information, strengthening technical and institutional capacities, engaging a wide range of stakeholders and facilitating the provision of financial and technological support.

Increasing climate finance in developing countries is necessary to meet the financing needs for smallholder farmers and Agri SMEs.

Smallholder farmers and Agri SMEs experience barriers to accessing capital from financial institutions such as banks, microfinance institutions due to;

  • Inadequate enabling environment
  • Agricultural risks and;
  • High transaction costs

Climate finance can play an important role in unlocking agriculture financing to Agri SMEs and smallholder famers, providing technical capacity and creating an enabling environment to access capital.

Banks or microfinance tend to have a negative view on agricultural financing perceiving it to have low margins, risky due to the seasonality of the cashflows, high transaction costs where there lacks proper infrastructure in place to access the farmers and a lacking suitable products tailored to meet the needs of the farmers.

Development partners, public and private institutions have the mandate to reduce the financing gap in the agriculture sector by providing technical support to both the Agri SMEs, small holder farmers and banks. In addition, creation of a risk sharing instrument such as guarantees, will encourage private lending institutions to finance agriculture related activities, create products that are aligned with the sector and encourage longer maturity loans that meet the requirement of the seasonal cashflows.

According to Simon Stiell, the Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC)said during COP 28, “Adaptation is an investment in our futures, not an admission of defeat. Let us give it the money and attention it deserves.

By Brian Ndegwa, Senior Consultant, Agri Frontier Growth Hub

Credits

https://www.gatesfoundation.org/ideas/climate-adaptation

https://www.usaid.gov/sites/default/files/2022-05/Climate-Adaptation-for-Food-Water-Security.pdf

https://unfoundation.org/blog/post/climate-adaptation-is-key-to-a-climate-resilient-future-but-what-does-it-mean

https://documents1.worldbank.org/curated/en/986961467721999165/pdf/ACS19080-REVISED-OUO-9-Making-Climate-Finance-Work-in-Agriculture-Final-Version.pdf

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