Blended Finance Bulletin

Abstract

As the impact of climate change manifest by way of adverse weather events and disasters, and becomes more frequent, the need for resilience towards the impact and the resulting risk becomes increasingly exigent. Critical infrastructure and sectors are the most at risk, like food and agricultural systems. The increasing frequency of adverse events threaten the stability of the agricultural and food systems more adversely than any other critical sector. Availability and affordability of agricultural produce are both essential factors that get impacted by climate change, addressing which requires both the understanding of the risk and the capacity to become resilient. One of the potential ways to address the capacity for resilience is the ensure that those who are exposed are capacitated to be able to identify the risks and afford the remedies. This enhancement of adaptive capacity can come if access is provided to such resources that can build said adaptive capacity. One such capacity is the ability to afford measures that build resilience, because the knowledge of risks and measures is not enough if the capacity to implement the measures is not present.

The document attached presents a framework for developing access to financing that is sourced from multiple sources, for supporting the implementation of climate adaptation measures. A form of financing that is sourced from multiple sources, most likely and preferably from public and private/commercial sectors, is known as blended financing. The framework presented here establishes a flow of broad activities necessary to create access to appropriate blended finance for enhancing climate adaptive capacity. The narrative developed for accessing blended finance begins with establishing an understanding of the landscape that is exposed to and impacted by climate change, the vulnerability prevalent in that landscape, and a measure of risk to agricultural livelihoods and business activities. The information gathering process is participatory and based on anecdotal references. This methodology is by design since it is more the perception of the risk and the resulting perception of loss and damage that governs business and financial decisions of agricultural entities, rather than the actual data. The process however does verify the anecdotal inputs against the scientific perception regarding landscape’s empirically determined climate risk. Based on this risk perception measures are identified that help enhance the resilience of the agricultural activity/value chain against the identified climate risks. The framework goes on to help create a business approach around the identified climate adaptation measures, help develop the value-chain in a climate adaptive manner using the identified measures and perform financial analysis to understand the viability of the identified measures. These activities, as per the framework, are performed in a participatory manner. The approach finally attempts to identify existing gaps in the process of creating access to blended financing. The document at hand attempts at creating a narrative, derived from the experiences from pilot projects implemented in six Indian states, collaborating with Farmer Producer Organisations (FPOs), across multiple agricultural value chains and value chain activities. The pilot projects used GIZ’s Climate Expert Tool to perform the risk assessment and strategy development for business planning for climate adaptation. The pilot project also enabled the FPOs to interact with financing institutions (public, commercial, and philanthropic) and access finance in the form of grants, equity, and debt to implement climate adaptation measures across various levels of various value chains.

–

To understand more about our approach towards leveraging blended finance for climate adaptation in Agriculture, you can access the complete report by using the link attached below.