Around the world, we are seeing the diverse consequences of climate change, and agriculture is particularly affected
This causes disruptions to livelihoods, economies, and puts food security at risk, while disproportionally impacting the lives of the poor.
To respond, the United States Agency for International Development (USAID) Climate Strategy 2022-2030 established an ambitious and comprehensive “all-of-Agency” approach, to support mitigation and adaptation, requiring USAID country missions to catalyze private and public sector climate action.
In partnership with Open Capital and Climate Policy Initiative (CPI), the USAID Africa Trade Initiative (ATI) conducted a landscape analysis of climate finance options for agriculture across sub-Saharan Africa. Through extensive analysis, we assessed the status quo, barriers, and identified opportunities to further scale climate finance across the continent. The report provides valuable insights into climate finance for agriculture in sub-Saharan Africa, exploring avenues for low-emissions agriculture, and suggesting interventions to facilitate the flow of climate finance.
To identify opportunities, we first needed to understand the barriers; our research identified a range of both supply- and demand-side barriers to climate finance flows:
On the supply side, the key barriers primarily relate to the limited maturity and depth of local financial markets, alongside the limited range financing instruments available. We also noted limitations in regulation and policy that constrained the growth of climate finance.
On the demand side, factors such as fragmented markets, small business sizes, limited investment readiness, and the lacking understanding of measuring climate impact and climate finance options, including how to access them, were the most prevalent barriers.
Our recommendations identified important actions for both the USAID Africa bureau and individual USAID country missions. At a regional level, the opportunity lies in supporting country missions to implement contextualized climate response strategies. Key actions would include: providing support to country missions to develop country/region-level climate finance roadmaps to accelerate climate finance flows; establishing a market acceleration facility to provide targeted technical assistance for the development and scale-up of effective climate projects and businesses; establishing a climate finance development facility to provide early-stage/ initial capital for climate-positive agribusinesses and projects; and supporting existing initiatives to increase the flow of climate finance.
USAID country missions are at the forefront of enabling the scale-up of climate finance at the national level. As a result, they need to consider the unique country contexts, by assessing the prevailing state of climate action and climate finance traction. Using important criteria as the assessment basis, country missions can establish the stage of climate finance traction within a country, from “early-stage” to “advancing”, and then develop a tailored roadmap of interventions to address the unique needs. Our research showed that early-stage countries should prioritize development of climate-smart projects, relevant government policies, and regulations to enable climate change response and attract investments. On the other hand, advancing countries should focus on enhancing the use of suitable climate finance instruments (e.g., carbon credits and green bonds), strengthening market information systems, supporting fiscal reform to incentivize low-carbon investments, and strengthening developer capabilities to develop climate-friendly projects.
Click here to read the full OCA & CPI - Climate Finance Innovation for Agriculture report
