The Inter-American Development Bank (IDB) has launched a Climate-Smart Agriculture Fund for Latin America and the Caribbean (CSAF), targeting $20 million to $25 million.
Current investors include the Global Environment Facility (GEF), with a commitment likely from the Nordic Development Fund (NDF), the joint development finance institution of the five Nordic countries. The fund is currently looking for more contributors, Katalin Solymosi, Climate-Smart Agriculture Fund Advisor, told Agri Investor.
Fundraising is expected to close by the end of this year, according to Patrick Doyle, senior climate and energy officer of the Structured and Corporate Finance Department of the IDB.
The fund was launched last week with $5 million in reimbursable finance from the GEF, an international corporate partnership that tackles global environmental issues. The NDF will contribute an additional $5 million to the fund including $1.6 million in non-reimbursable grant financing if its board approves the commitment.
IDB plans to add co-financing with its ordinary capital to the GEF commitment. Doyle said,“The funds raised from GEF will be used to provide loans or guarantees to allow our own and private capital to flow to these projects. So the total amount of investment that $5 million will support will be many times greater.”
The fund is identifying and conducting due diligence on projects currently but “any projects that relate to agroforestry, pure forestry or other agri production that need concessional climate change investment to move forward will be considered,” Solymosi said.
Climate-smart agriculture, the key target of the fund, is a business model that elevates agricultural output while stabilising or reducing the use of inputs, such as water, land or fertiliser, limiting the effects of climate change.
Investments in this type of agriculture are hindered by the access to finance such as lengthy payback periods, and great barriers to information on sustainable practices. Consequently, climate-smart investments get “put off indefinitely, perpetuating poor land-use management, additional greenhouse gas emissions, increased vulnerability to climate change and lower incomes for small producers,” according to an IDB statement.