What did COP26 bring for farmers in need of transition finance?
Published on: November 26, 2021
Whilst smallholder farmers work 1/5 of the world’s farmland to produce 1/3 of the global population’s food, they only receive 1.7% of total tracked climate finance. We have witnessed this first-hand at reNature, where one of our biggest challenges is unlocking finance to directly support smallholder farmers in implementing regenerative agriculture techniques.
As we tread with cautious optimism following the conclusion of COP26, it is time to reflect upon the pledges that were made and how this momentum can be used to catalyse this transition.
What commitments have been made?
A number of commitments were made during the COP, including the Global Coal to Clean Power initiative where more than 40 countries committed to quitting coal and the Global Methane Pledge with more than 90 nations committing to reduce methane emissions by 30% before 2030. Below we’ve listed the initiatives that show some potential in financially supporting smallholder farmers to transition to regenerative agriculture.
Glasgow Leaders’ Declaration on Forests and Land Use
The main objective of this declaration is to halt forest-loss by 2030. The initiative has received some skepticism based on the failed attempt of the very similar New York Declaration on Forests, which was actually followed by an increase of 43% on the annual rate of global deforestation. However, this new declaration does include 141 signatories who cover more than 90% of the world’s forests. Importantly, among these signatories are key players such as Brazil, Russia and the Democratic Republic of Congo. The Declaration is linked to the Global Forest Finance Pledge, which has earmarked $12 billion for ‘forest-related climate finance between 2021-2025.’
Smallholders are explicitly mentioned in the objectives of the Fund through ‘increasing the availability of finance for … community forestry, to improve livelihoods and support a transition to sustainable practices.’ Among the delivery mechanisms listed are funding for results-based payments and capacity building programmes.
Agriculture Innovation Mission for Climate (AIM4C)
AIM4C was created by the United States and UAE to accelerate investment and other support for climate-smart agriculture and food systems innovation. The signatories have pledged more than $4 billion of new investments for 2021-2025.
Two of their so-called ‘Innovation Sprints’ explicitly mention smallholder farmers, including a new $40m initiative led by CGIAR to explore climate-resilient traits from CGIAR’s genebank collections. Another $13m will be put towards crop protection innovation for farmers in Asia, Africa and Central America. The U.S. regenerative cotton fund will also see an investment of $5m to help scale these practices across the country.
An ambitious collective action initiative launched at COP26, which pledges over $60bn per year to finance the regenerative agriculture transition. The initiative aims to have over 50% of global food produced in a way that ‘drives regenerative outcomes’ whilst engaging over 500m farmers to do so.
Glasgow Breakthrough Agenda
Endorsed by 40 nations, the ‘Glasgow Breakthrough Agenda’ aims to scale the development of clean technologies and drive down prices through the coordination of nations and businesses. The Agenda is predicted to create 20 million new jobs globally and mobilise more than $16trn across different economies. One of the five focus areas is agriculture, striving to make ‘climate-resilient, sustainable agriculture… the most attractive and widely adopted option for farmers everywhere by 2030.’
Global Action Agenda
The Global Action Agenda on Innovation in Agriculture has been signed by 45 nations and more than 100 other organisations including businesses, research institutions, farmers groups and regions and states with the aim of mobilizing $4bn towards climate-resilient crops, digital technologies and solutions that improve soil quality. Co-led by FCDO and CGIAR, this programme is supported by four key initiatives including the 100 million farmers multi-stakeholder platform led by the World Economic Forum, the Global Research Alliance on Agricultural Greenhouse Gases (GRA) initiative, CGIAR research and innovation, and ClimateShot allies from the impact invest community.
CGIAR has secured close to 1 Billion USD to investigate and implement solutions to several climate-related challenges in agriculture, including adaptation and climate-smart solutions. To do so, CGIAR is partnering with several governments, including Sweden and Belgium, and philanthropic institutions, such as the Bill and Melinda Gates Foundation.
Glasgow Climate Pact: How does the main outcome of COP26 relate to land use and agriculture?
Although a final change of wording from India and China on ‘phasing down’ rather than ‘phasing out’ coal was a disappointing blow in the very last hours of the conference, the Pact itself is certainly significant relative to other commitments from prior COPs. As well as keeping 1.5C alive, the Pact also requires countries to provide annual revisions of their nationally determined contributions, rather than every 5 years.
Climate finance was also given some due attention in recognition of the pledge from the 2009 Copenhagen Summit, where developed nations agreed to support developing countries by jointly mobilising US$100bn annually by 2020. In short, this has not happened, with the highest amount of $79.6 billion distributed in 2019. The Climate Finance Delivery Plan has been formulated to ensure that the $100bn goal is met each year. Some key collective actions listed in the plan include improving access to climate finance, strengthening the UNFCCC and Paris Agreement financial mechanism, working with Multilateral Development Banks to increase and improve climate finance, and improving the effectiveness of mobilized private finance. The Delivery Plan calls for developed countries to create innovative financial instruments to ‘mobilize the private sector in areas and regions not yet sufficiently covered, including with respect to adaptation.’
As well as including the Delivery Plan, the Glasgow Climate Pact has agreed to double the proportion of climate finance going to adaptation. This is hugely significant, although must be taken hand-in-hand with a disappointing lack of reference to Loss and Damage pledges.
IFAD’s Adaptation for Smallholder Agriculture Programme (ASAP) and enhanced ASAP+ also made significant announcements at this COP. Sweden has committed around $11.7m to fund small-scale farmers through its ASAP+ programme, whilst Honduras signed a mutual commitment with IFAD to search for additional funding to promote climate-smart agriculture in the country.
What happens next to turn these initiatives into action?
Work is certainly needed to develop financial mechanisms that provide smallholder farmers with the funding they need to make the transition to regenerative agriculture.
At reNature we have a pipeline of around 80,000 farmers who are looking for funding to implement regenerative agriculture. This is one of the biggest challenges we face in our mission to regenerate 100 million hectares of land by 2030.
In order to support and scale these projects, farmers need access to blended financing mechanisms that utilise catalytic grant funding to prove the business case of regenerative agriculture. Once this proof of concept is established, the profitability and investment-readiness of the farm makes it easier to find other sources of investment.
At reNature, we are exploring innovative financing mechanisms that support our smallholder farmers, such as:
- Making use of local financial intermediaries, such as micro-finance institutions to provide favourable loans for farmers, coming from either private or public sources.
- The Power of the Crowd: Using crowdfunding platforms to channel investors with smaller ticket sizes.
- Supporting funds specific to regenerative agriculture: We are eager to start supporting asset managers to set up funds specifically to finance the transition to regenerative agriculture, for which we would then provide our pipeline of projects.
- Fundraising through our foundation: We wish to continue and strengthen our approach in seeking grant funding through our foundation to directly support the farmers in our pipeline.
reNature will continue to investigate new ways to fund the farmers who are spearheading this transition. We want to work with the wider finance community to make use of new opportunities in funding and ensure that they are going to the right people – the smallholders who provide so much of our food and are the ones who pioneer new strategies to address the climate crisis.