Plans for a blended finance regenerative agriculture facility that could raise billions of dollars are underway, led by Pollination and the Green Climate Fund, Carbon Pulse has learned.

The facility will seek to take a step towards the transformation of the agricultural system needed for the planet to tackle the biodiversity and climate crises, said Steven Lang, managing director of climate change investment and advisory firm Pollination.

“The initial idea is to develop this with a focus of between four and six African countries, to get the model right first, in the order of somewhere between $500 million and $1 bln,” Lang told Carbon Pulse. He hopes the fund will launch next year.

Each country would have between one and three ‘landscapes’ focused on trying to prove scalable models of regenerative agriculture, backed by Pollination’s fund.

Should these projects succeed, the fund could then expand its focus to countries in Southeast Asia and Latin America, to a total of between 30 and 50 landscape areas spanning different types of farming.

A vehicle of this size could generate enough data to inform the rest of the world on how to transform 50% of global food production, Lang claimed.

Over time, the facility could raise “several billion” dollars in finance from public and private sources, he said.

The money will go to smallholder farmers via local financial institutions, as well as debt and equity investments in local businesses throughout the food supply chain to enable a fully regenerative system to work coherently, he said.

The Kunming-Montreal Global Biodiversity Framework (GBF) has targeted generating more than $200 bln annually in biodiversity-related funding by 2030 from both public and private sources.

According to a deforestation study published last month on Nature, small-scale crops such as cocoa, oil palm, and rubber are primary drivers of forest loss in Africa.

GOVERNMENT ENGAGEMENT

Pollination has been developing the facility idea for a year with the UN’s developing country-focused Green Climate Fund (GCF), the world’s largest climate fund with $13.5 bln of financing allocated to projects.

Pollination has engaged with 14 African governments over the last five months on its regenerative agriculture facility idea. An investment in each country would differ depending on the nation’s dominant crop type, Lang said.

It has spoken with Uganda on coffee, Ivory Coast with cocoa, Nigeria on palm oil, and Tanzania on cotton, alongside Zambia, Rwanda, Namibia, and Kenya.

“This has to be owned and driven locally, with local institutions supporting African businesses and farmer cooperatives,” Lang said.

One of the GCF’s 11 targets for 2024-27 is enabling smallholder farmers to adopt low-emission, climate-resilient agricultural practices.

THE PROBLEM

The agricultural supply chain is one of the greatest contributors to climate change and biodiversity loss, while being notoriously difficult to make more sustainable on a global scale.

A key barrier to scaling financing in regenerative agriculture is the lack of bankable projects, Lang said.

“The appetite is there, the capital is there, but it’s just too risky. The role of blended finance is to bridge that gap between projects that are approaching bankability, and get them to the point that they are investment ready.”

Concessional capital from sources like government development agencies can attract private finance by enabling investments on more favourable terms.

“Evidence around regenerative agriculture is strengthening all of the time, and at some point that’s going to tip. It’s going to be abundantly clear that the prevailing business model is fragile.”

“The evidence in terms of impact and outcomes is there. What hasn’t been there is the combination of mechanisms to create the right incentives for farmers.”

Farmers need to be able to access better livelihoods through regenerative agriculture, backed by supportive financing, to achieve scale, Lang said.

The facility would provide more data on how financing models can support smallholder farmers en masse, while benefitting crop yields, resilience, and nutrients.

Small-scale food businesses received around 0.8% of total climate finance between 2019-20, according to a study by the Climate Policy Initiative published last year.

“It’s not reaching the people that need it because of perceived risk as well as a lack of institutional capacity to take that money and distribute it effectively – which is why you need a big facility focused on capacity building and technical assistance,” Lang said.

One of the “most significant” objectives of the Pollination facility would be to direct capital towards smallholder farmers, Lang said.

INNOVATION

The portfolio of landscapes could become innovation sites for trialling ways of monetising biodiversity markets, and new technologies, Lang said.

Work in the landscapes could try to answer questions such as: “How do you distribute finance to a million smallholder farmers simultaneously? How do you use blockchain technology to get full traceability from a regeneratively produced kilo of rice to market?”

Biodiversity and carbon credits can play a role in the facility’s revenue generation, he said.

Pollination appointed Dame Amelia Fawcett, co-chair of the influential International Panel on Biodiversity Credits (IAPB), as a senior advisor last week. Fawcett could play an “amazing role” in marshalling finance around biodiversity credits, Lang said.

The UK-France-led panel launched last year with the aim of catalysing high-integrity biodiversity credit markets.

While biodiversity credits have “unstoppable momentum” behind them they are “not a silver bullet” for the environmental crisis, he said.

“The fact that so many are thinking about how do we apply a markets mindset to funnelling money into nature and biodiversity I think is significant of itself.”

By Thomas Cox – t.cox@carbon-pulse.com

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