Case Study: Landscape Resilience Fund

The Goal

Climate change exacerbates natural hazards, food insecurity, and protracted crises. It poses a significant threat to those most vulnerable such as smallholders and communities in developing and least developed countries that need to adapt urgently. But even in 2020, climate adaptation remains underreported and underfinanced, even while extreme weather events ravage the world. The Landscape Resilience Fund aims to take down the barriers that hinder investments in climate adaptation being scaled up. It has been a 'winner' of the Global Environment Facility (GEF) Challenge Program for Adaptation Innovation (through WWF-US as a GEF agency), supported by the Least Developed Countries Fund and the Special Climate Change Fund.

The Challenge

The numbers seem to speak for themselves: A 2019 report by the Global Commission on Adaptation concluded that investing $1.8trn globally from 2020 to 2030 could generate $7.1trn in total net benefits. But currently, only a fraction of this amount is deployed. The United Nations Environment Programme Finance Initiative has identified three main barriers that hinder such investments being scaled up:

• No value for positive externalities – when private investments generate benefits to society that cannot be captured by a company because they do not generate an additional cash flow, the incentive for them disappears
• Imperfect capital markets – an instance is the lack of longer-term credit, which inhibits the ability to finance the investments required to cope with distant climate impacts
• Incomplete or asymmetric information – when critical information, such as on the expected impacts of climate change. is unavailable, inaccessible or distributed unevenly among different actors

The Solution

The Landscape Resilience Fund aims to close these three gaps. It supports the most vulnerable people in the land-use space to effectively adapt to climate change by providing knowledge to and investing in small and medium enterprises (SMEs) that target adaptation and resilience through sustainable agriculture. The fund accompanies SMEs on their pathway to financial profitability through an approach of three funding windows: pre-investment funding builds investment-readiness for SMEs; a landscape window connects local stakeholders and their projects, identifies opportunities in value chains, and mitigates social and environmental risks; implementation investment provides revolving soft loans to scale effective business models.