By Amelia Genis
There are huge gaps between the funding for climate mitigation and adaptation and the contributions of the public and private sectors to it.
Hayden Aldredge, senior manager of ISF Advisors (an American company that provides capital for a more sustainable, equitable, and productive food system), said in a panel discussion on climate change at the African Agri Investment Indaba in Cape Town that 95% of climate financing is allocated to climate change mitigation, but only 5% for adaptation. Of that, the private sector provides only 5% to 10%.
Since it costs $15 billion (about R272 billion) per year to tackle the effects of climate change in the agricultural sector of sub-Saharan Africa, but $200 billion (about R3,600 billion) per year if it’s not done, the private sector should make a more significant contribution, especially to solutions that can help smallholder farmers as well as small and medium-sized enterprises to adapt better.
‘Lack of information and risky’
Aldredge says the private sector’s small contribution is mainly due to a need for more information and a perception that agricultural production is risky.
“Private investors and commercial banks shy away from financing for adaptation because the solutions are so hyper-localised. They have a complete lack of understanding of it. There’s also hardly any information about the people or organisations implementing the adaptations.”
He says the secondary risk is “real” risk. “Agriculture is a risky sector, and 90% of commercial banks in Africa say climate change will have an enormous adverse effect on their portfolio.” According to him, traditional underwriting methods cannot capture the actual risk of agriculture.
He believes digital technology can help banks and farmers in this regard. Remote sensing (a crucial technology that uses satellite and aerial imagery) can provide banks with climate data to make more informed decisions. Similarly, farmers can use digital market platforms to build a transaction history.
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