302
There are also crucial differences among the types of agencies that promote
climate- smart investments. While on-farm and value-chain investments are driven
by private financial returns, public and civic agencies seek to support societal benefits such as sustainability, poverty reduction and inclusiveness. Public-private partnerships can therefore be helpful.
The purpose of this paper is to understand how rural finance instruments (credit,
savings and insurance) can support the adoption and upscaling of CSA. We do not
address targeted international financial mechanisms (such as Global Environment
Facility and Green Climate Fund) that intend to create specific supportive investment conditions for climate-smart practices. Instead, we focus on methods of linking local financial markets with adaptive CSA practices, with the goal of identifying
viable market-based pathways for bringing CSA systems to scale. Our study primarily addresses ways to enhance local adaptive capacity, since mitigation usually
requires more global and long-term mechanisms.
In this paper, we first outline the theories of change underlying investments in
CSA practices. Then we review the available empirical evidence from studies that
analyse these pathways. We give special attention to integrated finance models that
address critical complementarities among these pathways, and to different analytical approaches for assessing the impact of CSA-supportive financial policies.
26.2 Theories of Change
The term climate-smart agriculture describes systems designed to improve food
security and rural livelihoods and to support climate-change adaptation and mitigation efforts. Mitigation refers to reducing greenhouse gas concentrations in the
atmosphere, while adaptation—our focus in this paper— aims to reduce vulnerability to anticipated negative impacts of climate change such as rising temperatures,
increases or decreases in precipitation, and changes in the timing of the rain season
(UNFCCC 1992).
Meeting the financing requirements for implementing CSA is a significant challenge, since both technological innovations and socio-economic and institutional
changes are required. There are three markedly different pathways for assessing
CSA investments (Fig. 26.1):
• Direct pathway: Financial instruments for enhancing direct investments for
climate- smart practices, ranging from short-term input loans to medium- and
long-term loans (Pender and Gebremedhin 2008; Arimi 2014; Marenya et al.
2014; Nyong et al. 2007);
• Indirect pathway: Economic incentives for supporting farm-household incomes
that generate expenditure effects in favour of climate-smart practices (LopezRidaura et al. 2018; Ksoll et al. 2016; Jette-Nantel 2013; Wood 2011);
R. Ruben et al.
There are also crucial differences among the types of agencies that promote
climate- smart investments. While on-farm and value-chain investments are driven
by private financial returns, public and civic agencies seek to support societal benefits such as sustainability, poverty reduction and inclusiveness. Public-private partnerships can therefore be helpful.
The purpose of this paper is to understand how rural finance instruments (credit,
savings and insurance) can support the adoption and upscaling of CSA. We do not
address targeted international financial mechanisms (such as Global Environment
Facility and Green Climate Fund) that intend to create specific supportive investment conditions for climate-smart practices. Instead, we focus on methods of linking local financial markets with adaptive CSA practices, with the goal of identifying
viable market-based pathways for bringing CSA systems to scale. Our study primarily addresses ways to enhance local adaptive capacity, since mitigation usually
requires more global and long-term mechanisms.
In this paper, we first outline the theories of change underlying investments in
CSA practices. Then we review the available empirical evidence from studies that
analyse these pathways. We give special attention to integrated finance models that
address critical complementarities among these pathways, and to different analytical approaches for assessing the impact of CSA-supportive financial policies.
26.2 Theories of Change
The term climate-smart agriculture describes systems designed to improve food
security and rural livelihoods and to support climate-change adaptation and mitigation efforts. Mitigation refers to reducing greenhouse gas concentrations in the
atmosphere, while adaptation—our focus in this paper— aims to reduce vulnerability to anticipated negative impacts of climate change such as rising temperatures,
increases or decreases in precipitation, and changes in the timing of the rain season
(UNFCCC 1992).
Meeting the financing requirements for implementing CSA is a significant challenge, since both technological innovations and socio-economic and institutional
changes are required. There are three markedly different pathways for assessing
CSA investments (Fig. 26.1):
• Direct pathway: Financial instruments for enhancing direct investments for
climate- smart practices, ranging from short-term input loans to medium- and
long-term loans (Pender and Gebremedhin 2008; Arimi 2014; Marenya et al.
2014; Nyong et al. 2007);
• Indirect pathway: Economic incentives for supporting farm-household incomes
that generate expenditure effects in favour of climate-smart practices (LopezRidaura et al. 2018; Ksoll et al. 2016; Jette-Nantel 2013; Wood 2011);
R. Ruben et al.