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Fair instruction - Summary
Fair instruction - Summary

Excerpt

ADAPTA.EARTH

Disrupting how capital assesses and manages climate change and sector risks is key to help producers adapt to climate change.  All support (i.e.; technology, capital, and capacity) given to farmers, while positive, hardly makes a dent on the actual need because access to finance remains the achilleas heel of the sector.  In Kenya, only 5% of total loans go to the sector.  The
  • The recent Intergovernmental Panel on Climate Change (IPCC) report highlights the grim reality that "the rise in weather and climate extremes has led to some irreversible impacts." Agriculture is vulnerable to increasing heat, soil degradation, and more intense precipitation, affecting food systems, and bringing millions into food insecurity, mostly in developing economies.
  • Finance for adaptation has been neglected and is inadequate. UNEP estimates adaptation costs in developing countries at $140 billion - $300 billion by 2030. The public sector cannot meet these targets alone. Attracting private capital for adaptation is a priority. So, what is the game-changer to increasing private capital for adaptation?
  • Tiserin Capital Management Limited (TCM), a Kenyan advisory firm, the Bill and Melinda Gates Foundation (BMGF), and One CGIAR have joined forces to develop and launch ADAPTA.EARTH (ADAPTA), a climate adaptation FinTech for the agriculture sector. ADAPTA seeks to strengthen farmers' and Agri-SMEs' climate resilience and support their expansion plans and financial standing. More importantly, ADAPTA seeks to unlock capital from lenders and investors through an algorithm that leverages weather, soil, water, biodiversity, inputs, and market data, enhancing their approval process.  In the same way,
number in neighboring countries is worst.   A paradigm shift is required to transform the agriculture sector's risk-return profile and increase financing available for adaptation. Part of the solution lies in filling information gaps to support both the assessment and management of weather and climate risk in the sector. ADAPTA will become Africa’s first climate adaptation credit facility directed to the agriculture sector.  It seeks to transform the way lenders and investors assess the sector's risks by introducing weather and climate data, Ag-technologies, soil, and hydrology assessments, etc., to develop climate scores and adaptation plans that can help ADAPTA and other commercial banks make informed credit decisions and proactively manage agriculture portfolios for climate resilience.  The same way
  • credit scoring algorithms transformed consumer and corporate finance
globally, ADAPTA’s climate scoring algorithms, supported by these new technologies,
  • , ADAPTA's algorithm may unlock millions of dollars for climate-smart agriculture.

In brief - What will we do? 

Tiserin Capital, One CGIAR, and USAID's Kenya Investment Mechanism (USAID-KIM) have joined forces to develop and launch ADAPTA, the region’s first climate adaptation credit facility directed to the agribusiness value chain.   This innovative credit facility seeks to strengthen producers’ and Agri-SMEs' financial standing and expansion plans but, just as importantly, enhance their climate resilience. ADAPTA plans to use an innovative structure that combines blended finance and a climate-smart model (CSM) to address adaptation finance barriers. A US$3Mn Phase I involves the following components, focused on development and testing of the climate-smart model, which will be central to a Phase 2 US$20Mn+ adaptation fund, and will become a global public good for wider benefit.  Phase I will target Kenya:

Component 1: Develop and test CSM with One CGIAR and other partners 

  1. Climate scorecard.
  2. Climate due diligence.
  3. Climate adaptation plan.
  4. Climate portfolio management.

Component 2: Structure ADAPTA's delivery models through three to six projects in collaboration with USAID Kenya-KIM.

Component 3: Test outcomes and develop recommendations.

  1. Test gender, SDGs, and climate-smart ag outcomes.
  2. Refine tools and recommendations for phase II.
Phase I will develop the CSM, support One CGIAR and TCA infrastructure, and test ADAPTA in 3-6 projects. Once tested, ADAPTA's CSM will be accessible to local commercial banks and investors to increase lending and investment into the agriculture supply chain
  • Phase I: This phase is seeded with a US$1.5Mn grant from the Bill & Melinda Gates Foundation (BMGF) to develop ADAPTA's Climate Smart System (CSS), a technology-driven climate risk assessment that leverages technology and data to complement the traditional financial, legal, ESG, and tax due diligence appraisal process. The CSS will be tested in 6-10 projects in the maize, potato, horticulture, tea, coffee, grass, and dairy value chains, among others.  ADAPTA committed and disbursed its first loan early this year and plans to close three others by July 2022.   Five Kenyan financial intermediaries will also be invited to test the CSS.
  • Phase II: TCM plans to establish ADAPTA.EARTH in Delaware, USA, with two business verticals: (i) a US$40Mn+ blended finance FinTech that leverages the CSS and focuses on small and medium farmers and Ag-SMEs in Eastern and Southern Africa, Central America, Peru, and Colombia; and (ii) establish ADAPTA CS, a SaaS offering the CSS to lenders and investors in Africa and Latin America.
  • ESG: TCM has adopted IFC's E&S Performance Standards and uses IFC's Governance Guidelines for SMEs.
  • Impact: job creation, farmers reached, acreage under climate-smart agriculture, GHG reduction, etc. TCM and ADAPTA are aligned to the DFC's 2X Women Initiative.
  • Why ADAPTA: with growing global attention to climate action, ADAPTA is positioned to help the world’s adaptation priorities. ADAPTA has a local and proven team with expertise in multi-stakeholder facilities, agriculture and agribusiness, SMEs, credit and equity, blended finance, and ESG.