Small-scale farmers are integral to the global food supply, producing 80 per cent of all the food consumed in developing countries and 30 per cent of all the food consumed in the world. According to Urs Dieterich, Managing Director of the Landscape Resilience Fund (LRF), this makes them key to guaranteeing the sustainability and resilience of the agricultural sector so that it can absorb the impact of climate change. And yet this is a vulnerable group that doesn’t have access to technological innovations or bank loans like larger companies. It’s precisely these smallholders that the fund set up two years ago is focused on. It collects funds from private and public donors to support SMEs in developing countries in the southern hemisphere.
This support is earmarked for enterprises working in agriculture or forestry that source their products directly from local smallholders, are committed to promoting sustainable development in their region and are willing to offer smallholders relevant training opportunities.
The LRF made its first investment 18 months ago in ‘Koa’, a business in Ghana that processes the cacao pulp that surrounds the beans in the pod. ‘The juice is consumed as it is or turned into a powder that can be used as a sugar substitute in the food industry,’ explains Dieterich. ‘Koa is generating added value using a raw material that was previously discarded or left to rot in the fields.’ For small-scale farmers, this boosts profits by 30 per cent without any additional expenditure. The Ghana-based business used the two million Swiss francs allocated by the LRF to set up state-of-the-art production facilities, creating jobs for locals in the process. ‘Koa originally worked with 1,800 small-scale farmers and that figure has already increased to 3,000. We’re expecting it to jump up to 10,000 within three years,’ says Dieterich.
Using the pulp from the cacao plant as a sugar substitute.
Blended finance
The LRF was launched by WWF and climate consultancy South Pole in 2021. It’s financed by an international luxury goods company as the anchor investor and the Global Environment Facility (GEF), which Dieterich says is pioneering in climate adaptation. ‘Climate resilience is still not being talked about enough and is relying almost exclusively on state funding.’ The fund was also set up with the aim of finding more private investors. This is what Dieterich calls ‘blended finance’, which involves funding coming from various sources.
The LRF, which is registered as a foundation in Switzerland, combines philanthropic impact with profitability. Companies like Koa have to pay back their loans with a moderate interest rate applied. ‘As a foundation, making a profit isn’t our main priority,’ says the managing director. The LRF wants its investments to empower companies to set themselves up for long-term business success. In turn, those companies will be able to attract other investors. The idea is that LRF, as a credible investor with strong social and environmental values, acts as a catalyst and encourages other donors to get involved. ‘The LRF has three focus areas,’ says Dieterich. ‘We help SMEs in countries in the southern hemisphere to extend their capacity so they can become profitable businesses, we provide loans, and we bring together local stakeholders who want to make a positive impact in their region following a landscape approach.’ Alongside the environmental focus, this work also addresses social aspects, such as promoting gender equality and sharing knowledge about climate adaptation with small-scale farmers.
Cacao farmers in Ghana during the harvest. Both beans and cacao pulp are used.
Actions with multiple benefits
The fund’s primary objective is making enterprises working in agriculture and forestry more resilient to climate change. In this context, resilience isn’t about simply accepting climate change. Dieterich, who himself has a degree in Forest Science, firmly believes that efforts to counter climate change are important. But the reality is that the agricultural sector isn’t in a position to prepare for extreme events like droughts or floods – no matter how hard it tries. The good news is that some actions can have multiple benefits. Small-scale farmers that swap monoculture for biodiversity will be more resilient financially because they won’t be hit as hard by crop failures. They’ll also be improving soil fertility, which will increase their crop yields. Plus, healthy soil can store more water and CO2. That’s a positive in the fight against the climate crisis. Dieterich believes that people can learn so much from nature: ‘No system is more resilient than nature, which has already adapted to climate change many times in the past.’
Development phase complete
The Landscape Resilience Fund has already taken several SMEs in the southern hemisphere under its wing since it was launched. Alongside Koa in Ghana, a company in Tanzania working with small-scale farmers to produce certified organic spices has also benefited. Support is also being provided for the sustainable development of vulnerable landscapes in Brazil and Vietnam. The foundation supports ongoing operations and also allocates advance payments to allow SMEs to develop their business with a specific focus on climate change. That’s a risk that investors aren’t willing to take if all they care about is making a profit. According to Dieterich, the development phase is now over after two years. The foundation is ready for the next stage, which will involve collecting even more funding to add to the ten million dollars already received in donations to make a real impact.
