Developing Carbon Credits to Finance Smallholder-Inclusive Supply Chains

The Livelihoods Carbon Fund has invested in developing smallholder agroforestry systems in marginalized regions occupied by tribal minorities in the state of Andhra Pradesh, India, through the local NGO Naandi Foundation. The project is embedded in organic coffee production and marketing and serves to increase the resilience of the coffee production systems at landscape level.

The main climate hazards identified in the region are an increased number of extreme weather events, including heat, storms, and flooding, resulting in livelihood loss. For local farmers, the most effective way to adapt was found to be reforestation of degraded areas in combination with crop diversification and higher value addition to already
grown and new crops.

The combination of the restoration activities and the commercial aspect of local farming is a best practice to generate additional income while applying ecosystem-based
adaptation measures (in this case, mangrove reforestation). Impact investors use the climate benefits of restoration (carbon credit) to reinvest in commercial value chain
development, making it an economically sustainable project.

The project aligns with India’s NDC mitigation and adaptation targets: It contributes to bringing 33% of India’s area under forest cover, while engaging the private sector to
spend at least 2% of their annual profits on corporate social responsibility, including environmental initiatives. Adaptation funding for the most vulnerable rural poor is
another NDC priority captured by the project.