Financing Ecosystem-based Adaptation (EbA) through Micro-Finance Institutions

Although private sector involvement in climate adaptation finance is still a novelty, the United Nations Environment Programme is working with Microfinance
Institutions (MFIs) to shift the paradigm. MFIs cater to some of the most vulnerable populations, so if they promote sustainable adaptation products and services, they can target those who need them the most. Since 2012, the Microfinance for Ecosystem-based Adaptation (MEbA) project has provided technical assistance to MFIs so they may
autonomously disburse loans oriented towards Ecosystem-based Adaptation (EbA) options. In the process, MFIs incorporate the tools provided by the project to increase the Climate resilience of their clients and overall portfolio. Initially, three MFIs in Colombia and two in Peru participated in the project. Now, in its second phase, twelve MFIs are participating from six Latin American countries and three African countries.

The long-term goal is that partner MFIs extend specific loans to farmers for climate change adaptation measures and offer subsidized loans in return for expected
climate benefits. Barriers include identifying which adaptation measures qualify in which specific region and how credit officers can measure and report these to donors.
The main climate challenges identified locally by one of the participating banks were increased temperatures and landslides as well as flooding caused by extreme rainfall.
Resulting yield losses are currently exacerbated by poor farm management practices and limited access to financial resources. The project is aiming to help farmers adapt to
climate hazards by identifying local adaptation measures and financing them with favorable conditions.

The project aligns well with Nationally Determined Contribution (NDC) adaptation targets and strategic areas in Colombia as well as in Peru. In Colombia’s NDCs,
agriculture was identified as a key sector for adaptation with a heightened importance as revenue generating activity in post-conflict rural areas. Ten agricultural subsectors,
including rice, coffee, livestock and combined systems, are planned to have improved capabilities to adapt to climate change and variability. In Peru, a strong focus is on areas that have been previously deforested and where agricultural productivity is low due to degradation. In this regard, EbA is a strong fitand aligns well with sector policies beyond the country’s NDCs.