Leveraging Climate Finance for Smallholders’ Adaptation to Climate Change

Developed a roadmap for engaging corporations and impact investors, leveraging carbon markets and Nature-based Solutions to scale investment in smallholder climate adaptation.

The challenge

Smallholder farmers are among the populations most vulnerable to climate change, yet adaptation remains one of the most underfunded areas of climate finance. Smallholders produce over 80% of developing nations’ food supply and manage a substantial share of global agricultural land, but receive minimal climate finance allocations: less than 2% of climate finance reaches small-scale agricultural producers, with adaptation finance significantly overshadowed by mitigation investments.

At the same time, growing corporate commitments to net-zero emissions, biodiversity protection, regenerative agriculture, and nature-based solutions are creating entirely new markets and sources of capital. The core challenge is connecting these emerging investment opportunities with smallholder adaptation needs.

Our contribution

Commissioned by the Office of the Vice-President for Strategy and Knowledge at IFAD in preparation for COP27, Altamira examined how adaptation financing could become more investable and how IFAD could strengthen its positioning within climate finance ecosystems, guided by two research questions: can adaptation benefits be monetised, and through which financing and implementation mechanisms; and how can IFAD partner with corporations, investors, and sustainable finance actors to mobilise greater investment for smallholder adaptation and a just transition?

Altamira’s role spanned research framework design, facilitation of strategic dialogues with climate finance experts, impact investors, corporations, multilateral organisations, and nature-based solutions specialists, and roadmap development for private-sector partnerships.

Our approach

The methodology shifted from a traditional funding-gap perspective toward three strategic elements.

Value generation through adaptation

Rather than treating adaptation solely as public expenditure, the research examined how the multiple benefits generated by resilient agricultural systems could create new revenue streams, attract private capital, and unlock innovative financing mechanisms.

Systems thinking integration

The analysis connected three traditionally separate domains: smallholder agriculture and rural development; climate and sustainable finance; and nature-based solutions and ecosystem markets.

Collective intelligence and market dialogue

The process combined literature review, systems analysis, climate finance trend mapping, review of pioneering instruments, strategic leadership dialogues, and collaborative roadmap design.

Key findings

Monetisable adaptation benefits

Six mechanisms emerged with strong adaptation support potential: soil carbon credits, water credits, corporate stewardship investments, wetland and mitigation banking, payment for ecosystem services, and Adaptation Benefit Mechanisms, creating opportunities to mobilise resources beyond traditional public and development finance.

Nature-based solutions markets

Growing demand for carbon credits, ecosystem services, and nature-based solutions is opening pathways for investments that simultaneously support climate adaptation, mitigation, biodiversity, and rural livelihoods, with regenerative agricultural practices particularly promising for improving soil health, carbon sequestration, water retention, and climate resilience.

Carbon markets as a catalyst

Voluntary carbon markets can play an important catalytic role in financing adaptation and regenerative agriculture, though carbon finance alone is not sufficient. Carbon revenues can serve as entry points for broader strategies capturing multiple environmental and social benefits.

Mosaic projects and regenerative value stacks

The research highlighted “mosaic projects”: integrated investments capable of generating multiple value streams simultaneously by combining carbon credits, water benefits, biodiversity outcomes, ecosystem services, and corporate investments into what Altamira terms a regenerative value stack.

Strategic outcome

The roadmap identified practical pathways for leveraging voluntary carbon markets, expanding nature-based solution partnerships, mobilising corporate climate and sustainability investments, supporting regenerative agricultural transitions, increasing smallholder adaptation investment, and positioning IFAD as an emerging climate and nature finance catalyst.

Why this matters

The project redirected the discourse from how adaptation can be funded to how adaptation can become investable. By connecting climate resilience, ecosystem restoration, regenerative agriculture, and rural development as mutually reinforcing value creators, the work advanced an emerging vision of finance that rewards long-term resilience rather than short-term extraction. These insights continue to inform regenerative finance, nature markets, and development finance institution discussions.