Financing a Just Transition for Smallholder Farmers
Unlocking Climate Finance, Nature Markets, and Private Capital for Climate Adaptation
- Client: International Fund for Agricultural Development (IFAD)
- Region: Global
- Period: 2une–September 2022
- Category: Climate Finance & Investment Origination
- Role: Research Design, Strategic Facilitation, Stakeholder Engagement, Roadmap Development
- Focus Areas: Climate Adaptation, Regenerative Agriculture, Nature-Based Solutions, Carbon Markets, Sustainable Finance
- Methodology: Systems Analysis, Market Mapping, Strategic Dialogues, Collective Intelligence
- Key Output:COP27 Discussion Paper and Strategic Roadmap
- Strategic Theme: Financing a Just Transition for Smallholder Farmers
- Outcome: Roadmap for engaging corporations and investors to scale adaptation finance and regenerative agriculture
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. Despite producing more than 80% of the food consumed in developing countries and managing a large share of global agricultural land, smallholders receive only a fraction of global climate finance flows. Less than 2% of climate finance reaches small-scale agricultural producers, while adaptation finance remains dramatically overshadowed by mitigation finance.
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 challenge is how to connect these emerging opportunities with the adaptation needs of smallholder farmers and rural communities.
Our Contribution
Commissioned by the Office of the Vice-President for Strategy and Knowledge at IFAD in preparation for COP27, Altamira designed and led a strategic research and stakeholder engagement process to explore how climate adaptation can become more investable and how IFAD could strengthen its role within the evolving climate finance ecosystem.
The assignment focused on two fundamental questions:
- Can adaptation benefits be monetized, and if so, through which financing and implementation mechanisms?
- How can IFAD partner with corporations, investors, and sustainable finance actors to mobilize greater investment for smallholder adaptation and a just transition?
Altamira designed the research framework, facilitated strategic dialogues with climate finance pioneers, impact investors, corporations, multilateral organizations, and nature-based solutions experts, and developed a roadmap for IFAD’s future engagement with private-sector partners.
Our Approach
Traditional climate adaptation discussions often focus on funding gaps.
This project explored a different perspective:
1. How can adaptation generate value that attracts investment?
Rather than treating adaptation solely as a public expenditure challenge, the work examined how the multiple benefits generated by resilient agricultural systems could create new revenue streams, attract private capital, and unlock innovative financing mechanisms.
2. Systems Thinking Across Finance, Agriculture, and Nature
The analysis connected three domains that are often treated separately:
- Smallholder agriculture and rural development
- Climate and sustainable finance
- Nature-based solutions and ecosystem markets
3. Collective Intelligence and Market Dialogue
The process combined:
- Literature review and systems analysis
- Mapping of emerging climate finance trends
- Review of pioneering financing instruments and partnerships
- Strategic dialogues with leaders from multilateral organizations, private-sector corporations, impact investors, and conservation finance initiatives
- Collaborative design of a roadmap for action
Key Findings
1. Adaptation Benefits Can Be Monetized
A central insight emerging from the dialogue was that Europe’s water challenge is not primarily a financing challenge. Rather, it is a challenge of investment origination, coordination, governance, and institutional alignment. Participants repeatedly highlighted that better outcomes depend as much on how investments are conceived, planned, and coordinated as on the availability of capital.
A central conclusion of the research was that adaptation benefits are increasingly becoming investable.
The study identified six financing and revenue-generation mechanisms with particularly strong potential to support smallholder adaptation:
- Soil carbon credits
- Water credits
- Corporate stewardship investments
- Wetland and mitigation banking
- Payment for ecosystem services
- Adaptation Benefit Mechanisms
Together, these instruments create new opportunities to mobilize resources beyond traditional public and development finance.
2. Nature-Based Solutions Are Creating New 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.
Particularly promising is the role of regenerative agricultural practices that improve soil health, increase carbon sequestration, enhance water retention, and strengthen resilience to drought and climate shocks.
3. Carbon Markets Are a Stepping Stone, Not the End Goal
The research concluded that voluntary carbon markets can play an important catalytic role in financing adaptation and regenerative agriculture. However, carbon finance alone will not be sufficient.
Instead, carbon revenues should be viewed as an entry point for broader investment strategies capable of capturing multiple environmental and social benefits.
4. The Future Lies in “Mosaic Projects”
One of the most important insights emerging from the research was the concept of mosaic projects—integrated investments capable of generating multiple value streams simultaneously.
Rather than relying on a single revenue source, these projects combine different mechanisms such as carbon credits, water benefits, biodiversity outcomes, ecosystem services, and corporate investments.
Altamira described this emerging approach as the creation of a regenerative value stack, where multiple benefits are recognized, valued, and mobilized to improve project bankability and long-term sustainability.
Strategic Outcome
The project resulted in a roadmap for IFAD’s strategic engagement with corporations, impact investors, and sustainable finance actors.
The roadmap identified practical pathways for:
- Leveraging voluntary carbon markets
- Expanding partnerships around nature-based solutions
- Mobilizing corporate climate and sustainability investments
- Supporting regenerative agricultural transitions
- Increasing investment in smallholder adaptation
- Positioning IFAD as a catalyst within emerging climate and nature finance ecosystems
Why This Matters
As climate impacts intensify, adaptation finance will become one of the defining challenges of sustainable development.
This project helped shift the conversation from how adaptation can be funded to how adaptation can become investable.
By exploring how climate resilience, ecosystem restoration, regenerative agriculture, and rural development can create mutually reinforcing value, the work contributed to an emerging vision of finance that rewards long-term resilience rather than short-term extraction.
The insights generated through this assignment continue to inform broader discussions on regenerative finance, nature markets, and the role of development finance institutions in enabling a just transition.
