By Lynda Kiernan-Stone, Global AgInvesting Media
The facts are startling. Acumen details how smallholder farmers supply a third of the world’s food. And in Africa, their ability to produce food is even more critical, providing 80 percent of the continent’s caloric intake. But it is these farmers, half of whom are living in poverty, that are some of the most deeply affected by climate change.
Drawing on its 20 years of supporting early-stage social enterprises and its experience scaling the off-grid energy sector through individual investment and commercial funds, Acumen has created the Acumen Resilient Agriculture Fund (ARAF).
Sponsored by Acumen, anchored by Green Climate Fund (GCF) and managed by Acumen Capital Partners, a wholly owned subsidiary of Acumen, ARAF has successfully closed at $58 million, supported by the Dutch entrepreneurial development bank (FMO), the Soros Economic Development Fund, the French development institution PROPARCO (through FISEA+, the AFD Fund advised by PROPARCO), the Children’s Investment Fund Foundation, IKEA Foundation, Global Social Impact, among other highly valued backers.
“The world’s poorest communities are often those hit hardest by the negative impacts of climate change,” said Jacqueline Novogratz, founder and CEO, Acumen. “While wealthier people can afford to adapt, rebuild, and relocate, the poor are left to fend for themselves. At Acumen, much of our work focuses on helping low-income people, particularly farmers, adapt to and become resilient to climate change. That’s why we are so proud to sponsor ARAF and lead a group of committed investors to inject much needed capital into early-stage, integrated agribusinesses that will promote economic growth where it’s needed most and help us build a future with the sustainability of the earth at its center.”
Novogratz added, “Leveraging institutional support often requires initial philanthropic commitments, which are rare in the impact sector. We are deeply grateful to IKEA Foundation for its philanthropic gift that played a vital role in the launch of this critical fund.”
This funding is $8 million above the target for the fund, and comes at a critical moment. Currently, only 5 percent of capital investment under a climate mandate is directed toward adaptation, and the success of ARAF could signal a shift in climate finance, noted Tamer El-Raghy, managing director, ARAF.
The climate crisis has brought change upon global agriculture through the worsening of soil degradation, severe storms, and shifting weather patterns, threatening the livelihoods of farmers and food security worldwide.
The weight of these changes is only heightened for smallholders due to structural inefficiencies and limited access to credit. But through funding digital platforms, aggregator platforms, and financial solutions, ARAF is looking to build an ecosystem that will allow smallholders to increase their incomes as well as their resilience.
“The Soros Economic Development Fund is thrilled to support ARAF as a lead investor and help improve the climate resilience of smallholder farmers across sub-Saharan Africa,” said Catherine Cax, director of investments at the Soros Economic Development Fund.
“We believe ARAF can foster change by helping to seed, expand, or scale business models and restructure their relationship with powerful economic actors to empower smallholder farmers to improve their livelihoods and thrive,” continued Cax. “While initiated before COVID-19, this investment speaks to the moment by supporting vulnerable communities that are already disproportionally at risk.”
New research by Acumen – funded by the United Kingdom Foreign, Commonwealth, and Development Office’s (FCDO) Strengthening Impact Investment Markets for Agriculture (SIIMA) program – has illustrated the need for change, and calls for an increase in risk-tolerant, blended capital for the sustainable scaling of agribusinesses that work to create climate resilience.
In answer, ARAF’s first loss layer, supported by GCF and IKEA Foundation enables this risk tolerance.
Research has also demonstrated the need to work with farmers by providing repeat training on how to leverage products and services for the best outcome.
In response, ARAF uses blended finance to provide long-term support to small and medium-sized agribusinesses, giving farmers the hands-on support they need through its $5 million Technical Assistance Facility (TAF) funded by generous grants from GCF, IKEA Foundation, FCDO, and FMO.
“The Green Climate Fund is delighted to partner with Acumen to support innovative agribusinesses that enhance the climate resilience of smallholder farmers in Africa,” said Tony Clamp, director, private sector facility, GCF.
“GCF has supported the Acumen Resilient Agriculture Fund from the early concept phase and provided catalytic capital to unlock private investment into this first climate adaptation-focused agribusiness investment fund in Africa. The fund will make critical investments to support climate resilience and agriculture productivity for smallholder farmers across countries in East and West Africa and help shift the pattern of investment in climate change adaptation in Africa from grants to a long-term capital approach,” Clamp concluded.
ARAF began deploying capital in 2020 by investing in agri startups in East and West Africa working to reduce poverty and build climate resilience, thereby demonstrating the impact of such investments in agriculture. To-date the fund has invested in five companies located in Kenya, Uganda, and Nigeria.
“We are pleased to support ARAF as a lead investor,” said Pieternel Boogaard, director of agribusiness, food, and water at FMO. “As a very reputable investor with an impressive track record in impact investing, Acumen’s focus on investing in promising early-stage companies active in smallholder value chains across East and West Africa aligns perfectly with FMO’s strategy. More importantly, by also being the first climate adaptation-focused agribusiness fund for African smallholders, the fund meets both our Green and Reducing Inequalities labels.”
– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@