Review of World Bank report – “Opportunities for Climate Finance in the Livestock Sector: Removing Obstacles and Realizing Potential”
The World Bank recently published a report entitled “Opportunities for Climate Finance in the Livestock Sector: Removing Obstacles and Realizing Potential.” Our blog post gives an overview of the report, and outlines how La Pradera ranch makes use of opportunities to reduce the amount of carbon already in the atmosphere, and from current emissions.
What is Climate Finance?
Simply put, climate finance refers to the local, national or transnational financing that seeks to assist in alleviating practices that contribute to climate change, or the adaptation of action that will address the same issues. These finances are drawn from public, private and alternative sources, all of which contribute to creating sustainable business practices.
Climate finance has been assisted with the adoption of The Convention, the Kyoto Protocol and the Paris agreement, all of which call for the assistance from parties with more financial resources to assist those who are less financially robust and are more vulnerable in terms of their economic status. This in turn recognizes that the contribution each country makes to climate change can be prevented, but capacity to do so, and the capacity to deal with the consequences of climate change, differ across the board.
Climate finance finds itself in an advantageous position to assist with the alleviation of the effects of climate change, as large-scale investments are needed in order to develop and change existing infrastructure and systems in place that contribute to carbon emissions. In order for these structures to be changed, major investment may be needed.
The need for climate finance
Climate finance can assist with the adaptation of practices and systems. Financial resources are necessary in order to reduce the impacts of climate change. The Paris Agreement, in particular, highlights the obligations of developed nations in assisting underdeveloped countries in adapting their practices. Developed countries are to take the lead in mobilizing climate finance from various sources. There are barriers that need to be addressed in order to accelerate private sector climate investments in order to assist these developing nations.
Developing nations face significant challenges when addressing climate mitigation and adaptation. These challenges include lack of affordable long-term financing, perceived financial and technological risks and high up-front capital needed to develop or adapt existing systems and infrastructure.
Governments and stakeholders are likewise called to understand and evaluate the financial needs of these developing nations, as well as to understand how these resources can be organised. These resources, ultimately, should be used to find the balance between alleviation and adaptation in order to ensure sustainability.
Goals of Climate Finance
Mitigation outcomes, as well as other co-benefits, could be in reach if rural communities and policy makes within low- and middle-income economies can access financial resources. In this case, the importance of the livestock sector is highlighted.
This sector has often found it difficult to access traditional sources of financing, as livestock smallholders do not often hold substantial collateral beside from their livestock. Furthermore, these livestock smallholders often have little experience of working with financial institutions and can be put at a disadvantage because of this.
In the case of traditional lenders, they see the livestock sector as overly risky, with low potential for substantial profits to justify their investment. This leads many traditional lenders uninterested in investing in livestock smallholders.
This leads to the importance of expanding financial inclusion, which would improve livelihoods, increase resilience and help to reduce GHG emissions. While the risks cannot be ignored, innovative approaches to financing the livestock sector are all the more necessary. The livestock sector plays an essential role for almost 60% of rural households and contributes up to half of the agricultural GDP. The importance of reducing carbon emissions while maintaining livelihoods and reducing poverty cannot be stressed enough.
A recent report by The World Bank has identified investment opportunities for increasing climate finance in the livestock sector in order to drive sustainable transformation.
The primary messages of the report are that, firstly, increased climate finance is necessary to fast-track transitions within industries to become more sustainable and environmentally friendly. The livestock sector, in particular, struggles due to the perception by investors that profitability is low and the risk is high.
Secondly, there are many opportunities to invest in reducing the amount of carbon already in the atmosphere and from current emissions. These opportunities within the livestock sector include:
· the increase of productivity and production efficiency;
· the improvement of animal feed digestibility and nutritional levels;
· the extraction of methane from manure for fuel;
· the reduction of the number of unproductive animal in the herd;
· the adoption of energy-efficient equipment; and
· the efficient management of the land
These opportunities offer many co-benefits, such as more stable revenues and improved livelihoods for small-holder producers, improved food security and better adaptation to climate change.
Finka Token represents the rights to your share of the net operating revenue of the La Pradera cattle ranch, Bolivia. How does La Pradera reduce the amount of carbon already in the atmosphere and from current emissions?
· Productivity and production efficiency has been increased through an optimization program at La Pradera. The result is that in Q3 and Q4 2020 saw a record birthing of 865 calves. Pregnancy and birthing rates were within the KPI’s and reflected improvements in the optimization plan.
· Net carbon emissions for open-range, grazing-based cattle ranching (i.e. at La Pradera) are in fact negative, thus there is a net reduction of carbon emissions. Overall, pastures sequester (absorb) on average 3.5 times the amount of carbon that cattle produce graving in the same pastures.
Lastly, the report identifies six investment opportunities to drive the livestock sector’s sustainable revolution with climate finance. These include:
· Condition credit lines on climate mitigation actions
· Encourage value-chain finance for native ecosystem protection
· Drive clean investment through Emissions Trading Schemes
· Verify sustainable sourcing of livestock feed
· Reward innovation in livestock climate finance through prize-based programs
· Reward proactive policy commitments through Official Development Assistance
Climate finance has the potential to change the landscape of climate change, and it is important that sectors, like the livestock sector, gets the support needed in order to make the necessary changes.