The effects of climate change are no longer a distant threat but a daily reality for millions of people in the countries where we invest. Rising temperatures and unpredictable weather patterns are disrupting not only communities but also supply chains, infrastructure and economic stability.
Strengthening resilience to these changes is essential. The UN estimates that developing countries face an adaptation financing gap of $187-359 billion per year. Yet despite the urgency, adaptation and resilience investments remain underfunded. This is because adaptation projects often face challenges such as commercial viability risks owing to unproven technologies or business models, high upfront development costs or small ticket sizes. This makes them less attractive to commercial investors compared to mitigation projects.
Blended finance offers a solution. By using catalytic capital to de-risk early-stage projects and crowd in private investment, blended finance can make adaptation investments viable and scalable. At BII, through our Climate Innovation Facility, we deploy tools such as credit enhancement to attract commercial investors into adaptation-focused funds, and project development loans to cover early-stage costs for climate-resilient infrastructure.
Our latest case study, Strengthening adaptation and resilience using blended finance, highlights practical examples of our blended finance approach in action:
- In Kenya, we have supported SunCulture to provide smallholder farmers with solar-powered irrigation pumps. By pre-financing carbon credits, we’re enabling SunCulture to lower its pump prices, avoid emissions and increase revenue.
- Grow Indigo is working with smallholder farmers in India to increase adoption of regenerative agricultural practices. Our loan is helping fund the expansion of Grow Indigo’s carbon programme which aims to reach 191,000 farmers and help them become more resilient to climate-related shocks.
- Our first-loss capital into BlueOrchard’s blended climate insurance fund has helped mobilise private investors into the climate insurance sector while giving 4.3 million households and MSMEs access to insurance.
- In Nouakchott, Mauritania, we are supporting the development of a coastal resilience infrastructure project managed by Meridiam by funding early-stage development costs such as feasibility studies through a project development loan.
While our investments are at an early stage, they highlight the exciting range of opportunities across sectors and regions to boost adaptation and resilience using blended finance. We hope these examples of how catalytic capital can scale up adaptation finance can help inform other like-minded investors on similar journeys.
