Market Research and Investment Development for Financing in Sustainable Agriculture and Food Systems

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In this project we follow a bottom-up approach to gain insights into Indonesia’s highest climate related risk exposures and impact potential in various agriculture value chains and across various regions in Indonesia. From this landscape study, the Climate Smart Agriculture Fund expects to generate a list of agricultural companies (in priority agriculture value chains and regions) that have financing needs (senior and sub-debt, USD 3-15 million, 3-8 years repayment period), and are a commercial fit for the fund. 

The country's agriculture, forestry and fishing sectors, which accounts for around one third of the working population with a 2022 GDP contribution of 12.4% (Worldbank), is highly vulnerable to climate change. The implications of climate change are great for the 17 million rice farmers susceptible to crop losses resulting from extreme weather events. The country's $27 billion domestic fishery sector, which supports around 7 million jobs, is also under threat due to overfishing and the loss of coastal ecosystems. At the same time, Indonesia is consistently within the top 15 of global GHG emitters. The agriculture, land use change (mostly due to agriculture activities) and forestry sectors are the largest GHG contributors in Indonesia. Despite these vulnerabilities and GHG emissions, agricultural and resource-rich Indonesia can play a very crucial role in securing food sovereignty and addressing the global food crisis. 

From the current impact investment landscape study we are conducting for Indonesian Impact Alliance, we found that the agriculture sector is among the top three sectors for impact investors in Indonesia. Between 2020-22, 93 million USD have been deployed as impact investments across 11 deals. However, the average ticket size of deals is around 10 million USD, which is relatively large. The target ticket sizes of the Climate Smart Agriculture’s fund should therefore be able to meet the financing gaps of many enterprises in the agriculture sector.

Through the market scoping study, we assess deeper these climate vulnerabilities in Indonesia’s top commodities and identify companies that are possible to apply climate smart approaches and at the same time ready for investment.

This work is conducted in collaboration with The Social Invesment Consultancy UK.