Our climate is visibly changing. Record-setting heatwaves, flooding, storms, and wildfires are increasingly part of everyday reality in many parts of the world and already imply significant economic and social costs to societies globally. Adapting to these and expected future changes in climate and weather patterns has traditionally been considered predominantly a public task, for example by building dams, water reservoirs, and climate proofing public infrastructure. The Climate Policy Institute, which publishes an annual Landscape of Climate Finance report, found that in 2019 and 2020, financing for climate change mitigation accounted for more than 90% of all climate finance tracked by the study. Almost all finance for climate change adaptation was provided by public actors and primarily went towards water and wastewater investments and other cross-sectoral projects.

At the same time, often unnoticed by official estimates of climate finance, a growing number of entrepreneurs offer products and services that support climate change adaptation, such as efficient irrigation systems, drought resistance seeds and plants, and IT based solutions for improved supply chain management. Analysts at Bank of America estimate that the market for climate change adaptation solutions will double to $2 trillion a year within the next five years. Often, such solutions are offered by Small and Mediums Sized companies (SME’s) from developing countries and emerging economies that are disproportionately impacted by the effects of climate change and do not have publicly funded adaptation efforts.

For example, Nigerian agricultural extension service provider, FutuX, provides training for farmers  in climate resilient, sustainable production, and combating key causes of food insecurity, rural-urban migration, and loss of livelihood. Kenyan agri-tech company, MajiAgri Solutions, is another great example of a SME in a developing economy that builds adaption solutions. MajiAgri Solutions enables farmers to collect and reserve ground run-off or roof water whenever it rains through the installation of innovative water harvesting ponds.

Nigerian agricultural extension service provider FutuX offers services such as agribusiness advisory, food safety audit, farm assessment, e-extension, market linkage, research, training and verification.
MajiAgri Solutions supports farmers in addressing water and irrigation needs and, in addition, provides farmers with access to agronomic skills and knowledge.

Through the project “Private Adaptation Finance”, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), with funding from the German Federal Ministry for Economic Cooperation and Development, supports these and other adaptation SMEs in Nigeria and Kenia in improving their investment readiness. The project also engages with impact investors on integrating climate change into their investment strategies.

“We still find a gap between the demand and supply of impact finance for climate change adaptation solutions, though” shares Denise Engel, project manager at GIZ. “SMEs offering climate change adaptation solutions face similar challenges as other small enterprises in developing economies, with the additional need to communicate the adaptation relevance and impacts of their business case to investors. For most impact investors, climate change adaptation is a relatively new topic. Speaking to a number of investors, we identified a need to better understand the growing market opportunities, how to identify companies that have adaptation benefits and how to measure adaptation impacts in a robust but practicable way.”

At the ANDE West Africa Regional Conference in Accra, Ghana on July 19th, the project will bring together investors and SMEs to explore the gap between the demand and supply side of private adaptation finance.