Important mitigation outcomes and other co-benefits could be in reach if rural communities and policy makers in low- and middle-income economies overcome the obstacle of access to finance in the livestock sector.
Traditional sources of financing have long been difficult to access for livestock smallholders who often do not hold collateral except for their animals and have little experience of working with financial institutions. Traditional lenders see the livestock sector as overly risky, with little potential for significant profits, leaving them largely uninterested. Expanding financial inclusion would improve livelihoods, increase resilience, and help reduce GHG emissions.
Innovative approaches to financing for the livestock sector are needed. In a sector that plays an essential economic role for some 60% of rural households – made up of 1.7 billion people – and contributes up to half of agricultural GDP, reducing carbon emissions while maintaining livelihoods and reducing poverty is essential. This report identifies investment opportunities for increasing climate finance in the sector and driving its sustainable transformation.
i. Increased climate finance is necessary to accelerate a green transition. Today, the sector misses that opportunity due to investors’ perception that profitability is low and risk is high; the difficulty and cost of measuring the economic impact of mitigation pathways; and the low degree of technical knowledge about its benefits associated with mitigation.
ii. There are many opportunities to invest in reducing the amount of carbon already in the atmosphere and from current emissions: increasing productivity and production efficiency; improving animal feed digestibility and nutritional levels; extracting methane from manure for fuel; reducing the number of unproductive animals in the herd; adopting energy-efficient equipment and through efficient land management. Such mitigation interventions also present many co-benefits, such as more stable revenues and improved livelihoods for small-holder producers, improved food security, and better adaptation to climate change.
iii. This report identifies six investment opportunities to drive the sector’s sustainable transformation with climate finance.
- 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