Agroforestry is a leading practice for advancing climate mitigation and adaptation and broader regenerative benefits and ecosystem services such as protecting and promoting soil and water health and biodiversity. In the context of the coalition’s work and objectives, agroforestry offers value through its applicability across various contexts and agricultural supply chains and its ability to realize livelihoods and nature-related co-benefits.
Despite its ability to realize social and environmental value, insufficient funding flows to agroforestry, with even fewer resources supporting smallholder agricultural systems. Existing funding tends to focus on mitigation rather than communities’ adaptation and resilience needs; too large, designed for large-scale operations rather than the SMEs and smallholders underpinning global supply chains; and too expensive, with unrealistic risk mitigation requirements and/or return expectations. We believe that this mismatch and associated under-funding largely stems from suboptimal information on the part of climate funders and potential project developers on what climate finance looks like on the ground, lack of understanding of community priorities, and actual project costs. Subsequent financing assessment efforts will expand into smallholder agricultural activities beyond agroforestry, but agroforestry is the initial focus.
A Model for Smallholder Agroforestry Development
The CASH coalition shares a vision for regenerative- and nature-based smallholder solutions, inclusive climate finance, and sustainable land management. We work to make regenerative agriculture and climate action profitable for smallholder farmers and local communities in the Global South.
Modeling smallholder agroforestry
The CASH Coalition has built a sophisticated and multi-faceted model to systematically understand trade-offs, paths to scale, and options for optimization to make smallholder agroforestry projects successful. The model is built to address the needs of a range of potential users, including project developers, producers, farmer-facing intermediaries, and other organizations interested in maximizing the impact of viable projects. It helps understand key drivers for carbon sequestration, overall project economic viability, and individual stakeholder profitability. Given the long-term implementation horizon for agroforestry and upfront capital requirements, the model also helps understand the relative impact of different financial instruments (grants, debts, equity etc.) to support the development of optimal project financing structures.
The model considers both environmental and financial aspects of agroforestry projects. On the environmental side, it integrates the impact of multiple inputs to calculate carbon sequestration potential, taking into account improvements in soil health and fertility in addition to carbon capture from trees. In addition, the model builds an overview of project finance, including direct and indirect revenue streams and direct and indirect costs. This enables organizations considering smallholder agroforestry projects to experiment and optimize for success by weighing different financing instruments, assessing the impact of project cash flows over different implementation periods, and model changes on key financial performance metrics. In addition to a project-level assessment, the model allows for individual stakeholder views (for example, from the perspective of the farmer, a project developer, NGO, etc.), and the consideration of profitability and viability for each stakeholder. The model also allows for scenario planning that considers shifting market conditions to optimize project designs.
Future development and iteration
The model is a live model that we intend to iterate to enhance its capabilities and keep it relevant in the rapidly evolving world of agroforestry projects. This could, over time, translate into a model that can incorporate more risk factors and aggregate multiple projects across diverse regions under one view. Ultimately, this model is intended to benefit the sector and development community. We are working through modalities to enable greater access. As the model is tested under multiple conditions, it will generate better benchmarking, become more robust, and contribute more and more valuable and reliable data over time.
Collaboration and data sharing for model improvement
Please contact admin@cashcoalition.earth if you want more information about the model or if you have data and insights that can add value as we iterate it.