Leveraging policy tools to improve impact of financial instruments in sustainable agriculture, forestry, and other land use (AFOLU)

This policy brief by the Climate Policy Initiative examines how financial instruments for sustainable agriculture, forestry, and other land use (AFOLU) can leverage national regulations, government subsidies, and subsidized rural credit to overcome investment barriers and attract private capital.

• The Global Innovation Lab for Climate Finance (the Lab) has created 55 financial instruments since 2014, with 18 specifically targeting barriers in the sustainable agriculture, forestry, and other land use (AFOLU) sector.
• Leveraging national regulations, as seen in the Responsible Commodities Facility, helps identify project pipelines and demonstrate impact. To mitigate risks, the brief recommends setting realistic lending conditions in weak regulatory contexts, implementing strong monitoring systems, ensuring coherence with climate objectives to guard against political change, and marketing sustainable practices to drive demand.
• Government subsidies for insurance premiums, exemplified by the Blockchain Climate Risk Crop Insurance, can increase product demand, fundraising, and socio-economic impact. Design recommendations include using subsidies temporarily to avoid market distortions, timing subsidy use for commercial viability, utilizing index-based designs to reduce due diligence risks, and bundling insurance with services to lower politicization risks.
• The Conexsus Impact Fund demonstrates how expanding sustainable projects within subsidized rural credit—specifically Brazil’s Pronaf credit line—can increase loan demand, repayments, and capital investments. Success factors include aligning with existing subsidized credit lines, partnering with local financial institutions, and providing financial literacy assistance to improve borrower creditworthiness.
• Financial instruments that leverage policy tools can address common AFOLU barriers by stimulating demand for climate-relevant products, identifying pipelines, demonstrating measurable social and environmental impacts, and attracting private, philanthropic, and public investments.

APA

Climate Policy Initiative (2021). Leveraging policy tools to improve impact of financial instruments in sustainable agriculture, forestry, and other land use (AFOLU). https://www.climatepolicyinitiative.org/publication/leveraging-policy-tools-to-improve-impact-of-financial-instruments-in-sustainable-agriculture-forestry-and-other-land-use-afolu/

Chicago

Climate Policy Initiative. Leveraging policy tools to improve impact of financial instruments in sustainable agriculture, forestry, and other land use (AFOLU). 2021. https://www.climatepolicyinitiative.org/publication/leveraging-policy-tools-to-improve-impact-of-financial-instruments-in-sustainable-agriculture-forestry-and-other-land-use-afolu/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Leveraging policy tools to improve impact of financial instruments in sustainable agriculture, forestry, and other land use (AFOLU) |date=18 October 2021 |url=https://www.climatepolicyinitiative.org/publication/leveraging-policy-tools-to-improve-impact-of-financial-instruments-in-sustainable-agriculture-forestry-and-other-land-use-afolu/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2021leveraging, author = {{Climate Policy Initiative}}, title = {{Leveraging policy tools to improve impact of financial instruments in sustainable agriculture, forestry, and other land use (AFOLU)}}, institution = {Climate Policy Initiative}, year = {2021}, month = oct, url = {https://www.climatepolicyinitiative.org/publication/leveraging-policy-tools-to-improve-impact-of-financial-instruments-in-sustainable-agriculture-forestry-and-other-land-use-afolu/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }