The $75 Billion Climate Finance Gap: An imperfect but important figure for small scale farmers

Small-scale farmers are on the frontlines of the climate crisis. They are the first to feel the effects of a prolonged dry spell or a devastating flood. Deserts encroach on their small plots of land and salt water poisons the soil in which they plant their crops. 

Thirty-five per cent of the world’s food supply comes from small farms of under two hectares. This means that when their ability to produce food is at risk, so too is the global food system.  

And yet, small-scale farmers receive just 0.8 per cent of global climate finance each year – a meagre US$5.53 billion – to adapt to this new climate reality. 

But just how much would they need to be able to face today’s climate challenges?  

As IFAD’s Lead Technical Specialist for Environment and Climate, I advocate for investing in small-scale farmers every day. In a context where development budgets are increasingly tight, it is also increasingly difficult to do so without solid figures.  

This challenge is compounded by the fact that many data and definitions are lacking or inconsistent, starting with a universal definition of small-scale farmers. This results in discrepancies in how their financial needs are assessed.  

We’ve been lacking rigorous figures for some time. In 2009, developed countries agreed that by 2020, they would mobilize the somewhat arbitrary figure of US$100 billion per year to support developing countries' climate action.  

This was followed in 2015 with a commitment under the Paris Agreement to set a new collective quantified goal (NCQG) on climate finance. This goal will provide clarity on the funding available for developing countries to implement their next National Climate Plans, which are due by February 2025. 

The NCQG is due to be adopted this year at COP29 in Azerbaijan. But just a few weeks out from the conference, negotiators have yet to agree on the basics needed to implement this goal, starting with the amount of money needed.

In the absence of an estimate of the climate finance gap for small-scale farmers – and given the fast-approaching deadline for the Sustainable Development Goals – I have developed a ballpark figure, with some caveats. 

I relied on a simple methodology. As mentioned before, small-scale farmers produce 35 per cent of the world’s food. I use this as a basis for calculating their proportional climate finance need.  

This is imperfect: the share of food produced does not necessarily equal the share of finance needed, especially considering small-scale farms' production is affected disproportionately by underinvestment and climate change. 

Nevertheless, it gives a conservative basis for calculating the gap. Other bases could be the share of farms they make up, the share of agricultural workers employed on small farms, or the number of people relying on small farms for food and livelihoods. Each of these would all give a much higher estimate of the real need. 

In 2020, Climate Policy Initiative data indicated that climate finance needed to increase seven-fold, from US$28.5 billion to US$199.5 billion, in order to align with even the most conservative climate transition scenarios. Adjusting for long-term inflation of about 3 per cent, the total annual climate finance need for agrifood systems is US$224.5 billion 

This number assumes that adaptation and mitigation costs are the same for small-scale farmers as they are for other types of actors within agrifood systems. In truth, small-scale farmers face disproportionately higher costs due to limited access to finance and technologies, fragmented land holdings and higher vulnerability to climate change.  

Based on this, the financing gap between current levels and a conservative estimate of the required finance is an alarming US$75 billion annually.  

Given their crucial role in feeding the world, this seems like a small price to pay so they can better adapt and protect not only their livelihoods, but also global food security.

The world is not prepared for the escalating impacts of climate change, and nowhere is this more evident than in rural farming communities. The widening gap between the climate finance these communities need and what they receive threatens to exacerbate food insecurity, poverty and migration.   

Addressing this imbalance is not only a moral imperative but also a practical one. Investing in small-scale farmers is one of the most impactful ways to safeguard global food systems.  

The message is simple: to safeguard global food security, climate finance for small-scale farmers must urgently surge by nearly 14 times the current level. We must reach the critical target of at least US$75 billion. 

At IFAD, we recognize the urgency of this moment – and we already know that targeted investments in small-scale farmers can drive adaptation and build resilient agricultural systems. Our goal is to deliver climate finance at speed and scale, ensuring that the world's 500 million small-scale farms receive the resources they need to adapt to a changing climate secure a resilient global food supply for us all.