Latin America and the Caribbean (LAC) face significant barriers to scaling climate finance for agrifood systems. High perceived risks, such as lack of project pipeline visibility, insufficient credit history, and price or currency volatility, combine with actual risks from governance, macroeconomic, and geopolitical factors to deter investment. Long-standing challenges, including underdeveloped financial markets and small-scale projects, are compounded by climate-specific hurdles such as limited technical capacity to assess climate impacts and the relevance of climate-smart practices. Private investors are particularly hesitant due to long investment horizons, small ticket sizes, and low returns, resulting in private finance accounting for only 2% of climate finance for agrifood systems in 2021-22.
The role of blended finance in LAC’s agrifood sector has been limited, with USD 7 billion mobilized through 59 transactions by 2024, primarily concentrated in Brazil and Colombia and focused on agroforestry. Strategies remain fragmented, leaving climate-vulnerable areas underserved, especially in nature-based solutions and smallholder finance. Smaller transaction sizes, limited concessional capital, and prolonged pilot phases have slowed the deployment of early-stage or higher-risk projects.
Blended finance holds potential to mobilize private investment when carefully designed. Initiatives such as the ClimateShot Investor Coalition, Catalytic Climate Finance Facility’s Learning Hub, and the Global Innovation Lab for Climate Finance have explored approaches that combine risk-targeted interventions, layered de-risking tools, technical assistance, guarantees, and off-take agreements. For example, the AGRI3 Fund uses guarantees and technical assistance to expand lending for smallholder farmers in Colombia, while Brazil’s Living Amazon Mechanism leverages off-take agreements and anchor investors to reduce default risks and catalyze broader participation. Tailoring finance to local value chains, regulatory environments, and climate risks, combined with capacity building, is critical for maximizing effectiveness.
Blended finance archetypes in the region include incubating local financial intermediaries to extend services to underserved, climate-vulnerable areas, and supporting investments in local infrastructure and natural capital assets. Concessional finance can mitigate structuring complexities, long payback periods, and early-stage risks, making capital-intensive projects like renewable energy, storage, and warehousing viable. Strengthening local financial institutions also improves domestic finance mobilization and inclusion across value chains.
To scale investment, coordination with policymakers and regulators is essential. Blended finance can address climate priorities and adaptation needs more effectively when aligned with national strategies such as Nationally Determined Contributions and National Adaptation Plans. Policy engagement can create co-financing opportunities, attract foreign capital, and reduce regulatory risks. Market-based mechanisms, such as Colombia’s payment for ecosystem services, are creating incentives for private investment in climate-smart and nature-positive initiatives.
Multilateral development banks and climate funds can enhance impact by streamlining approvals and targeting early-stage markets, particularly in Small Island Developing States, which are highly vulnerable to climate risks yet struggle to attract finance. COP30 represents a key opportunity to close financing gaps by integrating blended finance into strategies for LAC’s agrifood systems. While not a silver bullet, well-deployed blended finance can shift investment toward resilient, nature-positive agrifood systems, unlocking sustainable growth, climate adaptation, and biodiversity conservation in the region.
