With climate adaptation attracting growing attention within sustainable finance, IFAD has launched a US$70m bond designed to support small-scale farmers and rural communities while helping to develop the market for adaptation-focused investments.
As sustainable finance has developed, much of the focus has been on climate mitigation initiatives such as renewable energy and emissions reduction.
The International Fund for Agricultural Development (IFAD) says its latest bond issue is specifically focused on climate adaptation, helping small-scale farmers and rural communities respond to the impacts of climate change.
The organisation has announced a US$70 million climate adaptation bond privately placed with Japanese agricultural cooperative insurer Zenkyoren.
Announced at COP31 in Antalya, IFAD described the issuance as the first global adaptation bond focused on rural communities, designed to channel private capital towards helping small-scale farmers adapt to climate change.
According to IFAD, proceeds from the bond, which was issued under its Sustainable Development Finance Framework, will help finance the organisation’s rural development investments worldwide, supporting climate adaptation for small-scale farmers and more resilient rural economies.
The organisation said the issuance comes against a backdrop of significant demand for adaptation funding. Developing countries are expected to require an estimated US$305bn annually by 2035 for adaptation, while international public adaptation finance reached between US$28.2bn and US$31.7bn in 2024.
IFAD also noted that small-scale farmers produce one third of the world’s food but receive less than 1% of climate finance.
Commenting on the launch, Alvaro Lario, president of IFAD, said: “This landmark bond demonstrates that climate adaptation is investable and that private capital can be mobilized at scale to finance rural resilience.
“We thank Zenkyoren for its leadership, and partnership in advancing a climate-resilient, food-secure future in which rural communities can adapt, build resilience and drive economic growth and development.”
IFAD, which is rated AA+, is the only United Nations fund authorised to issue sustainable bonds on capital markets and has issued more than US$1bn in sustainable bonds since 2022.
Lario said the bond could help support the development of a broader market for adaptation-focused debt instruments.
“This bond is an important milestone. We want it to open a broader market for adaptation bonds, particularly in agriculture. That market will only grow if investors are confident their money delivers measurable results.
“With nearly five decades of experience in rural development, climate adaptation and impact measurement, IFAD is helping set the standards and accountability that make that possible,” he said.
Main image: climate adaptation, agricultural, rick-van-der-haar-V0J9vNWPOs8-unsplash
