Editing IPCC:AR6/WGII/Chapter-5 (section)

=== 5.14.2 Enabling Conditions for Implementing Adaptation ===

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==== 5.14.2.1 Addressing social inequities in food systems ====

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Addressing gender and other social inequities (e.g., racial, ethnicity, age, income, geographic location) in markets, governance and control over resources is a key enabling condition for climate-resilient transitions in land and aquatic ecosystems ( ''high confidence'' ) ( [[#Pearse--2017|Pearse, 2017]] ; [[#Vermeulen--2018|Vermeulen et al., 2018]] ; [[#Blesh--2019|Blesh et al., 2019]] ; [[#Rao--2019b|Rao et al., 2019b]] ; Cross-Chapter Box GENDER in Chapter 18, Section 5,13,1; [[#Tavenner--2019|Tavenner et al., 2019]] ). Adaptation strategies can have negative impacts on marginalised social groups and worsen socioeconomic inequities unless explicit efforts are made to address unequal power dynamics and differences in access to resources in agricultural, fisheries, aquaculture, livestock and forestry systems ( ''high confidence'' ) ( [[#Glemarec--2017|Glemarec, 2017]] ; [[#Haji--2017|Haji and Legesse, 2017]] ; [[#Nagoda--2017|Nagoda and]] [[#Nightingale--2017|Nightingale, 2017]] ; [[#Nightingale--2017|Nightingale, 2017]] ; [[#Rao--2019b|Rao et al., 2019b]] ; [[#Huyer--2020|Huyer and Partey, 2020]] ; [[#Mikulewicz--2020|Mikulewicz, 2020]] ; [[#Taylor--2020|Taylor and Bhasme, 2020]] ; [[#Eriksen--2021|Eriksen et al., 2021]] ). Technical approaches to adaptation that ignore inequities can worsen them; see, for example, the case study on Climate Smart Agriculture (Box 5.12). Enabling environments support inclusive decision making, capacity building, shifts in social rules, norms and behaviours and access to resources for marginalised groups for climate change adaptation (e.g., [[#Tschakert--2016|Tschakert et al., 2016]] ; [[#Ziervogel--2019|Ziervogel, 2019]] ; [[#Eriksen--2021|Eriksen et al., 2021]] ; [[#Garcia--2021|Garcia et al., 2021]] ).

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==== 5.14.2.2 Incorporating Indigenous knowledge and local knowledge ====

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Indigenous knowledge (IK) and local knowledge (LK), while an important component of many adaptation strategies (Reyes-García, 2014; Roue, 2018), continues to be marginalised in food systems; greater integration will increase effectiveness ( ''high confidence'' ) ( [[#Ford--2015|Ford et al., 2015]] ; [[#Brugnach--2017|Brugnach et al., 2017]] ; [[#Figueroa-Helland--2018|Figueroa-Helland et al., 2018]] ). Where Indigenous Peoples have access to and control over their lands and natural resources, food systems can potentially be more sustainably managed and more resilient ( ''high confidence'' ) ( [[#Rumbach--2014|Rumbach and Foley, 2014]] ; O’Connell-Milne, 2015; [[#Camacho--2016|Camacho et al., 2016]] ; Janhiainen, 2017; [[#Kihila--2018|Kihila, 2018]] ). For example, on Solomon Islands, community-based adaptation combining with IK-informed community mapping helped boost agricultural yields sustainably ( [[#Leon--2015|Leon et al., 2015]] ), and in China people living in rich plant resource regions have used their wild plants IK to complement the decrease of crop yields during extreme droughts to ensure food security ( [[#Zhang--2016|Zhang et al., 2016]] ). These cases have led scientists and local communities to call for more practical actions to bridge local knowledge, IK and formal science ( [[#Borquez--2017|Borquez et al., 2017]] ; [[#Klenk--2017|Klenk et al., 2017]] ; Mukhopadhyay, 2017; Olorunfemi, 2017; [[#Reyes-Garcia--2019|Reyes-Garcia et al., 2019]] ). Despite this increased public and scientific recognition, IK is often not acknowledged or used.

Effective adaptation requires a more holistic approach that includes the recognition of Indigenous rights, governance systems and laws ( ''high confidence'' ) ( [[#Robinson--2016a|Robinson et al., 2016a]] ; [[#Brugnach--2017|Brugnach et al., 2017]] ; [[#Magni--2017|Magni, 2017]] ; [[#McMillen--2017|McMillen et al., 2017]] ; [[#McNeeley--2017|McNeeley, 2017]] ; [[#Pearce--2018|Pearce et al., 2018]] ), and to couple IK with proactive and regionally coherent adaptation plans, actions and cooperation ( [[#Shaffer--2014|Shaffer, 2014]] ; [[#Melvin--2017|Melvin et al., 2017]] ; Forbis Jr. and Hayhoe, 2018; [[#Makondo--2018|Makondo and Thomas, 2018]] ).

Supporting Indigenous groups’ knowledge and other excluded social groups can help preserve and harness underutilised resources to enhance nutritional and economic security, with careful measures in protecting Indigenous intellectual rights and avoiding commodification exploitation ( [[#Nakashima--2012|Nakashima et al., 2012]] ; [[#Nandal--2014|Nandal and Bhardwaj, 2014]] ; [[#Ghosh-Jerath--2015|Ghosh-Jerath et al., 2015]] ; [[#Ebert--2017|Ebert, 2017]] ). In some regions, there has been a loss of IK about food systems, reducing adaptive capacity ( [[#Richards--2019|Richards et al., 2019]] ; [[#Panikkar--2020|Panikkar and Lemmond, 2020]] ). Knowledge exchange between Indigenous elders and youth can support adaptive capacity ( [[#Osterhoudt--2018|Osterhoudt, 2018]] ; [[#Richards--2019|Richards et al., 2019]] ; [[#Zin--2019|Zin et al., 2019]] ). Education utilising IK and LK can help prevent maladaptation options ( ''high confidence'' ) ( [[#Melvin--2017|Melvin et al., 2017]] ; Taremwa, 2017; Forbis Jr. and Hayhoe, 2018; [[#Narayan--2020|Narayan et al., 2020]] ). There are examples of integrating IK and LK into resource management systems and school curricula and in local institutions with existing decision-making process to strengthen their capacity to address climate change ( [[#Huaman--2014|Huaman and Valdiviezo, 2014]] ; [[#McNamara--2014|McNamara and Prasad, 2014]] ; [[#Abah--2015|Abah et al., 2015]] ; [[#Mistry--2016|Mistry and Berardi, 2016]] ; [[#Tschakert--2017|Tschakert et al., 2017]] ; [[#McNeeley--2018|McNeeley et al., 2018]] ; [[#McNeeley--2020|McNeeley et al., 2020]] ). However, there are limitations of IK and LK to address future climate impacts. Therefore, it is important that science-based knowledge and other knowledge coalesce to produce solutions that are sustainable and viable in the face of projected impacts of climate change. Community-based adaptation approaches can integrate IK and LK and more formal knowledge systems, provided efforts to establish relationships of respect, trust and common understanding between different stakeholders involved ( [[#Herath--2015|Herath et al., 2015]] ; [[#Camacho--2016|Camacho et al., 2016]] ; [[#Fidelman--2017|Fidelman et al., 2017]] ; [[#Inaotombi--2019|Inaotombi and Mahanta, 2019]] ; [[#Lam--2019|Lam et al., 2019]] ).

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==== 5.14.2.3 System transformation and policy enablers ====

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Recent literature highlights the future challenges of producing the quantities of food needed to feed a growing world population in a way that satisfies nutritional needs, benefits everyone equally and equitably, and minimises the negative impacts of food systems on the environment and the natural resource base. There is broad agreement that current trajectories towards the SDGs and countries’ commitments under the Paris Agreement are slow and that transformation of food systems is needed ( ''medium agreement'' , ''robust evidence'' ) ( [[#Campbell--2018|Campbell et al., 2018]] ; [[#Brondizio--2019|Brondizio et al., 2019]] ; [[#Dury--2019|Dury et al., 2019]] ; [[#EAT-LANCET--2019|EAT-LANCET, 2019]] ; FAO, 2019 f; [[#Food%20and%20Land%20Use%20Coalition--2019|Food and Land Use Coalition, 2019]] ; [[#Sachs--2019|Sachs et al., 2019]] ; Searchinger, 2019a; Searchinger T, 2019b; [[#Loboguerrero--2020|Loboguerrero et al., 2020]] ; [[#Meridian%20Institute--2020|Meridian Institute, 2020]] ; Steiner A, 2020).

Recent reviews have summarised literature on production system transformations, driven at least in part by a changing climate or changing climate variability. Such transformations may involve sometimes substantial shifts in farm and livelihood enterprises and land configurations, including intensification, diversification, sedentarisation and abandonment of agriculture ( [[#Vermeulen--2018|Vermeulen et al., 2018]] ; [[#Thornton--2019|Thornton et al., 2019]] ). Relevant literature is summarised in Table 5.24, showing reported farmers’ perceptions of the drivers of change and the different outcomes of these changes. The consequences of these production system transitions have been mixed; in about 40% of cases, the outcomes at household level have been unequivocally beneficial. In the other cases, there were detrimental effects on livelihoods, or a mixture of positive and negative effects. The effects on nutritional security reported in these studies were limited. Different enablers of change appear critical if transitions are to have positive outcomes. Policy environments, defined in terms of multi-level governance structures and institutions, are a key driver of systems change, as well as being enablers of and barriers to adaptation responses ( [[#Xu--2008|Xu et al., 2008]] ; [[#Namgay--2014|Namgay et al., 2014]] ; [[#Galvin--2015|Galvin et al., 2015]] ; [[#Schmidt--2016|Schmidt and Pearson, 2016]] ; [[#Liao--2017|Liao and Fei, 2017]] ). Policies around property and grazing rights are directly linked to small-scale food producer vulnerability, and land ownership changes will pose a key challenge as climate change impacts in the marginal lands intensify ( [[#Reid--2014|Reid et al., 2014]] ). Collective action at multiple scales and effective governance structures are also a key enabler of transformational change, for helping community initiatives overcome economic, social and technical barriers, and to strengthen social capital and farmer knowledge ( [[#Haglund--2011|Haglund et al., 2011]] ; [[#Reed--2017|Reed et al., 2017]] ; [[#Vermeulen--2018|Vermeulen et al., 2018]] ; [[#Fedele--2019|Fedele et al., 2019]] ). Market development has been shown to be a critical factor for successful adaptation at scale in sub-Saharan Africa ( [[#Ouédraogo--2017|Ouédraogo et al., 2017]] ; [[#Iiyama--2018|Iiyama et al., 2018]] ; [[#Totin--2018|Totin et al., 2018]] ). At the same time, financing mechanisms may be a crucial enabler for different food system actors: de-risking agricultural production and food system investments for producers and input suppliers, for example, that address core market failures and compensate actors for extra short-term costs that can lead to longer-term benefits, particularly for small-scale producers and businesses with comparatively low access to technologies and services ( [[#Vermeulen--2018|Vermeulen et al., 2018]] ; Millan, 2019; see [[#5.1|Section 5.1]] 4.2.5).

The examples in Table 5.24 highlight the uneven impact of adaptation programmes and projects in general, due in part to differences in institutional support and failure of policies to take into account inequities ( [[#Clay--2019|Clay and King, 2019]] ; [[#Nightingale--2020|Nightingale et al., 2020]] ). Focusing on transformational adaptation, Vermeulen (2018) suggested the need to expand the remit of adaptation planning to consider the multi-functionality of agriculture and a system-wide view of food production and consumption. Several authors argue that transformational change must address the personal, practical and political spheres, in view of the role of power relations and worldviews in shaping practices, food security and inequity (O’Brien, 2015; [[#Nightingale--2017|Nightingale, 2017]] ; [[#O’Brien--2018|O’Brien, 2018]] ; [[#Eriksen--2019|Eriksen et al., 2019]] ; [[#Gosnell--2019|Gosnell et al., 2019]] ). If it involves new or unfamiliar technology, transformation may also be highly disruptive, and the added vulnerabilities of food system actors at risk will need to be addressed ( [[#Herrero--2020|Herrero et al., 2020]] ; see Box 5.5).

'''Table 5.24 |''' Agricultural and livelihood system transformations from systematic searches of the literature, which are at least partially attributable to climatic factors and that involve increased or decreased system integration, and major consequences of the change. Information in the table is from the references cited. Sources: updated from ( [[#Vermeulen--2018|Vermeulen et al., 2018]] ; [[#Thornton--2019|Thornton et al., 2019]] ).

{| class="wikitable"
|-
! '''Underlying production system'''

! '''Primary drivers of change as stated'''

! '''Major processes of change as reported'''

! '''Consequences of change,''' '''if reported'''

! '''Reference'''

|-
| colspan="5"| '''''Extensive grassland-based systems'''''

|-
| Extensive grassland-based, northwest China

| Government policy, climate

| Sedentarisation

Diversification (crops, wages)

| Income decline, asset holding decline

| Liao and Fei, (2017)

|-
| Extensive grassland-based, Peruvian Andes

| Multiple climatic and non-climatic drivers

| Diversification (wages, livestock assets, land)

Extensification

| Livestock accumulation in wealthy households, asset diversification in poorer households

| López-i-Gelats et al., (2015)

|-
| Extensive grassland-based, Bhutan

| Government policy, labour constraints, climate

| Sedentarisation

Diversification (crops)

Exit

| Increased risk, loss of cultural identity, improved market access, livelihood ‘lock-in’ (inability to change rapidly)

| Namgay et al., (2014)

|-
| Extensive grassland-based, Borana, Ethiopia

| Increase in climate variability, resource degradation

| Livestock herd diversification (more small stock and camels, fewer cattle)

| Enhanced household resilience

| Megersa et al., (2014)

|-
| Extensive grassland-based, Tibetan Plateau

| Government policy, climate

| Sedentarisation

Diversification (crops, off-farm wages, trade)

| Increased food production, increased disease burden

| [[#Xu--2008|Xu et al. (2008)]]

|-
| Extensive grassland-based, Afar, Ethiopia

| Government policy, climate

| Sedentarisation

Diversification (crops)

| Weakened institutions and cultural practices, deteriorating natural resources

| [[#Schmidt--2016|Schmidt and Pearson (2016)]]

|-
| Extensive grassland-based, Kajiado, Kenya

| Government policy, climate, population growth

| Sedentarisation

Diversification (crops, wages, remittances)

Intensification

| Nutritional status remains poor

| [[#Galvin--2015|Galvin et al. (2015)]]

|-
| Extensive grassland-based, Mongolian Altai

| Government policy, climate

| Sedentarisation

Diversification (cashmere sales, forest products)

| Fodder shortages, forest over-use, unsustainable land use system

| [[#Lkhagvadorj--2013|Lkhagvadorj et al. (2013)]]

|-
| Extensive grassland based, Mongolia

| Increasing drought, grassland degradation

| Diversification (decreases in sheep and goats, increases in cattle, decreases in grain production, increases in fruit and vegetable production)

Exit from agriculture

| Increased household income from off-farm employment, more diverse diets

| [[#Du--2016|Du et al. (2016)]]

|-
| Extensive grassland-based, northern Kenya

| Climate change and variability

| Diversification (crops, wages, migration)

| Decreasing adaptive capacity, over-dependence on local knowledge for adaptation

| [[#Ogalleh--2012|Ogalleh et al. (2012)]]

|-
| colspan="5"| '''''Extensive systems with crops'''''

|-
| Extensive with crops, Eastern Cape, South Africa

| Multiple

| Intensification (richer households)

Exit and abandonment (poorer households)

Livelihood diversification

| Wildlife conflicts, loss of cultural identity

| [[#Shackleton--2013|Shackleton et al. (2013)]]

|-
| Extensive with crops, Peruvian highlands

| Economic globalisation, climate change

| Diversification (dairy production, wage migration)

Conversion (away from staple crops to feed production)

Intensification (feed production)

| Reduced vulnerability to climate change, but potential loss of both agrobiodiversity and food self-sufficiency identified by the author

| [[#Lennox--2015|Lennox (2015)]]

|-
| Extensive with crops, East Africa

| Climate

| Diversification (crops, livestock, wages)

Intensification (crops, intercrops)

| Increasing household vulnerability

| [[#Rufino--2013|Rufino et al. (2013)]]

|-
| Extensive with crops, Ghana

| Climate variability, temperature change

| Diversification (off-farm activities)

| Reduced vulnerability

| [[#Antwi-Agyei--2018|Antwi-Agyei et al. (2018)]]

|-
| Extensive smallholder cropping, Nepal

| Annual and seasonal warming. Increased precipitation with changes in patterns.

| Diversification and integration (from growing buckwheat and barley to vegetables and fruit trees)

| Increased household resilience due to diversification of production

| [[#Konchar--2015|Konchar et al. (2015)]]

|-
| Extensive smallholder mixed system, Niger

| Droughts and famines, and land degradation

| Large-scale regeneration of native trees and shrubs in the arable landscape

| Increased household income, effects on household food security not yet known

| [[#Haglund--2011|Haglund et al. (2011)]]

|-
| colspan="5"| '''''Other mixed coastal and forest systems'''''

|-
| Coastal rice-based, Bangladesh

| Increased salinity due to reduced dry season flows from rivers in India, use of groundwater for irrigation

| Diversification (from rice cultivation to aquaculture of shrimp and prawn)

| Increased household income, increased engagement of women, increased human disease vulnerability

| [[#Faruque--2017|Faruque et al. (2017)]]

|-
| Smallholder cropping systems, coastal Bangladesh

| Increasing frequency and severity of floods since 2008

| Diversification (re-allocation of land from crops to aquaculture)

Exit (migration away from village)

| Mixed impacts on household incomes and seasonal migration frequency

| Fenton et al. (2017)

|-
| Smallholder mixed cropping in forested landscapes in Indonesia

| Floods, drought, crop and livestock disease

| Diversification (re-allocation of land from forests to rubber plantations and rice)

Intensification (agroforestry)

Extensification (reforestation, forest protection)

| Locally, increased household incomes in general; more widely, some trade-offs with biodiversity, water, carbon stocks

| [[#Fedele--2018|Fedele et al. (2018)]]

|}

‘Transformation’, defined by [[#IPCC--2019a|IPCC (2019a)]] as ‘a change in the fundamental attributes of natural and human systems’, is defined here as a redistribution of at least a third in the primary factors of production (land, labour, capital) and/or the outputs and outcomes of production (the types and amounts of production and consumption of goods and services arising from multi-functional agricultural systems) ( [[#Vermeulen--2018|Vermeulen et al., 2018]] ; [[#Thornton--2019|Thornton et al., 2019]] ).

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==== 5.14.2.4 Finance needs and strategies for adaptation ====

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Current understanding of finance flows and needs for adaptation in crop agriculture, livestock, fisheries, aquaculture and forest products relies primarily on top-down projections, with limited data ( [[#UNFCCC--2018|UNFCCC, 2018]] ; [[#Buchner--2019|Buchner et al., 2019]] ; [[#Jachnik--2019|Jachnik et al., 2019]] ). By one estimate, in 2017/2018, agriculture, forestry and land use received 24% of public adaptation finance (totaling USD 7 billion; half via multilateral development finance institutions and one-quarter from governments) and 35% of international grants (with 71% used for adaptation) ( [[#Buchner--2019|Buchner et al., 2019]] ). According to data from [[#OECD--2020|OECD (2020)]] , finance flows for agriculture, forestry and fisheries have risen fairly linearly from ca. USD 1.46 billion in 2010 (the year the Rio marker on climate change adaptation was introduced) to ca. 5.5 billion in 2018. Over the entire tracked period, the three subsectors combined received a total of USD 29.82 billion for activities with principal and significant adaptation components. [[#footnote-001|4]] However, the data set only includes climate-related development finance from bilateral, multilateral and private philanthropic sources, whereas private sector finance flows are not captured as this is notoriously difficult to track ( [[#UNEP--2016|UNEP, 2016]] ; [[#OECD--2020|OECD, 2020]] ; cross-ref to Cross-Chapter Box FINANCE in Chapter 17). Most of the funding (85%) was directed towards agriculture, with forestry (12%) and fisheries (3%) receiving significantly less, but across the subsectors, there is consistency in the sense that policy and administrative management and development receive the lion’s share of support, which is predominantly given in the form of grants (72%), while debt instruments (26%) and equity and shares in collective investment vehicles (2%) contribute less. From a regional perspective, 80% were directed to Africa (47%), Asia-Pacific (27%), and Latin America and Caribbean States (7%), whereas Eastern Europe and Western Europe and Other States received (2%) each and 17% were destined for ‘developing countries’ without regional tags. Finally, it is noteworthy that 38% of adaptation finance in agriculture, forestry and fisheries is marked as also having mitigation benefits, and roughly a quarter of funding is reported as having principal or significant gender objectives.

Whether current levels of growth in adaptation finance for agriculture, forestry and fisheries is keeping up with estimated needs cannot be assessed because of the large uncertainties that surround adaptation cost estimates (Cross-Chapter Box FINANCE in Chapter 17). There is, hence, high agreement that better assessment of adaptation costs of climate impacts requires considerably more research ( [[#Watkiss--2015|Watkiss, 2015]] ; [[#Diaz--2017|Diaz and Moore, 2017]] ). A recent study focusing on investments needed to offset the effects of climate change on the prevalence of hunger concludes that investments in agricultural research and development (R&amp;D) have to increase from USD 1.62 billion to USD 2.77 billion per year between 2015 and 2050 ( [[#Sulser--2021a|Sulser et al., 2021a]] ). In addition to agricultural R&amp;D, significant investment increases in water and infrastructure in the range of USD 12.7 billion and USD 10.8 billion are required, respectively, a considerable portion of which is relevant to the food system. In total, [[#Sulser--2021a|Sulser et al. (2021a)]] estimate that annual investment between USD 21.47 billion and USD 29.8 billion are needed to avoid sliding back from climate-change-related increases in the prevalence of hunger but recognise the shortcomings of their approach and acknowledge that ‘a full analysis of adaptation to climate change in agriculture would require including many other social, economic, and environmental dimensions’. For comparison, [[#World%20Bank--2010|World Bank (2010)]] estimated global costs of USD 70–100 billion per year for agriculture, forestry and fisheries, infrastructure, water resources, health, ecosystem services, coastal zones and extreme weather events to adapt to an approximately 2°C warmer world between 2010 and 2050. While the World Bank includes more sectors, more recent publications consider the resulting figures to be significantly too low ( [[#Baarsch--2015|Baarsch et al., 2015]] ; [[#UNEP--2016|UNEP, 2016]] ; Rossi and Miola, 2017; [[#Hallegatte--2018|Hallegatte et al., 2018]] ; [[#Markandya--2019|Markandya and González-Eguino, 2019]] ; [[#Chapagain--2020|Chapagain et al., 2020]] ; WGII Cross-Chapter Box FINANCE in Chapter 17). Therefore, despite the methodological and data challenges, further efforts are needed to better capture the economic risks of climate change and provide estimates of adaptation costs at global to national scales as well as across sectors ( [[#Watkiss--2015|Watkiss, 2015]] ; [[#Diaz--2017|Diaz and Moore, 2017]] ).

Financial barriers limit implementation of adaptation options in agriculture, fisheries, aquaculture and forestry ( ''high confidence'' ) ( [[#Shukla--2019|Shukla et al., 2019]] ; [[#FAO--2020|FAO et al., 2020]] ). Finance strategies can contribute to adaptation in these sectors in different ways (Table 5.25) and to different degrees. Standardised strategies have not yet been developed for specific adaptation needs, and in current practice, finance strategies are opportunistically deployed, with developing countries facing particular challenges due to under-developed financial mechanisms ( [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ).

'''Table 5.25 |''' Potential adaptation finance strategies for categories of climate-related risks in the agriculture, fisheries, aquaculture and forestry sectors.

{| class="wikitable"
|-
! '''Finance strategies'''

! '''Reduced food availability'''

! '''Low food safety /''' '''dietary health'''

! '''Diminished livelihoods'''

! '''Declining ecosystem services'''

|-
| '''Reduce vulnerability'''

| ''Avoid staple failure'' : Vouchers to producers for improved production inputs

| ''Diversify production strategies'' : Invest in alternative crops/species/harvest methods

| ''Increase producer capacity'' : Fund technical assistance programmes

| ''Incentivise improved management'' : Improved access to credit based on environmental performance

|-
| '''Anticipate/minimise impacts'''

| ''Minimise impact of extreme weather'' : Fund early-warning systems

| ''Diversify products in supply chains'' : Finance processing equipment for alternative food products

| ''Moderate food price spikes'' : National food reserves

| ''Minimise resource depletion'' : Subsidise micro-lending for water-efficient technologies

|-
| '''Steer capital towards climate resilience'''

| ''Develop climate-resilient production technologies'' : Fund R&amp;D for improved genetics (crops, fish, livestock) and management

| ''Build nutrition-sensitive food systems'' : Finance early-stage market building for diversified food products

| ''Increase resilience of supply chain infrastructure'' : Finance improved storage and transport facilities

| ''Disincentivise low-resilience production:'' Screen investments based on climate risk disclosures

|-
| '''Pool climate-related risks'''

| ''Distribute climate-related risks:'' Securitise investments in production systems

| ''De-risk diversified food supply chains'' : Invest in producer aggregation to improve supply chain efficiency

| ''Insure against supply chain risks'' : Subsidised index insurance programmes

| ''Detect high-risk production systems'' : Invest in supply chain monitoring/traceability mechanisms

|-
| '''Compensate for climate-related impacts'''

| ''Compensate for production losses'' : Financial transfers to affected producers

| ''Avoid food shortages'' : Subsidise food importation

| ''Avoid selling off productive assets'' : Fund social support for low-income households

| ''Ecological restoration'' : Direct development aid to land rehabilitation projects

|}

Many types of financial instruments are employed by diverse actors (Table 5.26) guided by their mandates (e.g., development, commerce), capacity (investor, intermediary, donor) and risk appetite. Actors within a sector or local production area can coordinate their financial strategies towards common objectives (e.g., reduced supply chain loss) or participate in joint financial action such as blended finance structures that combine commercial and concessionary finance to catalyse additional private investment, enrich the pipeline of bankable projects, and test business models ( [[#FAO--2020b|FAO, 2020b]] ).

'''Table 5.26 |''' Potential adaptation finance objectives for major actors in agriculture, fisheries, aquaculture and forestry sectors.

{| class="wikitable"
|-
! '''Actors'''

! '''Potential adaptation finance objectives'''

|-
| colspan="2"| '''Private sector''' : Focused on capturing positive externalities (i.e., lower risks or costs) from adaptation investments ( [[#Woodard--2019|Woodard et al., 2019]] ). Major considerations include fiduciary responsibilities; expected rates of return (i.e., risk-adjusted; benchmarked to comparable investments); investment characteristics (e.g., liquidity, structure, size) and contribution to investor portfolio; material business risks (e.g., supply chain reliability; stranded assets); cost control (e.g., product losses; insurance); legal compliance; and sectoral requirements (e.g., climate risk disclosure) ( [[#Havemann--2020|Havemann et al., 2020]] ).

|-
| Production companies or cooperatives

| * Supply chain transactions (e.g., trade finance)
* Sustainable agricultural infrastructure (e.g., capital investment in storage or processing facilities to reduce exposure to climate risks)
* Developing or accessing advisory services (weather data; agronomic information) ( [[#Orchard--2019|Orchard, 2019]] )
* Risk management (e.g., insurance/reinsurance; budget reserves)

|-
| Financial investors and intermediaries (e.g., banks, asset managers, venture capital; non-bank financial institutions)

| * Ownership shares in established companies (i.e., private equity) or large publicly traded companies (i.e., listed equities)
* Debt issuance (e.g., working capital; catastrophe bonds; emergency loans)
* Real estate investment
* Financial derivatives
* Technological research and development
* (Impact investors) Bespoke non-financial sustainability objectives (e.g., fairtrade products; financial inclusion) ( [[#Havemann--2020|Havemann et al., 2020]] )

|-
| colspan="2"| '''Public sector''' : Encompassing nearly commercial (e.g., specialised commodity boards; bond issuances), partially subsidised (e.g., low-interest loans) and fully subsidised (e.g., R&amp;D; grants) investments. Major considerations include avoiding negative impacts to citizens (e.g., food price spikes) and specific constituencies (e.g., catastrophic losses to producers) and maintaining/enhancing public revenues (i.e., taxes from economic activity in agriculture, fisheries, aquaculture and forestry).

|-
| Government agencies and multilateral institutions

| * Strengthen enabling environments for sustainable production and ecosystem protection (e.g., price transparency; information exchange; international coordination)
* Support demonstration projects for sustainable land and resource management (e.g., grants)
* Disaster risk reduction (e.g., national disaster funds; social protection programmes; contingent credit lines; sovereign/sub-sovereign insurance ( [[#Global%20Commission%20on%20Adaptation--2019|Global Commission on Adaptation, 2019]] )
* Increase resilience through early-warning systems, infrastructure, and capacity building (e.g., climate change adaptation funds)
* Increase revenues for adaptation activities (e.g., income/luxury taxes)
* Reduce production risks (e.g., agricultural subsidies)
* Promote advanced technology implementation (e.g., tax incentives)
* Coordinate and align donor funding with national priorities (e.g., multi-donor national climate change funds)
* Incentivise and de-risk commercial investments (e.g., interest rate reduction programmes, structured financing, guarantee funds) ( [[#Woodard--2019|Woodard et al., 2019]] )

|}

Expanding access to financial services and pooling climate risks can enable and incentivise climate change adaptation ( ''medium confidence'' ) ( [[#Shukla--2019|Shukla et al., 2019]] ). To mobilise financial instruments (Table 5.27) towards adaptation needs, individual actors can apply an adaptation lens to existing or new activities, accounting for investment characteristics (e.g., development stage; cash flow profile), requirements (e.g., amount; risk–return) and context (e.g., regulatory landscape) ( [[#Havemann--2020|Havemann et al., 2020]] ). Risk-layering can match financial instruments to severity and probability climate risks ( [[#Hochrainer-Stigler--2021|Hochrainer-Stigler and Reiter, 2021]] ).

'''Table 5.27 |''' Major types of financial instruments suitable to adaptation finance in agriculture, fisheries, aquaculture and forestry sectors (adapted from [[#Havemann--2020|Havemann et al., 2020]] ).

{| class="wikitable"
|-
! '''Financial instrument'''

! '''Description'''

|-
| colspan="2"| '''Equity''' : Ownership stake in a company (e.g., agricultural technology company; processing company) or collective investment vehicle (e.g., agriculture fund; Timber Investment Management Organization; commodity index fund) providing returns (via dividends and/or sale of equity shares) corresponding to business-related risk (e.g., higher return for higher risk and/or lower liquidity)

|-
| Listed equities

| Ownership of shares in a company listed in a public market

|-
| Private equity

| Ownership of shares in a company or other assets

|-
| Junior or risk-absorbing equity

| Ownership of lower-tier shares in a company (e.g., common stock) or collective investment vehicle (e.g., first-loss tranche)

|-
| colspan="2"| '''Debt''' : Capital provided directly or indirectly (via banks or other third-party institutions) to users with defined repayment terms (i.e., timeframe, interest rate); more likely to deliver adaptation benefits when coupled with capacity building (e.g., technical assistance, education, analytics) ( [[#Woodard--2019|Woodard et al., 2019]] )

|-
| Loan, bond, note, credit line

| Direct or indirect provision of capital (e.g., operating loans; dedicated credit line for agricultural trade); concessionary loans may allow for below-market interest rates

|-
| Soft loan

| Direct interest-free loan (e.g., funds provided in advance of good/service delivery)

|-
| Emergency loan

| Lending in response to climate risks or impacts with repayment terms (e.g., return period) that consider necessary relief, recovery and reconstruction

|-
| Catastrophe bond

| Risk transfer instrument in which insurers or reinsurers provide high interest payments to investors in exchange for a payout (and repayment deferment or forgiveness) activated by specific events (e.g., extreme weather)

|-
| Impact bond

| Subsidised investment providing capital upfront or based on defined outcomes

|-
| Subordinated loan

| Concessionary capital with a junior position (i.e., accepting higher risk of non-repayment and / or lower rate of return on investment) relative to other investors

|-
| Securitised investments

| Aggregation of equity or debt to offer marketable securities to a wider pool of investors with different risk–return appetites

|-
| colspan="2"| '''Guarantees''' : Commercial and concessionary guarantees that provide compensation for losses due to specified risks (e.g., political risk, performance risk); more likely to deliver adaptation benefits when linked to robust underwriting standards and verification protocols ( [[#Woodard--2019|Woodard et al., 2019]] )

|-
| Credit guarantee

| Compensation for specified losses incurred by agricultural lenders

|-
| Payment, performance, surety bonds

| De-risking mechanism for transactions between providers and buyers of goods/services; may be used in trade finance and other forms of intermediation

|-
| colspan="2"| '''Insurance''' : Policies and other financial instruments that provide compensation for losses based on defined terms and conditions.

|-
| Production insurance

| Compensation for specified losses related to production (e.g., insurance indexed to specific weather events) or supply chains (e.g., shipping insurance)

|-
| Market and price insurance

| Compensation for specified market-related losses (e.g., price or currency fluctuation)

|-
| colspan="2"| '''Grants''' : Concessionary funding provided by public or philanthropic entities to support climate adaptation costs or outcomes (no expectation of repayment)

|-
| Direct support

| Funding for provision of goods (e.g., fertilizer, seeds, nursery stock) or services (e.g., technical assistance, product storage) to producers, local companies or intermediaries (e.g., for agronomic or business management expertise); can reduce credit risk when part of blended finance arrangements

|-
| Performance-based grants

| Grants or other concessionary funding contingent on achievement of defined adaptation outcomes (with possible third-party verification requirement); may support development and testing of new approaches (i.e., design funding; challenges/prizes)

|-
| colspan="2"| '''Governmental instruments'''

|-
| Policy incentives

| Public policies designed to stimulate adaptation action among targeted groups (e.g., producers, consumers, agri-businesses, financiers) including direct or indirect subsidies (e.g., producer payments, tax breaks, health insurance), procurement policies (e.g., low carbon and sustainability criteria; nutrition-sensitive school feeding programmes) and other fiscal measures (e.g., infrastructure development; funding R&amp;D in climate-resilient practices or technologies) ( [[#Shukla--2019|Shukla et al., 2019]] )

|-
| Development aid

| International or domestic programmes that directly or indirectly fund adaptation actions including financial transfers (e.g., producer support or anti-poverty programmes) and subsidised credit ( ''medium confidence'' ) ( [[#Shukla--2019|Shukla et al., 2019]] )

|-
| Planning grants

| Financial support to governments for adaptation planning (e.g., via readiness programmes)

|-
| colspan="2"| '''Other instruments'''

|-
| Fintech

| Data analytics and risk analysis models used to better assess borrowers’ repayment risk (e.g., due to crop failure) and reduce transaction costs (e.g., streamlined lending processes); applications may include financial inclusion (e.g., micro-financing; lending to small- and mid-size operators), alternative repayment programmes (e.g., for larger capital borrowing), insurance (e.g., more granular risk assessment) or digital strategies (e.g., crowdfunding, smallholder credit) ( [[#Agyekumhene--2018|Agyekumhene et al., 2018]] )

|-
| Payment for Ecosystem Services (PES)

| Funds delivered to land and resource managers in exchange for compliance with specified sustainability practices or environmental outcomes; PES depends on willing payers (i.e., direct and indirect beneficiaries of ecosystem services such as governments, companies, conservation groups, philanthropies)

|}

<div id="5.14.2.5" class="h3-container"></div>

<span id="constraints-on-adaptation-finance-for-food-feed-fibre-and-other-ecosystem-products"></span>
==== 5.14.2.5 Constraints on adaptation finance for food, feed, fibre and other ecosystem products ====

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Flow of adaptation finance in the agriculture, fisheries, aquaculture and forestry sectors is impeded by weak measurement and benchmarking of financial and resilience outcomes ( [[#Kramer--2019|Kramer et al., 2019]] ; [[#Negra--2020|Negra et al., 2020]] ), and challenges in assessing repayment capacity of investee producers and companies ( ''medium confidence'' ). Immature information systems (e.g., weak analytics, fragmented standards) ( [[#Woodard--2019|Woodard et al., 2019]] ; [[#Negra--2020|Negra et al., 2020]] ) inhibit effective due diligence and impact assessment, contributing to uncertainty and low investor confidence ( [[#Havemann--2020|Havemann et al., 2020]] ; [[#NGFS--2020|NGFS, 2020]] ). Improved characterisation of adaptation finance strategies (e.g., insurance, subsidies, blended finance) requires increased transaction volume ( [[#Millan--2019|Millan et al., 2019]] ) and analysis of financial (e.g., risk–return profile, investor demand) and resilience (e.g., reduced vulnerability) effects.

Use of climate-resilient financial strategies and instruments is limited by weak incentives, which commonly take the form of high upfront costs ( [[#Verdolini--2018|Verdolini et al., 2018]] ), high transaction and intermediation costs ( [[#Havemann--2020|Havemann et al., 2020]] ) and relatively long pay-off time. Tenant producers may not experience benefits from adaptation investments ( [[#Woodard--2019|Woodard et al., 2019]] ). Investors seek low-risk, liquid investments and credit-worthy counterparties ( [[#Havemann--2020|Havemann et al., 2020]] ), yet small- and medium-sized producers and supply chain actors often lack access to formal credit. Given limited experience and weak information for adaptation finance, sub-optimal outcomes may include imbalanced allocation of public and private finance (e.g., to less vulnerable regions and producers; to lower-resilience investments; to short-term benefits) as well as inequitable division of risks and returns (e.g., within blended finance structures) ( [[#Clapp--2017|Clapp, 2017]] ; [[#World%20Bank--2018|World Bank, 2018]] ; [[#Attridge--2019|Attridge and Engen, 2019]] ). Additionally, while risk-sharing finance strategies can deliver adaptation benefits, they do not inherently reduce overall risk and commonly cover only specified types of risks ( [[#Kellett--2014|Kellett and Peters, 2014]] ; [[#Watson--2015|Watson et al., 2015]] ).

Methods to strengthen adaptation finance include updating regulations and policies to support adaptation finance instruments (e.g., climate accounting standards), requiring climate-risk disclosure, improved information-sharing among public and private sector actors and devolving funding to local actors ( ''medium confidence'' ) ( [[#Global%20Commission%20on%20Adaptation--2019|Global Commission on Adaptation, 2019]] ; [[#Millan--2019|Millan et al., 2019]] ).

<div id="box-5.12:-is-climate-smart-agriculture-overlooking-gender-and-power-relations?" class="h2-container box-container"></div>

'''Box 5.12: Is Climate-Smart Agriculture Overlooking Gender and Power Relations?'''
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Climate-smart agriculture (CSA) is an approach that aims to increase agricultural productivity, enhance food security, adapt to climate change and, where possible, reduce GHG emissions. The effective implementation of climate-smart practices is conceptually linked to an enabling environment in which policies, institutions and finance can re-orient agricultural systems, thereby supporting development and enhancing food security in a changing climate ( [[#Lipper--2014|Lipper et al., 2014]] ; [[#Karttunen--2017|Karttunen et al., 2017]] ). However, the concept has received criticism based on the absence of conceptual clarity of the interrelations between productivity, food security, adaptation and mitigation ( [[#Arenas-Sanchez--2019|Arenas-Sanchez et al., 2019]] ) and because of limited evidence on the efficacy of CSA for achieving adaptation and mitigation outcomes at a global scale ( [[#Arslan--2015|Arslan et al., 2015]] ; [[#Lamanna--2016|Lamanna et al., 2016]] ; [[#Chandra--2018|Chandra et al., 2018]] ). Some argue that CSA operates within an apolitical framework that tends to minimise issues concerning power, inequity and access, and is overly focused on technical approaches ( [[#Taylor--2017|Taylor, 2017]] ; [[#HLPE--2019|HLPE, 2019]] ). CSA is explicitly referenced by more than 30 countries in their Intended Nationally Determined Contributions (INDCs) ( [[#Ross--2016|Ross et al., 2016]] ), but measuring the degree of its implementation still represents a challenge.

There is ''low agreement'' , ''medium evidence'' on the relationship between CSA and equity (Allen, 2018; [[#Karlsson--2018|Karlsson et al., 2018]] ). CSA can potentially benefit women if they are able to take advantage of improvements in productivity, food security and adaptation decision making as a result of the implementation of CSA practices. Nevertheless, these advantages can be unequally realised given male domination in receiving information and extension services, as well as financial or resource access ( [[#Jost--2016|Jost et al., 2016]] ). Some ( [[#Huyer--2020|Huyer and Partey, 2020]] ) argue that CSA may undermine gender equity ( [[#Collins--2018|Collins, 2018]] ), entrench and solidify power ( [[#Haapala--2018|Haapala, 2018]] ), and result in the disproportional allocation of new labour-intensive activities to women ( [[#Jost--2016|Jost et al., 2016]] ). Uptake of some climate-smart technologies can further marginalise the most disadvantaged local groups ( [[#Roncoli--2009|Roncoli et al., 2009]] ; [[#Haapala--2018|Haapala, 2018]] ). Unequal sharing of benefits and burdens with respect to emission reduction costs among different agricultural groups has also been observed ( [[#Budiman--2019|Budiman, 2019]] ).

In contrast, emerging research points to the potential of CSA as a supporting condition for gender equity, provided that equity and power concerns are explicitly included in the approach ( [[#Chanana-Nag--2020|Chanana-Nag and Aggarwal, 2020]] ). Some CSA technologies and practices, such as direct seeding, green manuring and laser land levelling, can have a significant role in reducing the gender gap in labour burden for women in agriculture ( [[#Khatri-Chhetri--2020|Khatri-Chhetri et al., 2020]] ). The use of participatory approaches can facilitate community-based adaptation of gender-sensitive CSA practices (Rosimo, 2018). CSA may also empower both men and women: in two villages in India, CSA adoption empowered both sexes in decision making and use and control of income ( [[#Hariharan--2018|Hariharan et al., 2018]] ).

In general CSA programmes have tended to overlook questions of inequity ( ''medium confidence'' ), including limited attention to social conditions that promote Business-As-Usual pathways, although this is now changing. Addressing questions of rights, social injustice, unequal power relations and inequity would help make CSA-related policy responses more effective in addressing vulnerability ( [[#Chandra--2017|Chandra et al., 2017]] ; [[#Clapp--2018|Clapp and Isakson, 2018]] ; [[#Karlsson--2018|Karlsson et al., 2018]] ; [[#Westengen--2018|Westengen et al., 2018]] ; [[#Ellis--2019|Ellis and Tschakert, 2019]] ; [[#Eriksen--2019|Eriksen et al., 2019]] ; [[#Westengen--2019|Westengen et al., 2019]] ).

<div id="box-5.13:-supporting-youth-adaptation-in-food-systems" class="h2-container box-container"></div>

'''Box 5.13: Supporting Youth Adaptation in Food Systems'''
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Young people are key agents in agrifood systems: both a vulnerable group, and one that can foster systemic change ( ''high confidence'' ) ( [[#Brooks--2019|Brooks et al., 2019]] ; Figure X; [[#IFAD--2019|IFAD, 2019]] ; [[#Flynn--2021|Flynn and Sumberg, 2021]] ; [[#HLPE--2021|HLPE, 2021]] ). Food systems are the largest source of employment for young people, but do not always provide adequate livelihoods or decent working conditions ( [[#HLPE--2021|HLPE, 2021]] ). Regions with more youthful populations—such as Sub-Saharan Africa, South Asia and Central America—are both highly vulnerable to climate change impacts and reliant on agriculture, forestry, aquaculture and fisheries for livelihoods ( [[#Brooks--2019|Brooks et al., 2019]] ; [[#IFAD--2019|IFAD, 2019]] ; [[#HLPE--2021|HLPE, 2021]] ). Rural youth in these sectors are particularly vulnerable, often with less access to land, water, capital and other resources, shaped by family and social relations, and fewer opportunities ( ''high confidence'' ) ( [[#Chingala--2017|Chingala et al., 2017]] ; [[#Ricker-Gilbert--2018|Ricker-Gilbert and Chamberlin, 2018]] ; [[#IFAD--2019|IFAD, 2019]] ; [[#Yeboah--2020|Yeboah et al., 2020]] ; [[#Flynn--2021|Flynn and Sumberg, 2021]] ; [[#Nhat%20Lam%20Duyen--2021|Nhat Lam Duyen, 2021]] ). In these vulnerable regions, climate change compounds other drivers such as poverty to increase youth out-migration to urban areas or other regions ( ''medium confidence'' ) ( [[#Zin--2019|Zin et al., 2019]] ; [[#Weinreb--2020|Weinreb et al., 2020]] ; [[#HLPE--2021|HLPE, 2021]] ; [[#Stoltz--2021|Stoltz et al., 2021]] ; [[#Voss--2021|Voss, 2021]] ), which can further worsen rural economies. Young low-income rural women may be particularly marginalised and vulnerable due to systemic gender inequities in access to land, credit, employment, institutions and other resources ( ''medium confidence'' ) ( [[#Sah%20Akwen--2017|Sah Akwen, 2017]] ; [[#IFAD--2019|IFAD, 2019]] ; [[#Flynn--2021|Flynn and Sumberg, 2021]] ).

Youth play a critical role in all sectors of the food system ( [[#HLPE--2021|HLPE, 2021]] ; Figure Box 5.13.1), and some are actively pursuing work and innovation in agrifood systems ( ''medium confidence'' ) ( [[#Sah%20Akwen--2017|Sah Akwen, 2017]] ; 2019; [[#Yeboah--2020|Yeboah et al., 2020]] ; [[#Flynn--2021|Flynn and Sumberg, 2021]] ). Climate change impacts may reduce youth employment options in food systems in some regions, while they are often politically marginalised ( [[#Brooks--2019|Brooks et al., 2019]] ; [[#IFAD--2019|IFAD, 2019]] ; [[#HLPE--2021|HLPE, 2021]] ). At the same time, due to heightened awareness about climate change, youth may be more willing to apply climate adaptation strategies ( ''medium confidence'' ) ( [[#Ali--2017|Ali and Erenstein, 2017]] ; [[#Jiri--2017|Jiri et al., 2017]] ; [[#Sah%20Akwen--2017|Sah Akwen, 2017]] ; [[#Chamberlin--2021|Chamberlin and Sumberg, 2021]] ; [[#Doherty--2021|Doherty et al., 2021]] ). Agrifood policy implementation of adaptation strategies could increase inclusive participation of youth to meet their needs ( [[#HLPE--2021|HLPE, 2021]] ). Inclusive investments in water management, infrastructure, agrifood science, and policies that increase youth access to land, credit, knowledge, education, skills and other crucial resources can support dignified and rewarding agrifood employment ( [[#Ahsan--2016|Ahsan and Mitra, 2016]] ; [[#Brooks--2019|Brooks et al., 2019]] ; [[#HLPE--2021|HLPE, 2021]] ). Digital technologies can support agrifood adaptations, but digital divides must be overcome to avoid worsening inequities ( [[#HLPE--2021|HLPE, 2021]] ). Initiatives which protect and strengthen youth engagement and employment in the all points of the food system, including recognition of youth’s critical role and agency through rights-based approaches, can support sustainable food transitions ( [[#HLPE--2021|HLPE, 2021]] ). Harnessing youth innovation and vision to address climate change alongside other SDGs such as gender inequity and rural poverty will be a crucial strategy to ensure resilient economies in food systems ( ''high confidence'' ) ( [[#Laube--2016|Laube, 2016]] ; [[#Brooks--2019|Brooks et al., 2019]] ; [[#IFAD--2019|IFAD, 2019]] ; [[#Abay--2021|Abay et al., 2021]] ; [[#HLPE--2021|HLPE, 2021]] ).

[[File:15b45d66eecc294638de6296f51ceb58 IPCC_AR6_WGII_Figure_5_Box_5_13_1.png]]

'''Figure Box 5.13.1 | Youth agency, engagement and employment in food system ( [[#HLPE--2021|HLPE, 2021]] ).'''

<div id="5.14.3" class="h2-container"></div>

<span id="climate-resilient-development-pathways"></span>