Climate-Smart Investments in El Salvador

El Salvador

The UN Environment/UNDP/WRI Green Climate Fund Readiness Programme is supporting financial institutions in El Salvador to identify innovative mechanisms to engage in climate finance.

The leading economic activity in El Salvador is small and medium scale agriculture, which makes the country vulnerable to the effects of climate change. In the past 40 years, the country has seen steadily increasing rates of heavy rainfall and flooding, a trend recently broken by a four-year drought (2012 – 2016), which wreaked havoc on the agriculture industry and the small and medium agricultural producers that characterize the economy. As such, helping the most vulnerable populations and empowering the small and medium producers to adapt to climate risks is a top priority.

The small and medium agricultural producers that could benefit the most from climate-smart agricultural initiatives often do not have access to financial products that accommodate their needs. Local financial institutions have a low level of understanding of climate risks and the potential market for renewable energy or climate-resilient agriculture loan products. In response to this, the UN Environment/UNDP/WRI Green Climate Fund Readiness Programme is supporting financial institutions to identify innovative mechanisms to engage in climate finance.  

A training delivered in July 2017 educated national development banks, private banks and microfinance institutions, as well as other relevant public and private sector actors on the topic of climate finance. The workshop was held over two days, and was attended by representatives from local financial institutions, small agricultural producers, the Ministry of Environment, and the Nationally Designated Authority (NDA), the Vice-Ministry of Development Cooperation.

The first day focused on providing an overview of the risks and opportunities presented by climate change and climate smart investing, and introduced private sector representatives to core concepts, terminology and mechanisms typically used for climate finance. Participants learned about investment opportunities that aligned with climate risks, including in renewable energy and irrigation technology, and innovative financial products such as climate insurance, as well as an overview of domestic and international climate finance sources, including the Green Climate Fund, to give clear evidence of the market opportunity.

On the second day, participants worked together to develop concept notes on climate adaptation and mitigation initiatives that benefit small and medium producers and engage commercial banks. The group then collectively prepared an action plan for submission to the NDA, recommending key actors and strategies to more actively include the private sector and financial institutions in climate initiatives in El Salvador.

“One priority initiative that emerged was ensuring greater access to finance in rural areas for small producers. Given El Salvador’s dependence on agriculture, and the vulnerability of its farmers to the effects of climate change, this was seen as of vital importance by the workshop participants,” said Carlos Gomez, GCF Readiness Programme National Coordinator for El Salvador.

Following this workshop, the Government will work with the key banks and financial institutions to ensure that their role in funding and supporting climate change adaptation and mitigation projects is expanded.

Photo: FAO El Salvador/Oscar Mendoza