The Acumen Resilient Agriculture Fund (ARAF) has closed a $58 million impact fund which is the first-of-its-kind equity fund to provide critical capital to support African agribusinesses that help smallholder farmers adapt to climate change.
Sponsored by Acumen and anchored by Green Climate Fund (GCF), the fund is supported by the Dutch entrepreneurial development bank (FMO), the Soros Economic Development Fund, the French development institution PROPARCO (through FISEA+, the AFD Fund advised by PROPARCO), the Children’s Investment Fund Foundation, IKEA Foundation, Global Social Impact, and other respected investors and funders. The fund is managed by Acumen Capital Partners, a wholly-owned subsidiary of Acumen.
“Smallholder farmers feed the world, but they are among the most affected by the climate crisis,” said ARAF’s Managing Director Tamer El-Raghy.
“ARAF’s impressive $58 million close, $8 million above our initial target for the fund, is a watershed moment and, with only 5% of climate investment directed toward adaptation, signals the beginning of a shift in climate finance.
“By investing in agri-startups in East and West Africa, ARAF can reduce poverty, build climate resilience, and demonstrate the impact of investing in resilient agriculture. Since we started deploying capital in 2020, our team has invested in five companies operating in Kenya, Uganda, and Nigeria.”
Poverty, climate change, and resilient agriculture are intrinsically linked: More than half of the people living in poverty are smallholder farmers. These farmers provide a third of the world’s food supply. In Africa, their role is even larger as they produce approximately 80% of the continent’s food.
Soil degradation, severe storms, shifting weather patterns, and more have changed the nature of farming, threatening farmers’ livelihoods and their ability to feed communities worldwide. These challenges are intensified by structural inefficiencies and limited access to credit. By supporting agribusinesses that offer aggregation, digital platforms, and financial solutions to smallholder farmers, ARAF seeks to build an ecosystem that enables farmers to raise their incomes and increase their resilience.
“The Green Climate Fund is delighted to partner with Acumen to support innovative agribusinesses that enhance the climate resilience of smallholder farmers in Africa. GCF has supported the Acumen Resilient Agriculture Fund from the early concept phase and provided catalytic capital to unlock private investment into this first climate adaptation-focused agribusiness investment fund in Africa.
“The fund will make critical investments to support climate resilience and agriculture productivity for smallholder farmers across countries in East and West Africa and help shift the pattern of investment in climate change adaptation in Africa from grants to a long-term capital approach,” said the Director of GCF’s Private Sector Facility Tony Clamp.
New research by Acumen, funded by the United Kingdom Foreign, Commonwealth, and Development Office’s (FCDO) Strengthening Impact Investment Markets for Agriculture (SIIMA) program, illustrates the need for this transition and calls for an increase in risk-tolerant, blended capital to sustainably scale agribusinesses that help build climate resilience.
ARAF’s first-loss layer, supported by GCF and IKEA Foundation, enables this risk tolerance. Research also shows the importance of working with farmers and providing repeat training and instruction on how to best leverage products and services. ARAF answers this call by using blended finance to provide long-term support to small and medium-sized agribusinesses and through its $5 million Technical Assistance Facility (TAF) that is designed to provide farmers with the hands-on support they need. The TAF is funded by grants from GCF, IKEA Foundation, FCDO, and FMO.
“We are pleased to support ARAF as a lead investor. As a very reputable investor with an impressive track record in impact investing, Acumen’s focus on investing in promising early-stage companies active in smallholder value chains across East and West Africa aligns perfectly with FMO’s strategy. More importantly, by also being the first climate adaptation-focused agribusiness fund for African smallholders, the fund meets both our Green and Reducing Inequalities labels,” said Pieternel Boogaard, director of agribusiness, food, and water at FMO.
“The Soros Economic Development Fund is thrilled to support ARAF as a lead investor and help improve the climate resilience of smallholder farmers across sub-Saharan Africa. We believe ARAF can foster change by helping to seed, expand, or scale business models and restructure their relationship with powerful economic actors to empower smallholder farmers to improve their livelihoods and thrive. While initiated before COVID-19, this investment speaks to the moment by supporting vulnerable communities that are already disproportionally at risk” said Catherine Cax, director of investments at the Soros Economic Development Fund.
To create ARAF, Acumen drew on its 20-year history supporting early-stage social enterprises and its experience scaling the off-grid energy sector through individual investments and commercial funds. Through ARAF, Acumen is bringing the same approach to resilient agriculture and delivering catalytic investment to address the capital gaps for agribusinesses on their journey to scale.
“The world’s poorest communities are often those hit hardest by the negative impacts of climate change. While wealthier people can afford to adapt, rebuild, and relocate, the poor are left to fend for themselves. At Acumen, much of our work focuses on helping low-income people, particularly farmers, adapt to and become resilient to climate change.
“That’s why we are so proud to sponsor ARAF and lead a group of committed investors to inject much-needed capital into early-stage, integrated agribusinesses that will promote economic growth where it’s needed most and help us build a future with the sustainability of the earth at its center,” said Acumen Founder and CEO Jacqueline Novogratz. “Leveraging institutional support often requires initial philanthropic commitments, which are rare in the impact sector. We are deeply grateful to IKEA Foundation for its philanthropic gift that played a vital role in the launch of this critical fund.”
ARAF’s $58 million close illustrates a new focus on climate resilience among major investors. Together, the ARAF funders are reducing poverty, increasing climate resilience, and galvanizing sector-wide growth that can help build a more sustainable and prosperous future for us all.
