LATTE Facility Launches to Bolster Climate Resilience for Colombian Coffee Farmers – CoffeeTalk

A new financing initiative, the Latin American Climate Resilience Coffee Facility (LATTE), has been unveiled by IDH Investment, aiming to allocate USD 30 million towards enhancing climate resilience for smallholder coffee farmers in Colombia. The financial structure includes around 70% senior debt and 30% junior first-loss capital, focusing on deploying junior debt and guarantees essential for scaling adaptation financing.

The coffee sector is under severe threat from climate change, with projections suggesting that by 2050, nearly 88% of Latin America’s coffee-growing regions could become unsuitable for cultivation due to rising temperatures and erratic rainfall, adversely affecting millions of smallholder families. Despite the critical need for climate finance, funding for smallholder agriculture is alarmingly low, comprising less than 1% of global climate finance. In Colombia specifically, about 563,000 Arabica smallholders require assistance, while conventional financing avenues are often reluctant due to factors like high initial costs, absence of land titles, and restricted credit histories. This scenario presents a significant financing opportunity of approximately USD 914 million for interventions that target smallholder farms and adaptation measures, within the wider context of a USD 2.5 billion need for resilience financing across all farms.

LATTE tackles these obstacles by aligning capital, farmer incentives, and technical support across the coffee value chain. It brings together major coffee brands, traders, and financial intermediaries to implement a scalable, replicable model. Leveraging IDH’s established network in the coffee sector, LATTE works to reduce investment risks for local financial intermediaries, enabling them to extend competitively priced credit to smallholder farmers. Additionally, incentive payments funded by brands help enhance farmer cash flow and create a supportive feedback loop.

Key objectives of LATTE over its five-year rollout include reaching 16,000 farmers with financial and technical support, converting 22,400 hectares to climate-smart agricultural practices, deploying USD 28 million in loan capital, sequestering or preventing the release of 187,000 tCO2e, and achieving a 17% increase in average yields over baseline figures. These anticipated results aim to demonstrate improved lending performance for farmers, incentivizing ongoing corporate support and establishing coffee lending as a viable asset class.

Evgenia Sokolova, Program Director at IDH Invest, highlighted the essential role of the Lab in advancing LATTE’s financial strategy, ensuring it is investor-ready with a clear investment framework, risk-sharing methodology, and a pathway for attracting private capital.

LATTE also pre-designs specialized transition loans for diverse financial intermediaries, including agri-fintechs, Microfinance Institutions (MFIs), and banks, which then provide loans to coffee farmers, fortified by LATTE’s de-risking capital. Intended junior debt amounts are between USD 1-5 million, with guarantees making up less than 35% of the total loan portfolio at an 8% annual fee. Financial intermediaries are chosen based on their geographical alignment with targeted brand supply chains.

These transition loans will finance an array of interventions—from short-term solutions like low-carbon fertilizers and shade crop integration to medium-term strategies involving biochar, and long-term investments in agroforestry and coffee renovations with climate-resilient varieties.

LATTE has already identified over 10 financial intermediaries within Colombia’s rural lending ecosystem through IDH’s reVive Hub, with six undergoing detailed assessments and one currently engaged in a pilot. Together, these intermediaries handle over USD 40 million in agricultural lending, and an estimated USD 12 million to USD 20 million is in discussion for pilot projects, potentially benefiting 5,000 to 9,000 coffee farmers. Noteworthy institutions include Confiamos (MFI, active pilot), Agricapital (Fintech, advanced discussions), and Crezcamos (MFI, preliminary talks). The launch of LATTE signifies a pivotal move towards securing a sustainable and resilient future for the Colombian coffee industry.

Read More @ Climate Policy Initiative