Climate finance and impact investment: The overlapping financial agenda to save the Earth

Impact investing is intentional investment activities to achieve positive impact (social or environmental) and financial return. As a result, addressing climate change issues can be accomplished through both impact investing and climate finance. According to the Global Impact Investing Network (GIIN), 50% of impact investors considered their contribution to the global agenda, including the Paris Agreement to limit the global temperature rise to no more than a 1.5-degree Celsius increase, as a very important motivator for making investment decisions³. In Indonesia, climate-related sectors were performing very well in the impact investment landscape. Forestry and land was the industry with the most impact capital inflows from 2013 to 2020, followed by energy in the third place, and food and agribusiness in the fourth place⁴.

To illustrate how impact investing and climate finance can address climate issues, take Adena Coffee as an example. As one of the social enterprises we supported through ImpactX, Adena Coffee preserves natural resources by integrating Good Agricultural Practices (GAP) in their operations. One of many ways GAP is implemented in their coffee farms is by utilizing agroforestry principles to improve soil fertility, reduce the need for synthetic fertilizers, and optimize environmental health and crop productivity. By 2023, they have implemented GAP in 500 hectares of land in Flores and 248 hectares of land in Gayo, allowing them to maintain biodiversity.

Rumah Mocaf, another social enterprise we supported through ImpactX, embraces sustainable farming practices in their operations. By equipping their farmers with integrated and natural farming techniques, they repurpose production waste (cassava skins) for feedstocks then transform livestock waste into fertilizer, resulting in 90% of the leftover production being used as fertilizer.