Case Studies Demonstrating the Climate and Social Benefits of Livestock Sector Projects

The following case studies illustrate how investing in livestock development can reduce greenhouse gas emissions while alleviating poverty, improving nutrition, and building climate resilience. The case studies accompany the LD4D evidence brief The Climate Investment Case for the Livestock Sector.

Case study 1. Increasing East African Dairy Productivity and Reducing Emissions Intensity: Co-Investments in Early Forage Market Development

Dairy is an important sector in Kenya, contributing 4.5 % and 14% to national and agricultural Gross Domestic Product (GDP). The sector provides livelihood to an estimated 1.8 million smallholder households, employing an estimated 750,000 persons directly and 500,000 indirectly. However, dairy productivity remains low under primarily extension systems, meaning low profitability for smallholders and high emissions intensity of dairy products. A key constraint to improving dairy productivity and, in turn, reducing methane emissions intensity of dairy products, is limited access to nutritious forages and feed products. Access to quality forage and feed products to feed dairy cows is limited and highly seasonal, and dairy farmers struggle to produce forage on their own farms to meet their cows’ nutritional needs, leading to high emissions intensity. Forage production challenges are exacerbated by climate change, including periods of drought and erratic out-of-season rains. Investment in Kenya’s forage and feed market systems is a key lever to support dairy productivity and reduce emissions intensity in the dairy sector. However, to date, investment in the forage and feed market systems has not been adequate due to the informality of the sector and lack of investor ready forage and feed businesses.

The Nourishing Prosperity Alliance (NPA) is a project led by Land O’Lakes Venture37 with Forage Genetics International (FGI), Corteva Agriscience, and the International Livestock Research Institute (ILRI). A pilot of the project took place in Kenya from 2020-2023 and aimed to provide a scalable, market-wide solution to key gaps in the animal nutrition market to improve dairy production, boost climate resilience among farmers, increase access to animal-sourced foods, and reduce emissions by promoting climate-smart agriculture and optimized animal nutrition practices. The pilot strengthened forage enterprises, feed processors, and sales agents to increase access to nutritious and climate-adapted forage for dairy farmers and educate farmers on improved cow nutrition and ration balancing. The pilot reached 7,408 Kenyan farmers (60% women) and 25 private sector actors and produced the following results:

• 26% estimated GHG emissions intensity reduction for milk produced  
• 46% average increase per smallholder farmer of total liters of milk produced annually
• 41% average increase per farmer of total liters of milk produced annually for emerging farmers
• 68% average increase per farmer in annual income from milk for smallholder farmers
• 34% average increase per farmer in annual income from milk for emerging farmers

Due to the success of the pilot, Venture37 was able to secure blended financing, including $8 million in new funding from the Gates Foundation and $6.6 million in co-investment from private sector partners to expand NPA’s work in Kenya and begin work in Ethiopia under a new project called Nourishing Prosperity Alliance: Forage for Animal Growth in East Africa (NPA-FORAGE) which began in 2023 and will end in 2028. Under NPA-FORAGE, Venture37 will continue collaborating with implementing partners Corteva Agriscience, FGI, and ILRI, to reach 120,000 smallholder producers in Kenya and 100,000 smallholder producers in Ethiopia.

This scale-up will provide significant contributions to increasing sales and income for dairy farmers, as well as for private sector actors in the dairy sector (forage producers, feed processors and sales agents, agrvet providers, milk processors, etc.). It will also support progress towards Kenya and Ethiopia’s Nationally Determined Contribution which both list the livestock sector as a key sector for mitigation abatements with tremendous potential to reduce emissions through increased productivity and efficiency in the sector that will greatly reduce GHG emissions compared to a business-as-usual scenario. This is a critical transformation for both countries, particularly in the dairy sector, as dairy is a key economic sector which contributes 4.5% of total GDP in Kenya and 15% of total GDP in Ethiopia.

Case Study 2. Addressing Obstacles to Investments in Deforestation-Free Beef: The Innovative Model of Ecopec by Brazil Climate Lab

In 2017 the Brazil Climate Lab launched the pilot phase of Ecopec, an innovative financial mechanism intending to address deforestation caused by cattle ranchers in Brazil. The initiative aims to provide ranchers with the necessary financial and technical support to comply with the Brazil Forest Code. A diagnostic phase identified four main concerns that need to be addressed simultaneously to ensure the success of such a program:

1. Ranchers have long-term financing needs, previously not met by financial products offered; 
2. Ranchers do not have the collateral necessary for banks to offer them economically sustainable interest rates;
3. Ranchers often lack the technical capacities to implement intensification practices successfully; and

4. The beef processing market is highly concentrated, and ranchers lack the bargaining power to negotiate higher prices for deforestation-free beef.

To address these obstacles, the Brazil Climate Lab created The New Climate Smart Cattle Ranching Company (“The New Company”) to provide ranchers with their long term needs to implement intensification practices successfully. The goal is to increase their land productivity, thereby reducing GHG emissions from degraded pastures and deforestation related to beef production.

Cattle ranchers willing to be part of the program go through a thorough screening to ensure they can undertake such investment. The New Company then surveys the land and assess, with the ranchers, the financial and technical needs and best strategy to comply with the Forest Code, while maximizing their future revenues. This action plan is detailed in a “Rural Partnership Agreement” between the New Company and the cattle rancher.

The New Company then delivers between 10 and 85 percent of upfront capital and necessary ongoing funding for 10 years, along with continuous technical assistance. Rather than land titles, traceable livestock serves as guarantees to secure loans, using the latest monitoring technology to trace animal ownership. The New Company serves as an aggregator to negotiate better prices for inputs—such as feed and offtake agreements—with processing companies and retailers. Over the ten years, the net profit is shared between the New Company and the rancher proportionally to the initial investment provided by each party. The New Company uses these dividends to pay the investors’ part of the program.

The program uses several sources of funding. Grants from private foundations are dedicated to technical assistance and due diligence expenses. Concessional finance and first-loss capital serve to co-finance and guarantee the long-term pipeline of projects. Equity funds from impact investors, such as Naturvest, enable the New Company to negotiate input prices and conditions and develop a market for deforestation-free beef.

This financial instrument directly addresses the four concerns identified in the diagnostic phase. The Nature Conservancy implemented the program across 43 farms over 40,000 hectares. The results show that ranchers increased their productivity, became compliant with the Forest Code, and supplied better quality beef at better prices for meatpackers. Research demonstrates that over 100 ranchers in the region are willing to adopt sustainable practices in exchange for better access to credit.

As this initiative continues to scale-up and crowd in additional investments, it will contribute to a substantial increase in deforestation-free beef supply, helping Brazil to meet its goals to restore up to 12 million hectares of forests and 15 million hectares of degraded pastures by 2030.

Acknowledgment: This case study was originally published in in the 2021 World Bank report Opportunities for Climate Finance in the Livestock Sector: Removing Obstacles and Realizing Potential. 

Case Study 3. Crowding In Investments for Black Soldier Fly Production: Producing More Sustainable Animal Feed and Diverting Waste from Landfills

Feed production for meat livestock is growing rapidly across East Africa. There is a 1.5 million MT annual chicken feed demand in Tanzania alone. A Tanzanian company called Chanzi is capitalizing on this opportunity by utilizing black soldier flies (BSF) to transform organic waste into high-protein animal feed additives and organic fertilizer. BSF larvae is a sustainable alternative to two of the main animal feeds: fish meal and soy. BSF can produce 2,500 times more protein per acre per year than soy, using less water and land.

Chanzi is able to produce insect protein at $1.90 per kg, compared to fishmeal which costs $4.30 per kg and soybean meal which costs $2.20 per kg. Additionally, the Chanzi production model has found a blend of mechanization and labor-intensive production that contributes to greater employment opportunities in Tanzania and beyond, while embedding themselves in the local waste management and agro-input ecosystems.

Chanzi currently has a total of three sites in Arusha, Dar es Salaam, and Zanzibar and is in the process of launching its first site in Kenya in Nairobi. From an environmental perspective, a single Chanzi site is avoiding producing 0.4 MT of methane per day and 9.4 MT of CO2 per day, all of which is equivalent to taking 642 cars off the road or planting 49K fully grown trees annually. When comparing BSF production to soya farming, BSF farming demands significantly less land than soya farming to produce an equivalent amount of protein per year.

Through the waste management side of Chanzi’s business, the company reduces the strain on local landfill infrastructure. Chanzi provides smallholder farmers with extra income opportunities for their spoiled crops in addition to collecting waste from local markets for free and from their network of registered waste aggregation agents who they pay by volume for delivery to factory gate. Chanzi further sees an opportunity to source for brewer spent grain and waste from  local breweries in Tanzania. The spent grain will be combined with organic food waste from the community to provide a better-quality feed for the BSF.

In 2022, Chanzi won the Better World award through the 100+ Accelerator program (an accelerator managed by AB InBev, Unilever, Colgate-Palmolive and Coca-Cola) which provided the company with grant funding and an opportunity to partner with the consortium to scale. Chanzi used these funds to construct its facility outside of Dar es Salaam where one of AB InBev’s brewery is located to sustainably and cost-effectively offtake their brewery waste. Chanzi has future plans to work with other members of the program to cost-share the construction of waste processing facilities alongside their operations and provide Chanzi with the feedstock it needs to scale production.

In 2022, Chanzi also received significant grant funding from the Dutch Fund for Climate and Development. This funding is enabling Chanzi to conduct a detailed feasibility study to determine carbon offsets from production, ability to trade carbon credits and additional R&D for Chanzi. One area of R&D is to test out whether product contaminated with aflatoxin can be fed to BSF without the contaminants being passed through the food chain which would be a strong revelation from a food waste perspective given that aflatoxin is a huge problem with maize in the region, causing substantial food waste and health risks for consumers.

The global black soldier fly market is expected to reach $3.4B by 2030 with a CAGR of 34.7 percent from 2020 to 2030. Seeing this market opportunity, FINCA Ventures, an impact investing firm, has also invested in Chanzi to reduce CO2 and methane emissions through innovative food waste processing techniques, and provide more affordable feed solutions to smallholder farmers across East Africa.

Acknowledgment: This case study is based on a 2023 blog by Jacqueline Kigima of FINCA Ventures, Why We Invested: Chanzi. 

This set of case studies is the result of a collaborative effort of the LD4D Solutions Group on Climate Finance & Livestock.

The case study on deforestation-free beef in Brazil was originally published in in the 2021 World Bank report Opportunities for Climate Finance in the Livestock Sector: Removing Obstacles and Realizing Potential.

The case study on investments for black soldier fly production is based on a 2023 blog by Jacqueline Kigima of FINCA Ventures Why We Invested: Chanzi.

Compiled and prepared by: Nick Wheelhouse (Global Research Alliance on Greenhouse Gases and Edinburgh Napier University), Andrew Bisson (USAID), Rebecca Chamberlin (Land O’Lakes Venture37), Dominik Wisser (The Food and Agriculture Organization of the United Nations), and Michael MacLeod (Scotland’s Rural College). We gratefully acknowledge the feedback of Leah Arabella Germer (World Bank), Ben Henderson (World Bank), Anne Mottet (International Fund Agricultural Development), Luca Taschini (University of Edinburgh) and Claudia Melim-Mcleod (Future Horizons/University of Edinburgh).

The LD4D Climate Finance & Livestock Solutions Group brings together decision-makers and experts to generate evidence-based insights that help livestock development projects access climate finance. The group aims to unlock much-needed funding for a sector that is currently underrepresented in climate finance - despite its crucial role in adaptation and mitigation.

Livestock Data for Decisions (LD4D) is a worldwide community of over 1,000 members and partners working to improve livestock data and evidence in low- and middle-income countries. LD4D aims to support the transition to more sustainable and inclusive livestock systems by mobilizing trusted livestock data for better policies, investments, and strategies. Learn more at livestockdata.org.

This work is licensed under Creative Commons Attribution-NonCommercial- NoDerivatives 4.0 International. To view a copy of this license, visit https://creativecommons.org/licenses/by-nc-nd/4.0/. September 2024.

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