By committing catalytic funding in the early stages and then stepping back for private capital as projects mature, we can turn climate ambitions into tangible results, argues Karin Berardo
Between $6 trillion and $12 trillion per year is needed to meet global climate and sustainability goals. Yet current investment flows are grossly insufficient, especially for early-stage, high-risk projects.
These nascent projects are perceived as unproven and too risky to attract conventional investors.
Understandably, most private funders hesitate to step in until those uncertainties are resolved, leaving local communities, governments and entrepreneurs to shoulder the burden alone.
Bridging this gap requires a new playbook. To unlock funding for climate-resilient landscapes, early investments must be de-risked through the strategic use of public and philanthropic capital, paving the way for profit-seeking capital to follow.
Specifically, we must blend different types of finance in sequence, taking on higher risk upfront so that transformative projects can mature and eventually stand on their own in functional market conditions.
Alto Mayo: A case of challenges and opportunities
The Alto Mayo landscape in the San Martin department of the Peruvian Amazon is a biodiversity-rich landscape of forest and farms. The municipal government has a low-emission rural development plan, but the area's natural resources remain threatened by expanding roads and unsustainable farming practices, and has so far struggled to secure the outside investment needed to change course at scale.
Through the combined efforts of The 1,000 Landscapes for 1 Billion People initiative, along with partners Conservation International, EcoAgriculture Partners, and Capital Continuum Advisers, the Alto Mayo Landscape Finance Strategy aims to change that – and the findings are eye-opening.
Across the world, there are many Alto Mayos – landscapes rich in natural and human capital and with sustainable development goals and plans, but starved of funding because traditional finance can't see past the upfront risks
Analysts found that about $67 million invested in sustainable agriculture, forest conservation, and improved infrastructure can generate gross economic benefits of roughly $135 million over 20 years.
In essence, every dollar spent on "greening" Alto Mayo might deliver two dollars in benefits. This projected two-to-one pay-off grabs investors' attention, especially in latter stages where projects might exceed 3x return multiples.
Just as importantly, these investments would improve local livelihoods and sustain natural infrastructure. With upfront support for agroforestry, small farmers' incomes could rise nearly six-fold.
Conservation areas could continue to provide important sources of water, materials and other benefits.
Additionally, smarter land use (like avoiding unnecessary roads) could save the region millions in future costs.
The Alto Mayo landscape strategy illustrates that well-structured nature-based finance can turn a vicious cycle of resource degradation and poverty into a virtuous cycle of regeneration and profit. The question is: how do we structure the financing to make this happen?
The Capital Continuum: A roadmap to de-risking investments
The Capital Continuum framework is a strategy to align the right financing with each stage of a project's development. It recognizes that, in the beginning, capital must be patient and risk-tolerant, while later, as projects prove themselves, commercial capital can step in.
In practice, this means starting with development funding – grants, public investment, or soft loans – to support early innovation and absorb initial risks. Then, as the project demonstrates tangible results and its risk profile improves, the funding mix shifts toward private investors who seek predictable returns.
Essentially, each type of capital deploys when it's most effective to manage financial and non-financial risks.
Early-stage support lays the groundwork that later investors require. It might fund community engagement, technical training, or policy reforms, and deploy tools like insurance or guarantees to buffer against unexpected shocks.
These measures lower the risk, so that by the time private capital is accessible many uncertainties have been resolved.
The continuum uses blended finance to do the heavy lifting early, so that in later stages projects are de-risked enough to attract banks, companies, or institutional investors. The ultimate aim is to graduate a once-nascent project or industry into the financial mainstream – taking it from idea to bankable investment.
Applying the continuum in Alto Mayo's landscape strategy
The Alto Mayo strategy applies this approach to develop a concrete action plan. Grants and public funding are required to facilitate the next phase of community training, agroforestry trials, and improved land-use planning that clarifies the structures and de-risks opportunities for later stage capital.
As pilot efforts show success, intermediate financing is expected to enter: development banks and impact investors with low-interest loans and guarantees to scale up initiatives. For example, credit lines provided through institutions like the national Agrobanco, local banks and credit unions can rely on federal and municipal incentives to provide lower interest loans to smallholder farmers.
But the logistics and transaction cost of reaching dispersed rural producers can be prohibitive without coordination. In another vein, the existing Biocredit programme leveraged philanthropic technical assistance support to assess and provide subsidized debt for farmers achieving regenerative farming objectives but won't pay for up-front transition costs.
One near-term initiative is to break down these bottlenecks through digitization (since nearly all farmers now have cell phones), decentralization of outreach through technical assistance and other field-supporting organizations, interconnections across existing products, loan aggregation, and building very targeted gap funding solutions as needed.
With a growing track record, local banks and commercial investors gain confidence, and the capital mix begins to flip to about 70% private in later stages – with public funds stepping back into a supporting role.
Ultimately, the goal is for Alto Mayo to fully engage with mainstream capital markets once its economic sectors mature.
Once proven, the plan envisions issuing green bonds or other market instruments to fuel further expansion of sustainable industries.
In summary, what begins as a mainly government and donor-dependent effort can graduate into a self-sustaining investment landscape. By sequentially reducing risk and proving the business case, projects flip an "unbankable" landscape to one that banks and investors can confidently finance.
A blueprint for global climate finance
Alto Mayo's finance strategy holds far-reaching relevance. Across the world, there are many "Alto Mayos" – landscapes rich in natural and human capital and with mature sustainable development goals and plans, but starved of funding because traditional finance can't see past the upfront risks. The Capital Continuum offers a repeatable model to change that, helping local projects plan for how to bridge the funding gap and unlock sustainable growth.
Of course, each location will need a customised approach, but the core principle is the same: de-risk early to enable investment later. Achieving that will require public, private, and philanthropic actors to collaborate and mobilize capital.
Failing to invest in these sustainable transitions means accelerating environmental damage, increasing climate fragility and missing out on transformative economic opportunities.
The model developed for Alto Mayo shows that these obstacles can be overcome, and that doing so pays off. By committing catalytic funding in the early stages and then stepping back for private capital as projects mature, we can turn climate ambitions into tangible results.
Closing the early-stage investment gap isn't charity – it's sound economics. The challenge is to replicate and scale this approach, until the exception becomes the norm in environmental finance.
We encourage investors of all types to embrace the continuum and find the right place on the risk-reward journey to be part of the change.
Karin Berardo is Managing Partner and Co-Founder at Capital Continuum Advisers.
