Blog Climate risk financing: Building resilience for Pakistan's agrifood sector

by Sadie Shelton, Samaa Mufti

onApril 14, 2025

A new initiative is set to empower Pakistan’s agrifood micro, small and medium enterprises and financial institutions by providing tailored climate risk financing solutions, enabling them to adapt to climate challenges and de-risk investments in the agrifood sector.

A cycle of climate risks

Pakistan's agricultural sector stands at the frontline of the climate crisis, with escalating cycles of drought and flooding causing an estimated $4 billion USD in annual losses. The catastrophic 2022 floods displaced 33 million people; in Punjab, rising temperatures and unpredictable monsoons exacerbate environmental risk. Without adaptive strategies, livelihoods connected to the agriculture sector are at risk.

A new program, funded by the German Federal Ministry for Economic Cooperation and Development (BMZ) and supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, introduces climate risk financing solutions tailored to agrifood value chains. These will cover the entire value creation process from the agricultural production stage to processing, transport, storage, packaging and delivery. Increasing production, improving value addition and market linkages could significantly boost Pakistan’s agricultural exports. However, yield gaps and climate risks have hindered growth and innovation. By providing financial protection and fostering investment in innovation, quality and market access, this initiative aims to de-risk investments, strengthen resilience and enhance the inclusiveness and competitiveness of Pakistan’s agrifood sector.

Small-scale climate finance, big impact

The project collaborates with rural financial intermediaries to increase their understanding of climate risks and develops financial solutions tailored for micro, small, and medium-sized enterprises (MSMEs) in working across the stages of value chain. By integrating insights from local stakeholders with the I mpactSF Analyzer – an AI powered tool to recommend relevant climate adaptation measures based on its climate risk assessment – the initiative will help financial institutions mitigate agrifood lending risks while generating social and environmental benefits.

The project will:

Enhance climate risk awareness by identifying risks and resilience strategies in key value chains,
Generate data insights from leveraging the AI-driven ImpactSF Analyzer and stakeholder data to inform decision-making,
Build risk management capacity through training financial intermediaries on climate-smart financing and risk management,
Co-design and test financial solutions to protect against climate risks with Agri-MSMEs and financial intermediaries, and
Strengthen partnerships with key stakeholders to scale and sustain climate financing solutions.

"Agrifood enterprises are vital to Pakistan’s economy, yet they are among the most vulnerable to climate change,” said Samaa Mufti, ImpactSF. “This initiative provides financial actors the tools and knowledge to increase the flow of capital to agrifood enterprises working across the value chain so that they can navigate climate-related challenges with confidence."

Benefits for agri-MSMEs and financial institutions

Improved climate risk awareness, enabling informed decision-making to protect Agri-MSME livelihoods and reduce lending/investment risk
Enhanced resilience through risk management and adaptation strategies
Increased productivity through value addition across the value chain supported by data-driven insights and training
Gender-inclusive strategies supporting equitable opportunities and access to climate risk finance
Access to climate-smart finance and solutions for agri-MSMEs that reduce the economic impact of climate risks

Advancing on a climate-resilient future

Building on CGIAR’s research in Pakistan, including climate risk profiles and investment plans, this project integrates scientific data and remote sensing to inform targeted interventions in the value chains.

"If financial intermediaries can better assess and price climate risks, they can unlock much-needed financing for MSMEs and aggregators in the agrifood value chain. This project is about turning climate resilience into a viable business case for lenders and borrowers alike” said Jochen Ramcke, GIZ Pakistan.

By uniting government bodies, financial institutions, international agencies, and research organizations, this project creates a supporting ecosystem for sustainable agriculture, aligning with Pakistan’s global climate adaptation goals and its effort to support vulnerable populations.

Partners:

The /project “Introduction of Innovative Climate Risk Financing Solutions in Pakistan (CRF)” is funded by the German Federal Ministry for Economic Cooperation and Development (BMZ) and supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

About GIZ:

As a service provider with worldwide operations in the fields of international cooperation for sustainable development and international education work, GIZ works with its partners to develop effective solutions that offer people better prospects and sustainably improve their living conditions. GIZ is a public-benefit federal enterprise and supports the German Government and a host of public and private sector clients in a wide variety of areas, including economic development and employment promotion, energy and the environment, and peace and security.