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Fighting climate change with money.
This article details a roadmap for making farming communities resilient to the ravages of climate change. It discusses how the world can fight global poverty and food insecurity using new financial tools.
As the uncertainties wrought by the changing climate have a growing impact on the world’s food systems, we need to begin building systems that shelter the vulnerable from financial losses. In Africa, smallholder farmers contribute up to 70% of the food supply. Yet they are overly exposed to the negative impacts of climate change and often have no safety net to rely on. This has serious effects not just on the livelihoods of smallholder farmers, but the food security of their communities and nations. Creating the means of cushioning these farmers from the devastating financial impacts of climate change is a lynchpin to ensuring food security in the future.
Given that most of the agricultural systems in the world are rain-dependent (95% in Sub-Saharan Africa, 90% in Latin America), climate change effects on the patterns of rainfall are expected to hit farmers hard. They will introduce new financial risks to farming which will require new technologies to effectively mitigate.
Thankfully, the human development of new technology has so far kept pace with the changing environment, giving us the promise that we can find sustainable solutions to our world’s challenges. From developments in Earth observation technologies to advancements in artificial intelligence, the tools for monitoring our world open up new possibilities for us to confront our challenges as a civilization.
Developments in new areas such as decentralized finance are reinventing the world of business and laying the foundations for a new global financial paradigm. One in which marginalized peoples have an equal opportunity to participate and reap the benefits of the global financial system. Put together these and many other innovations provide an arsenal that can be used to fight climate change. If not to stop it, then to facilitate vulnerable communities to adapt to it and to mitigate some of its worst livelihood effects.
It is in this context of using cutting-edge technology to fight some of the world’s most pressing problems that humanity finds its hope. We need to consider how new insurance products can be developed which will cover the most vulnerable in a transparent and sustainable way. We need to develop an entire suite of financial products that facilitate individuals and entire communities to manage and transfer food production risks across the sea of humanity. By doing this we can reduce the risk exposure faced by vulnerable communities and buffer food production systems from the financial shocks of the changing climate.
At Shamba Dynamic, we are building the tools that will support the food systems of the future to feed the close to 10 billion people who will be on Earth by 2050. Using big data from remote, proximal, and in-situ sensors, we run analytics to keep track of our changing world and provide this information to the people and financial systems that need it. We leverage a variety of technologies, such as machine learning, to extract meaningful information from data that can be used to answer pertinent questions. Questions such as whether the soil has enough moisture to support a crop without water-stressing it, estimating the volume of a farmer’s yield at the end of a season, determining if the land cover across an area has changed in a certain way, and many others.
By providing the answers to these questions we enable developers of smart contracts in the field of decentralized finance to build a range of new products. From parametric crop insurance to agriculture-based derivatives and prediction markets, there are many new products that will be coming out in the next few months and years that will revolutionize risk management in agriculture. This will not only tend to the needs of the existing farmers, but it will also give confidence to new farmers to take up the trade now that the risk involved can be managed. The effect of this might well be more resilience and productivity in food systems, especially smallholder systems such as those found around the developing world.
Beyond helping communities around the world adapt to and mitigate the effects of climate change, these new technologies can be used to fight climate change itself. By disrupting products such as climate bonds and carbon credits, these new decentralized financial products offer the promise of a world more incentivized to cut emissions. While it is still early to make a call on what might happen, it’s a safe bet to say that the world has enough tools to meet its challenges head-on.
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