Known for their grueling hours, those who work in the technology and financial sectors may be more dependent on coffee than any group besides coffee producers themselves. Of course if you talk to the Skoll Foundation or the Multilateral Investment Fund (MIF) of the InterAmerican Development Bank about their support for Root Capital’s $7 million public-private initiative to fight the leaf rust epidemic devastating the Latin American coffee industry, it’s not really about getting that daily cup of Joe at all— it’s about the millions of people in Latin America who depend on the coffee industry for their livelihoods, many of whom are small farmers living in rural communities.
According to the International Coffee Organization, a fungus known as La Roya, or coffee rust, has infected more than half of the coffee farms in Central America, and is slowly killing off coffee trees. Climate change, which brings warmer, wetter weather to the world’s largest coffee-producing region, has caused the fungus to proliferate. In Central America alone, La Roya has cost approximately $1 billion in losses on this year’s harvest and left an estimated 400,000 people without jobs.
Given the historic underinvestment in sustainable farming, dealing with this issue may be a tall order, but this public-private partnership that also includes Green Mountain Coffee Roasters, Inc., is a greater start. The $7 million will be used to make more than $10 million in resilience investments, combining long-term lending to replace diseased trees with short-term trade credit, financial management training, climate-smart agronomic assistance and household-level income diversification. Operating through about 50 agricultural enterprises, Root Capital estimates this initiative will provide assistance to approximately 40,000 farmers and their families.
Beyond the direct impact, the initiative also aims to serve as a blueprint that can be replicated for other crops to help small farmers become more resilient to climate change, and increase stability and sustainability. "Coffee is the canary in the coal mine for climate change," says Ric Rhinehart, executive director of the Specialty Coffee Association of America, which is why Root Capital is starting with coffee, but with an eye toward developing a model that can be applied more broadly.
“A holistic approach that involves developing partnerships with a variety of organizations with different types of expertise is key,” explains Liam Brody, Root Capital’s Sr. Vice President of Value Chain Relations. As a Skoll Foundation Social Entrepreneurship Award Winner, Root Capital has received infrastructure support and seed funding for a number of their initiatives.
The debt capital made available through the InterAmerican Development Bank, and the partnership with Green Mountain, however, are no less crucial to this initiative. Green Mountain’s network of growers enables Root Capital to identify opportunities for growth, and their long-term contracts with suppliers lowers the risk involved with long-term lending. It is exactly this strategy that brings small farmers, small businesses and cooperatives, and money-lenders together in a win-win-win scenario that has allowed Root Capital to distribute more than $500 million in credit since its founding in 1999— while averaging a 99% repayment rate.