Project: Developing Carbon Finance Project for Farmers Adopting Regenerative Agriculture Practices in the Indo-Gangetic Plains
State of development: Current
Stage of development: Final negotiations
Stage notes: Scale Up
Type of instrument — Impact Bond: No; Outcomes Fund: No; Social Impact Incentives (SIINC): No; Social Impact Guarantee: No; Payment-by-results (no pre-financing): Yes; Technical Assistance and Market-building program: No; Other: 
Rationale for using outcome-based finance: Program innovations: The outcomes-based contract ensures that revenue is generated through successful outcomes, aligning financial sustainability with project achievements for Varaha. The revenue from carbon finance payments acts as an additional income stream for farmers, enhancing their livelihoods and motivating them to maintain regenerative practices. Partnering with respected research institutions like Maharana Pratap Horticulture University and IIT Kharagpur provides a strong scientific foundation for the project's methodologies. 
Financial sustainability & other considerations: Collaborating with 45 channel partners across multiple states in India provides a decentralized approach to engagement, reducing the risk of dependency on a few actors. Beyond venture capital, Varaha can seek partnerships with international development organizations, philanthropic foundations, private sector entities, impact investors, and carbon credit buyers, to reduce financial risk.
Pathways to scale: The success of the Indo-Gangetic Plains project can serve as a model for replication by Varaha in similar agricultural regions facing climate change challenges.
Key challenges to launch: "The key pain points for the Indo-Gangetic Plains Regenerative Agriculture Project are:
Lack of funding for significant upfront investment.
Risk aversion among farmers to adopt new agricultural practices.
The project's outcomes are complex and difficult to measure and verify.
Outcomes Accelerator support can help address these pain points in a number of ways:
Provide financial support to help the project get off the ground and cover implementation costs
Provide training and technical assistance to help farmers adopt regenerative agriculture.
Help mitigate the risks associated with the project.
Provide support for developing a robust MRV system.
In addition to the above, Outcomes Accelerator can also help the project to:
Help the project build partnerships with key stakeholders, such as governments, NGOs, and businesses. 
Help the project to scale up by providing support for replication and expansion. 
Help the project to disseminate lessons learned to other projects and organizations."
Social/developmental challenge: Varaha's outcome-based financing program addresses the underprovision of climate resilience and community benefits by the market. Currently, the market lacks monetary incentives for farmers to adopt regenerative agriculture practices. Furthermore, farmers face a lack of knowledge and access to equipment, due to the existing informational asymmetries. By quantifying and monetizing outcomes such as carbon sequestration, yield enhancement, and soil health improvement, Varaha's program provides tangible value to sustainable practices, thereby aligning incentives and alleviating risk for farmers. Varaha's Monitoring, Reporting, and Verification (MRV) system ensures transparency, overcoming information gaps. The program's emphasis on income diversification directly counters financial constraints faced by smallholders. In essence, Varaha's outcomes-based financing model transforms market failures into opportunities, incentivizing sustainable practices while fostering economic growth, resilience, and environmental stewardship. 
Expected intervention model: Varaha envisions a pay-by-outcomes contract that can foster sustainable agricultural practices among the smallholders involved in Varaha's Regenerative Agriculture Practices in the Indo-Gangetic Plains project. The project empowers farmers to adopt regenerative practices, such as direct seeding, zero-till farming, and crop diversification, resulting in carbon sequestration, reduced emissions, and improved soil quality. Payments to farmers are tied to these quantifiable achievements, ensuring fair compensation for positive impacts. A comprehensive Measurement, Reporting, and Verification (MRV) system guarantees accuracy, transparency, and accountability. Critical to this initiative is the concept of an outcomes-based financing model, akin to a development impact bond. Smallholders benefit not only from increased yields and reduced input costs but also from an additional income stream generated through carbon finance. This incentivizes sustained commitment to regenerative practices. Varaha's outcomes-based financing project presents a blueprint for harnessing agriculture's potential as a climate solution, uniting environmental stewardship with economic prosperity.
Policy sectors — Employment and private sector development: No; Education: No; Social protection: No; Criminal justice: No; Health: No; Agriculture: Yes; Environment and climate change: Yes; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: No; Other: 
Primary SDG goal: 3,8,13
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: Yes; Upper-middle-income: No; High-income: No
Notes: Data for this pipeline project was last updated in March 2024
Delivery location: India