Tanzania is increasingly facing the consequences of climate change, marked by a rise in the frequency and severity of extreme weather events. Moreover, factors such as deforestation, unsustainable agricultural practices, and limited access to clean energy further increase the vulnerability of the population to the adverse effects of climate change.

Alongside the dedicated efforts of the government, non-profit organizations, and local communities, there is a growing awareness of the key role that private enterprises can play in combating climate change through inclusive business models. These entrepreneurial approaches offer a promising and sustainable avenue for reducing carbon emissions, preserving biodiversity, and simultaneously improving livelihoods and resilience. Unfortunately , access to adequate financing is a significant obstacle that limits the impact of these enterprises. Despite their tendency to create positive externalities, the social and environmental benefits they generate are often undervalued and undercompensated.

Impact-linked finance can be a solution, by offering concessional capital linked to the achievement of pre-defined outcomes and rewarding impact enterprises for the social and especially environmental impact they create. It can be a highly effective and innovative way of aligning positive impact with economic viability and lies at the intersection between blended finance, impact investing, and results-based finance.

The Impact Linked Fund for Climate Change Mitigation and Adaptation in Tanzania is the second funding initiative of the Impact-Linked Fund for Eastern & Southern Africa (ILF ESA), which was first launched in 2021. ILF ESA’s Climate Window will provide impact-linked financing to market-based organisations operating in Tanzania and actively contributing to climate change adaptation or mitigation in different sectors such as agriculture, renewable energy or waste management.