From the Paris Agreement to the UN Sustainable Goals, the global community has defined an ambitious agenda to achieve by 2030. Yet, our delivery has fallen short. So how do we closer to meeting our objectives? In a nutshell – by paying for outcomes such as improved soil health, higher farmer incomes, and cleaner water, rather than activities or outputs like number of workshops held or seeds distributed. Outcome finance ensures that every donor dollar delivers real and measurable improvements in people’s lives and the environment. 

Outcome finance is a financial arrangement where payments are conditional to the achievement of measurable and verified results – such as increased soil health, lower water pollution, improved dietary diversity, or increased rural employment. However, this calls for a radical change in how we allocate development aid – moving away from processes and deliverables towards outcomes and results.  

At the Shamba Centre for Food & Climate, we believe that outcome finance is a game-changing solution. Here are five reasons why.  

1. Outcome finance funds farmers and SMEs to transition toward more resilient practices 

Blended finance in the agriculture and food sector has become a powerful idea that is increasingly embraced by the development community. However, amid the ongoing decline of ODA, which began in 2025, the landscape of blended finance is likely to shift more sharply toward efficiency and immediate impact. Projects that depend on prolonged, continuous support to become financially viable or those still in the pilot stage such as sustainable agriculture will face greater difficulty securing financing. Instead, blended finance will increasingly flow to initiatives that are already close to being bankable and have well-defined, scalable models. This dynamic will encourage a faster pruning of less mature or riskier projects, concentrating investment on opportunities that can demonstrate measurable results and growth potential with limited external support. The missing middle that don't have the track record or ‘credit worthiness’ to qualify for loans.

With blended finance retreating from high-risk, long-horizon projects, outcome finance will play a crucial role in bridging this gap by providing payments during the transition period. 

By providing farmers with an outcome payment contract tied to measurable improvements in productivity and income, donors have the confidence that their financial investment will generate real impact. At the same time, as farmers receive payments for undertaking measurable improvements, their cashflow improves, making them more attractive to lenders.  

As sustainable agriculture projects mature and cashflow stabilises, blended finance can step in to scale successful models, driving broader adoption and sustained impact. 

2. Outcome finance funds the transition towards more resilient practices  

Implementing sustainable practices requires high upfront investments and long-time horizon. Farmers, typically need three to seven years to see tangible results from their efforts. This delay not only slows returns for farmers but also poses significant financial risk for lenders, as capital is tied up for extended periods and the likelihood of default rises when outcomes take years to materialize. 

Outcome finance can help bridge this gap by providing payments during the transition period, enabling farmers and SMEs to adopt sustainable practices that would otherwise be difficult to finance. 

By linking payments to measurable outcomes, outcome finance supports farmers in adopting practices such as multi-cropping, switching to organic fertilizers, or harvesting rainwater. Rewards are tied to pre-defined outcomes—like improvements in soil health, carbon sequestration, biodiversity, or nutrition—ensuring that financial support leads to real, verifiable impact. 

3. Outcome finance pays producers to do the right thing  

If the goal is to reduce soil degradation or prevent water pollution, farmers must be paid directly for these outcomes. Traditional farming systems often reward outputs like crop yields, while environmental outcomes such as maintaining healthy soil, storing carbon, or protecting waterways remain unpriced. Without payments, farmers face an economic trade-off: adopting practices that protect the environment may increase costs or reduce short-term productivity. Paying farmers for achieving measurable environmental outcomes changes this calculus, making sustainable practices financially viable. 

When farmers can earn income by “selling” services like carbon sequestration, improved soil fertility, cleaner water, and enhanced biodiversity, these benefits become tangible economic assets rather than hidden public goods. This creates a direct link between sustainable land management and livelihoods, encouraging practices that restore ecosystems while supporting farm incomes. By valuing and pricing these outcomes, society can harness private capital to advance public goals. Ultimately, this approach will bring us closer to achieving the UN SDGs. 

4. Outcome finance creates markets for externalities  

Our outcome finance model is designed to address negative externalities—the harmful side effects of economic activity that impact people and the planet, such as polluted water, degraded soils, or toxic emissions. These costs are typically unpriced, leaving society to bear the consequences. 

Agrifood systems generate around USD 10 trillion each year in hidden social, economic, and environmental costs, meaning that the prices people pay for food do not reflect the full impact of producing and consuming it. These hidden costs include health problems from poor diets, low wages and poor working conditions for farmworkers, environmental damage such as deforestation, soil erosion, water pollution, and greenhouse gas emissions, as well as economic inefficiencies and market distortions (CPI, 2024) 

Outcome finance reduces the cost of these negative externalities by rewarding actions that generate positive, measurable environmental and social outcomes. By paying for results - like cleaner water and air, healthier soils, and reduced toxicity - it internalises these externalities and creates a market for them. This transforms previously unvalued benefits into economic returns, encourages sustainable practices, supports livelihoods, and helps bring us closer to achieving the UN SDGs. 

5. Outcome finance addresses complex problems  

Outcome solutions are designed to address competing interests that cannot be resolved by markets. For example:  

• Municipalities want to reduce waste-treatment costs. One way to do this would be to get farmers to reduce erosion and chemical runs offs from synthetic inputs.  

• Farmers want extra financing to cover crop and intercrop to reduce erosion and invest in biofertilisers.  

• Local communities want municipalities and farmers to reduce toxicity in their food and the environment.  

An outcome finance solution for farmers to increase soil health, increase biomass and produce clean water solves this complexity. The concerns of farmers, municipalities and local communities are also addressed.