Delivering climate finance at the local level: the Dema Fund

This case study looks at how the Dema Fund supports community action to protect the Brazilian Amazon. The fund reaches geographically remote communities that are largely excluded from social programmes and government services, including indigenous peoples, Afro-Brazilian communities, subsistence farmers and women.

Article, 07 November 2018
Delivering climate finance at the local level
A series of case studies showing solutions for getting climate finance to local communities

This video explains the structure of the Dema Fund and shows how it has been designed to effectively get funding to local communities. Download diagram as PDF.

The Sustainable Development Goals (SDGs) and the Paris Agreement pledged support to help developing countries respond to climate change. International climate finance is growing – but very little finance from dedicated climate funds is reaching small locally-led initiatives. A study by IIED showed that less than US$1 in $10 of climate finance explicitly seeks to support local climate action.

IIED is researching solutions for getting climate finance to the local level. We are developing good practice case studies with a focus on investments that do not limit access and rights to land and natural resources, that support local climate action and that demonstrate innovative ways of building trust between funders and local intermediaries and communities.

The Dema Fund (Brazilian language-site) operates in the northern Brazilian state of Pará, focusing on an area affected by significant deforestation and with a history of land conflicts. The fund was set up in 2004 to help communities that have stewardship rights over specific lands and resources. It supports

  • Indigenous peoples,
  • Small-scale producers,
  • Afro-Brazilian communities, and
  • Women.

It supports them to claim their rights based on historical ties to Amazon forest territories, to invest in sustainable forest management to improve their livelihoods and to restore degraded forest areas.

Initially set up with an endowment from government auctions of illegally logged timber and a contribution from the Ford Foundation, the Dema Fund has since attracted grant funding from a range of donors.

The fund manages almost US$6 million. It operates four separate funding streams developed for, and governed by, communities, and most grants are for less than $9,000. To date, it has invested in almost 500 projects, involving 78,500 people from 1,900 remote and socially excluded forest communities.

Funded projects

The initiatives below are examples of the types of projects being supported under each of the funding windows:

• The Quilombola Fund is managed by 'quilombola' communities – descendants of Afro-Brazilian slaves who escaped from 19th Century slave plantations.

Esta comunidade quilombola foi apoiada a fim de produzir farinha de mandioca. (Foto: Fundo Dema)

This Quilomboa community was supported to produce flour from manioc plants - also known as casava. (Photo: Dema Fund)

The Gurúpa quilombo community of Belém used their investment to build efficient ovens for making Manioc flour. Two hundred and twenty people in 120 families have learnt to build ovens and better market their flour, increasing production and incomes while also reducing smoke-related health risks and charcoal use.

Luzia Dorothy do Espirito Santo Fund managed by rural women’s organisations.

O Fundo Luzia Dorothy do Espírito Santo ajuda mulheres a aumentar sua independência econômica (Foto: Fundo Dema)The Luzia Dorothy do Espirto Santo Fund helps women increase their economic independence (Photo: Dema Fund)

The Luzia Dorothy do Espirto Santo Fund helps women increase their economic independence (Photo: Dema Fund)

This funding stream has supported women to create agro-ecological kitchen gardens for 21 women, increasing their economic independence, income and food security. It has also worked with the women on other challenges, including domestic violence.

Xingu Fund is managed by the indigenous Xingu peoples.

A tribo indígena dos caiapós plantou cerca de 2.000 árvores como parte de seu projeto para estabelecer um sistema agroflorestal (Foto: Dema Fund)

The Kayopo indigenous tribe have planted some 2,000 trees as part of their project to establish an agroforestry system (Photo: Dema Fund)

The Kayopó indigenous tribe from Baú village in the southern region of Altamira aims to protect its territories from illegal logging and fishing and improve local livelihoods. It used its investment to strengthen information technology for reporting and engagement, and to establish an agroforestry project for 45 people in 11 families. They have planted 2,000 trees on three hectares, and are working with Brazilian Institute of the Environment and Renewable Natural Resources to control forest fires and combat deforestation.

• The General Fund builds strategic capabilities, bringing in the technical and strategic advice needed to build stakeholders’ broader and project management skills. 

O fundo geral treinou famílias do campo para o manejo sustentável de açaizais. (Foto: Fundo Dema)

The General Fund has trained rural families to undertake sustainable acai palm tree management. (Photo: Dema Fund)

The Rural Families Association in Rurópolis, in Transamonica/Xinguto, was able to train 40 producers in sustainable açai palm tree management, including how to improve water supply, marketing and reforestation. This has improved livelihoods and strengthened the local association.

Breaking down the barriers – insights from the Dema Fund

Our research has identified four factors that are especially important to breaking down the barriers between large-scale funders and local communities. We looked at how the Dema Fund’s structure and ways of operating are aligned with these elements.

1. Building trust and a shared understanding of risk

The Dema Fund uses its strong and accountable governance framework to build trust with donors and communities.

The fund is hosted by the Brazilian NGO FASE (Federação de Órgãos para Assistência Social e Educacional). FASE is a respected NGO and provides external credibility. Its ongoing legal and technical support ensures high reporting standards, and it has helped to design a strong governance framework that includes FASE staff and community representatives on the steering committee and on the advisory council monitoring the fund’s performance.

Adhering to FASE’s legal and administrative standards assures donors that the fund has strong management. FASE's data system, which aggregates financial information and results for each territorial fund and displays a profile for each group supported, creates meaningful transparency for donors. The fund’s secretariat has invested in transparency, displaying all documents on its website.

This decentralised and open management model is core to the fund's success, winning the trust of the communities that triggered its creation.

2. Aggregating finance at scale

The Dema Fund is an effective aggregation platform: it is an intermediary between large donors with high reporting standards and small, geographically remote community groups that have no administration experience. 

Most grants are between $1,000 and $9,000, with the women’s fund having a cap of $3,000. To apply, a community organisation must have at least five families, be over two years old and be recommended by two other community groups.

FASE supports the fund’s efforts to aggregate individual initiatives prioritised by communities.

For platforms like the Dema Fund that are based on social movements, articulating the value of flexible and holistic approaches when reporting results to donors is a challenge: the range of funded activities can appear messy and unstrategic. The Ford Foundation helped the fund to develop a narrative theory of change that has helped attract funding from donors such as the Amazon Fund.

3. Setting the direction and rules

The fund supports local communities to organise and attend events such as hearings, debates and demonstrations. This supports communities to engage directly in local and national decision-making, rather than having the fund or other actors speak on their behalf.

4. Building long-term capabilities

The communities that the Dema Fund supports have limited experience of articulating their priorities in project format or administering projects in ways that meet donor requirements on issues such as procurement. The fund spends 75% of its non-investment budget on technical assistance. Volunteers drawn from social movements help communities to design projects, support them with administration and report back via six-monthly accountability workshops. Finding capable volunteers is a critical challenge when the fund expands into new municipalities.

The general fund plays a strategic role, funding projects which build long-term capabilities within communities. The fund has invested in community radio, internet connections for community offices, training supporting campaigns and meetings.

The fund's participatory governance structure and community engagement in decision-making processes are helping to build long-term capabilities to develop locally-owned solutions.

Additional resources

Read more about our work on getting climate finance to the local level: Mobilising Money to where it Matters