Optimizing groundwater management to prepare for climate change impacts

IDF investment: USD 5 mln; USD 25 mln catalyzed from FMO
Contracted: 2016
Instrument: USD loan, 10-year-tenor

Danper is one of Peru’s leading agricultural companies and currently produces fresh, canned and frozen fruits and vegetables mainly for export to North American and European markets.

IDF provides long-term funding to Danper, that it would not have otherwise got from local banks. Moreover, IDF long-term funding de-risks Danper for FMO and has thereby catalyzed an additional USD 25 mln from FMO with a shorter tenor (eight years). While it is a well-run company overall, Danper is exposed to risk in terms of the long-term availability of groundwater. This risk will be amplified by climate change. Danper has therefore developed an integrated water management plan for its Compositan farm close to Trujillo on Peru’s coast with the support of FMO capacity development funds. The plan is certified by the Alliance for Water Stewardship (AWS) Standard and its stakeholder management, including the surrounding communities. The AWS is a member of the ISEAL alliance, an international authority on sustainability standards, and Danper is one of only two private companies worldwide that is AWS certified.

Potential impact of Danper’s integrated water management plan on its climate change resilience

There are two main outcomes of Danper’s integrated water management plan. Firstly, optimising the fresh water consumption of its Compositan farm is not only expected to lead to more climate-resilient business practices but should also make the surrounding communities more resilient to climate-related water risks. This is especially important as Peru’s coast is facing a water crisis. Even though it is the most populous region of Peru, it has only 1.8% of the country’s renewable fresh water reserves. Secondly, albeit an indirect outcome, the plan also protects the jobs generated by Danper by supporting Danper’s sustainable growth path.

The main stakeholders of Danper’s integrated water management plan are its workers, the surrounding communities and of course the environment. Danper’s workforce includes a significant number of underprivileged women who did not traditionally have opportunities for formal employment before the growth of new agriculture activities in Peru.

Danper currently employs 18,336 people, approx. 50% of which are women (status July 2018), which is a massive increase compared to December 2016, when it employed 5,157 people, approx. 30% of which were women. Around 30% of Danper’s workforce are temporary workers. The rest are permanent employees (status 2016). Being SA8000 certified, Danper pays its workers a living wage. It is unclear exactly how many workers are at risk of losing their jobs if the water risk materialises, but some redundancies are likely.

As Danper developed an integrated water management plan, its ambition grew over time and we supported them to acquire an AWS certification.

Overall, Danper runs a solid business with well-diversified operations. The key remaining risk to its operations and thus the job security of its workers is that of the long-term availability of sufficient groundwater suitable for irrigation. The water risk mitigation strategy laid out in the integrated water management plan is based on thorough hydrological monitoring of the area surrounding the Compositan farm. It is therefore highly likely that this risk will be adequately addressed. Danper’s AWS certification underscores this assessment.