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Floating fish farm in Singapore Image credit: iStock

Climate finance in agrifood is “strikingly low”, says new report from CPI & CLIC

August 10, 2023

Image credit: iStock

Where the money goes (and where it doesn’t)

Across the board, climate finance for agrifood systems has to increase “at least sevenfold from current levels” in order to reach conservative estimates for climate mitigation and adaptation actions, according to the report. This translates to hundreds of billions of dollars more that needs to be channeled into climate finance for agrifood.

The latest figures fall far below estimates.

For 2019 and 2020, a big chunk of the $28.5 million that went into climate-focused agrifood financing at the project level went to agriculture and forestry activities, 42% and 41%, respectively.

Project-level finance for agriculture garnered $11.9 billion per year in 2019 and 2020 and almost $1 billion per year in VC investment, according to AgFunder data. However, this is “far below the estimated needs of $30 billion – $218 billion per year needed, notes the report.

Forestry attracted $11.7 billion in project-level climate finance in 2019 and 2020. Just $0.03 billion came from VC investment. Like agriculture, investments in forestry fall short of the estimated needs of $55 billion – $753 billion per year.

Initiatives that address food loss/waste, and low-carbon diets — both of which the report says are “essential” for climate mitigation — received together less than 1% of financing.

“Opportunities to finance food loss/waste and low carbon diets remain untapped,” the report noted, adding that these areas garnered only $0.1 billion at the project level and are “a minor fraction” of the annual needs of $48 billion – $50 billion.

Fisheries and aquaculture are also essential parts of climate mitigation and were also similarly under-funded: Aquaculture garnered $0.1 billion per year and $0.06 billion in VC investment, well below the required $11 billion per year.

Floating fish farm in Singapore. Image credit: iStock

How to increase agrifood climate finance

Citing the seven-fold increase in climate finance needed for meaningful climate action, the report notes that “general finance channeled to agrifood-related sectors suggests that enough liquidity exists globally to finance this transition” towards climate action.

Repurposing money that currently goes towards harmful practices (most of aquaculture and fisheries, according to the report) would be a major step forward towards reaching the levels of climate finance needed for meaningful change.

CPI and CLIC lay out four “guiding principles” that will also aid the process. These apply to policymakers and regulators, corporations, and financial institutions.

  • “Foster integrated sustainability objectives,” where stakeholders weave sustainability objectives throughout their activities. Agrifood corporates investing in regenerative agriculture backed by rigorous science is an example of this principle in action.
  • “Leverage virtuous cycles” wherein various actions and interventions from stakeholders in the public and private sectors are integrated. Policymakers must place agrifood “as a top priority on the global climate agenda”; investors could incentivise more climate investments amongst agrifood corporates.
  • “Strive for efficiencies and improve implementation” could also be seen as making the most of what capital is available for climate finance. That means avoiding duplication.
  • “Think globally, act locally” is often a slogan seen in local grocery markets, but it should also be a blueprint for how agrifood systems get built. Governments should encourage consumers to shift to low-carbon diets, while corporates might jointly invest in tools that can help reduce Scope 3 emissions. At the heart of this principle is combining global and community-level knowledge and traditions.

The report also calls out the private sector, noting it has plenty of opportunity to increase climate finance. Certain geographies, namely South Asia and, Sub-Saharan Africa, Latin America and the Caribbean, are ripe for more climate investment — particularly since these regions also bear the brunt of negative climate impacts.

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