Creating sustainable and equitable food systems that benefit the world’s most vulnerable people will require substantial investments – by some estimates as much as US$350 billion per year over the next decade. Public Development Banks (PDBs) have the potential to help finance this, and generate exponential social and economic returns, according to the International Fund for Agricultural Development (IFAD) who will today announce the formation of a coalition of partners to turn that potential into action.
Photo: IFAD/Francesco Cabras
“Public development banks already make considerable investments in food and agriculture. If we harness and redirect those investments to support the transition towards fairer and more sustainable food systems, this could be a game-changer,” said Gilbert F. Houngbo, President of IFAD. “We need PDBs to be part of strong, united and decisive action on a global scale if we want food systems to benefit all, particularly the poorest in rural areas who grow much of our food.”
The announcement will be made today by IFAD and its partners Agence Française de Développement (AFD) and Cassa Depositi e Prestiti (CDP) at the event Mobilizing trillions for food systems transformation taking place during the UN Food Systems pre-Summit this week in Rome. The event will include Daniele Franco, Italy’s Minister of Finance, Karina Gould, Canada’s Minister of International Development, and Arkhom Termpittayapaisith, Thailand’s Minister of Finance, as well as representatives from the African Development Bank (AfDB), Coller Capital, FIRA and Pan-African Farmers’ Organization (PAFO).
Investments are required to change how we grow, process, sell and consume food so that food systems deliver nutritious food for all, provide decent livelihoods for those who work in them, and protect the environment and biodiversity. According to estimates, transforming food systems that deliver healthy people, a healthy planet, and a healthy economy will require $300-$350 billion per year for the next decade – but this would also generate potential economic gains of $5.7 trillion annually.
“The world’s financial system has resources that could be put to work to address the inequities and inefficiencies of our food systems while reducing their harmful impact on the planet,” said Houngbo. “What we need are powerful actors with the political will and dedication to drive a new agenda and the financial clout to make it happen.”
PDBs are financial institutions controlled or supported by central or local governments that aim to deliver on public policy objectives to support economic development in a country or region.
Currently, PDBs who invest in food and agriculture as part of their portfolio account for almost two thirds of the formal financing for agriculture. According to research soon to be released by the Institute of New Structural Economics and AFD, their annual investments are estimated to reach as much as $1.4 trillion.
The planned coalition will not only bring together PDBs, but also governments, research institutes, the private sector and civil society working together to strengthen the capacity of PDBs to reorient, optimise and scale-up their financing for social and green investments, and to benefit the rural small-scale producers working in some of the world’s poorest countries.
To do this, many PDBs need to repurpose their investments, improve their governance, targeting, risk assessment and management, and better track and report on environmental and social impact. Many also need to develop more attractive instruments to stimulate investments from the private sector, and accessible and affordable financial products for rural producers and small and medium-sized agri-businesses. This requires better sharing of expertise to be able to access public climate finance and mobilize green investment capital.
“Public development banks can and must go further to tackle food insecurity and facilitate the move towards a fair and sustainable transition in line with the SDGs and the Paris Agreement. We invite all relevant stakeholders, through the Finance in Common movement, to join this initiative to scale-up green and inclusive investments,” said Rémy Rioux, CEO of AFD.
“The Coalition promoted by IFAD represents a first concrete step in accelerating the capacity of Public Development Banks to provide affordable finance and patient capital for a sustainable food system transformation. CDP, as the 2021 Finance In Common Summit host institution, is ready to move the initiative another step forward during the next Summit, together with IFAD, AFD and other relevant stakeholders, ” added Antonella Baldino, Chief International Development Finance Officer at CDP.
The first concrete action of the coalition will be the establishment of a platform for PDBs to share best practices and know-how, facilitate technical cooperation and set up innovative partnerships.
The planned coalition builds on the work of a cluster of PDBs convened by IFAD which, at the first Finance in Common Summit hosted by France last November, agreed in a joint statement to strengthen their investments to achieve the objectives of the Paris climate agreement and the SDGs. The importance of this work was recognized by G20 foreign affairs and development ministers in the Matera Declaration in June.
This article was originally published by IFAD.