Resources on Food Systems Finance part 2

Green Climate fund strategic plan 2024-2027 (2022)

GCF is the worlds largest dedicated climate fund servicing developing countries with adaptation and mitigation finance for climate resilient, sustainable development pathways. The program aims to scale financing for adaptation and resilience, while supporting inclusion of local institutions and integration of local communities, indigenous people, women and girls. Secondly it aims to include the private sector by deploying blended finance and early stage, seed and high-risk capital especially for pre-commercially viable solutions and de-risk private sector investments. It wants to catalyse climate finance engaging key actors such as local private sector, early-stage ventures, micro and small enterprises and national and regional financial institutions. Engaging private sector will be stimulated through blended finance constructions, GCF would like to include local organizations by also allowing them to become accredited agencies.
Source: Green Climate Fund

GCF sectoral guides Agriculture and food security (2021)

GCF acknowledges the importance of the agricultural sector for climate adaptation and mitigation. Climate change causes global shocks and challenges in food security and poverty reduction, while the worlds population is growing. In developing countries most agriculture is rainfed (70%) and affected by climate change through increasing temperatures and stronger rainfall variability. Farming and food systems need to be transformed to build resilience to these climate impacts while responding to the increasing demand for food by growing populations. To achieve this, GCF has identified three paradigm-shifting investment pathways:

1) Promoting resilient agroecology and adaptation.
2) Facilitating climate informed advisory and risk management services, based on climate data.
3) Reconfiguring food systems towards sustainable, environmental sensitive food systems to feed the rapidly growing population.

Food systems are here defined as: “ the entire range of actors and their interlinked value-adding activities involved in the production, aggregation, processing, distribution, consumption and disposal of food products.

Proposed actions are:
Empowerment of local communities and building on traditional knowledge and resources, while stimulating inclusion of women and youth, and engagement of the private sector. Empowerment and integration of local organizations can help to grow outreach, while reducing costs. GCF wants to stimulate flexible, grant-based, programmatic finance channelled through local financial mechanisms, with simplified access and approval processes

Financial instruments to catalyse investments: The GCF offers a range of financing instruments, including grants, loans, guarantees, and equity, and works with diverse groups of partners in order to catalyse larger financial flows towards transformative climate investments. It employs de-risking strategies and blended finance modalities to catalysing private investments, including stimulating domestic finance that can help climate finance reach local communities.

Fostering effective collaborations and partnerships including and multi- sectoral approaches and public/ private partnerships to improve agriculture and food security. Paradigm shifting in agriculture and reconfiguring food systems will necessarily impact a wide variety of actors spanning many sectors, and will require collaboration beyond traditional boundaries, at a scale not seen before and will need to effective partnerships among different stakeholder groups including political and social thought leaders, civil society, the research community, international development organizations, farmers, market intermediaries and businesses.

Source: Green Climate Fund

AGRA: Empowering Africa’s food systems for the future (2023)

It is estimated that roughly 257 million people in Africa are undernourished while the population is rapidly growing. (FAO, 2022). Africa’s food system is failing to deliver sustainable healthy diets to all, caused by the combination of climate change, ongoing conflicts, economic instability, low agricultural productivity due to outdated farming practices and crop losses after harvesting, and lack of storage and processing facilities. Women play a significant role in African agriculture but have fewer opportunities, resources, and rights than men, affecting productivity and sustainability in food systems. Transforming African food systems to become sustainable, efficient, and respond to the needs of the region’s rapidly growing population will face numerous social, economic, and environmental constraints.

Key drivers affecting African food systems transformation include.

• Rural population growth and associated rising land scarcity.
• Rapidly rising urban populations fuelling a constantly increasing demand for food.
• Economic transformation including rising wage rates and per capita income.
• Climate change and increasing incidence of extreme weather events.
• Accelerated pace of technical innovations.
• Ongoing global health crises, regional conflicts, and economic disruptions

To effectively address hunger and poverty, it is essential to revolutionize African agricultural and food systems. The four key building blocks of food systems according to AGRA are, 1) production and processing, 2) markets and trade, 3) income and employment, and 4) nutrition, and health. Achieving food systems transformation includes (i) strengthening Africa’s growing local food markets; (ii) catalysing rapid expansion in agricultural and food productivity (iii) boosting investment financing for Africa’s food systems transformation (iv) ensuring access to safe and nutritious food for all, and (iv) establish policies to reduce the cost and increase the availability of nutritious foods.

Food systems in Africa are heavily underinvested: less than 5 percent of the total credit volumes are invested agricultural sector. Food system actors such as smallholder farmers and SMEs, are not being reached by current financial instruments, which limits their contribution to sustainable food systems. Patient public funding for food systems is decreasing and (global) subsidies, and blended finance initiatives in Africa’s agriculture and food sector remain limited. In addition, the financial sector does not sufficiently consider the costs and risks of climate change and biodiversity loss in investment decisions.

There is a need for Innovative financing while establishing partnerships between governments, international organizations, private sector, and civil society. New financing strategies and models will include blended finance constructions, green bonds, social impact bonds, and long-term public capital for investments in climate adaptation, mitigation, and biodiversity. Mechanisms to involve local actors can increase cost effective results. These including finance to smallholder farmer, while enhancing supply chain resilience and stimulating local food economies. Innovations such as digitalization in food systems can improve economic efficiency, inclusiveness, and environmental sustainability. Policies and regulations that stimulate involvement of private sector are needed, as well as initiatives for as true pricing of food, including costs of damage to health and natural capital. In addition, investing in engaging youth, especially young women, in food systems development must be a top priority. Central banks realize the need to address climate change risk, and the need to develop national climate accounting standards and regulation to incorporate climate considerations into investment decision-making.

Climate adaptation, mitigation, and biodiversity funds represent a fundamental source of resources for transformative change in food systems. Private sector capital represents a rapidly growing source of climate finance and are increasingly investing in adaptation and mitigation-related activities. This is an important trend to build on. Key recommendation from the innovative finance include:

1. Government to tax and cost harmful practices
2. Regulate voluntary carbon markets so that benefits are shared equally
3. Use public finance in food to unlock private finance (e.g. guarantee facilities)
4. Invest in financial and digital literacy to stimulate inclusiveness
5. Invest in local sourcing in supply chains
6. For development agent/ impact investors: stimulate a mindset change to invest in long term investments: e.g. irrigation, better storage facilities
7. Use and deploy funds available worldwide (climate finance) to stimulate foodsystems transformation
8. Set up knowledge sharing and learning platforms also among African countries

Source: AGRA

UNCDF: the role of UNCDF in transformative food security finance

The Covid-19 pandemic has shed light on the fragility and unsustainability of global and local food systems. structural transformations towards sustainable, resilient, and equitable food systems include the way in which food is produced, accessed, distributed, valued, and consumed. It is acknowledged that sustainable food systems require that economic, social, cultural, and environmental dimensions are included. They also entail a shift from one-size-fits-all solutions to local and context-specific approaches and stronger collaboration of the involved public and business actors, as well as civil society. In 2015, UNCDF launched the Finance for Food programme (F4F) with the purpose of providing a coherent and comprehensive framework for promoting financial support to food systems (FS) and food security and nutrition (FSN).

Demography, urbanization, dietary transition, technological transition, aging and feminization of rural population, and climate change, are among the key drivers expected to have major implications for FSN in developing countries. Local Governments, farmers and communities are on the frontline to address FS and FSN problems. build partnerships between public, private and community efforts are needed. This requires financing instruments that are flexible, accessible and affordable alongside technical capacity to enable local governments to plan, finance and implement transformative FSN solutions

Financial resources from all possible sources (e.g., central budget transfers, ODA, remittances, FDI, Foundations and Global Funds, pooling of resources, etc.) to boost Local transformative FSN investments; Promoting the right mix of public goods (e.g., road infrastructure), productive (e.g., support to SMEs) and social finance (e.g., cash transfers) based on sound diagnostic and assessment of the FSN situation, the institutional and the socio-economic context of the targeted areas, and the needs of the various actors involved in FSN, including households, specific groups (e.g., women, youth) micro-enterprises, SMEs, municipalities.
Source: UNCDF

UNCDF: Enabling public and private investments to promote Local Food Systems

Food security directly impacts on people’s health and education, their ability to work and to generate income as well as to assert citizens’ rights and achieve equality. In developing countries, women and girls appear as the most vulnerable to the impact of food insecurity as they have less access and control over resources than men. . In order to tackle food security effectively, significant support is needed - technical and financial - to make the necessary investments at the local level. Addressing food security requires a stronger involvement of local actors, including local governments (LGs), producers, farming organisations and rural households. the Finance for Food (F4F) Programme will act as a laboratory for testing new approaches to food security rooted in the local context. UNCDF uses local development finance tools and instruments, to unlock domestic capital - public and private - for local economic development. . It considers all the elements of the local system in which foods are grown, produced, processed, distributed and consumed, within a determined territory. The program is active in Benin, Mali and Niger, Burundi and Mozambique, it has 4 components:

Supporting better adapted policies and programs, support local development and investment plans, provide strategic financing (grants, loans, guarantees, equity) combined with capacity building to local actors, capture lessons learned,

To this effect is has installed a Strategy: A blended finance mechanism coordinated and facilitated through Local Government to increase resilience and sustainability of food security interventions through a: Local development fund for public investors and a Local finance initiative for stimulating private investment in the food system. UNCDF’s financing models work through two channels: savings-led financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, and by showing how localized investments - through fiscal decentralization, innovative municipal finance, and structured project finance - can drive public and private funding that underpins local economic expansion and sustainable development.

4 pillars for effective food systems are:

• Availability: food supplies most be sufficient and adequate to feed the population.
• Stability: supplies of food should be stable with no fluctuations or shortages
• Accessibility: People must have physical, social and economic access to sufficient food
• Utilization: Food must be safe, nutritious and culturally accepted

The program is active in Benin, Mali and Niger, Burundi and Mozambique, and is supported by the Belgium fund for foodsecurity (Bffs)
Source: UNCDF

Mastercard:  How to Enhance Young People’s Employment and Entrepreneurship Opportunities Within Africa’s Agri-Food Systems

Youth are constrained by exclusion from decision-making processes that affect our lives, and by limited access to resources, knowledge, and expertise.

Several African countries have not adhered to the Maputo Declaration on Agriculture and Food Security in Africa, to allocate 10% of their national budgets to the agricultural sector, which is structurally under-resourced.Young African women face additional challenges when seeking meaningful opportunities in agriculture and in agri-preneurship.

The impact of climate change is significantly affecting Africa’s economic growth and resilience of the agri-food systems. Young people have innovative ideas and the technological adaptability and capacity to create solutions

We call on government, policy makers and civil society to create policies which empower youth to participate fully across the value chain. we ask private sector actors, governments, philanthropies, and civil society organizations to:

• Support investment in sustainable agriculture, climate-smart agriculture practices for youth farmers to produce more resilient crops and provide incentives and subsidies for agricultural inputs like fertilizers.
• Government and the private sector should promote a technology credit revolving scheme to ease access and repayment of farm machinery, alleviating financial burdens that youth-owned businesses face.

Development partners, financial institutions, agri-businesses, governments, and civil society organizations should Promote equitable financial inclusion through Public-Private Partnerships for tailored climate resilient financial packages, such as de-risking agriculture, favourable insurance products, and microfinance models to support women, and youth agri-businesses.
Source: Mastercard

CGAP: Accelerating Business to Empower Rural Women in Agriculture (ABERA)

Agriculture is the primary activity of 79% of economically-active women in low-income countries and, in Africa, women own one-third of small and medium enterprises. Equitable food and financial systems require rethinking the role of women as producers, entrepreneurs, and consumers (FAO 2020. This program aims to Convene a cohort of financial service providers, agribusinesses, and agtechs keen to improve their inclusion of and impact on rural women, particularly strengthening their income and resilience to the increasing stresses and shocks of climate change.  Support technical assistance and experimentation to help companies integrate gender and climate in their strategy and improve overall business performance  Cultivate a forum for peer exchange and learning where companies can share experiences and co-create scalable solution

The financial service providers, agribusinesses, and agtechs in the ABERA cohort will: Receive expert analysis of their business model that illuminates their current progress to overall as well as gender and climate goals.
Source: CGAP

CGAP:  Rural livelihoods in a changing food system (2020)

The need for creating a new, global vision for the future of the food system will be a multi-dimensional and continually evolving process. 

Putting rural livelihoods at the center looking at the future of food systems and the long-term positioning and role for smallholder households in the food system The potential for a technologically-disrupted future and what it might mean for rural households Reimagining the role of governments in driving and enabling a new food system. Is there a place for smallholder production and small agri-SMEs in a future food system and what does that look like?
Source: CGAP