A white paper from the International Fund for Agricultural Development and the NDC Partnership shows options on how mitigation and adaptation ambition can be raised and access to finance for implementation can be realized.
The key actions are benefit-sharing, building for bankability, investment bundling, and blending.
The investment pathways include providing transition finance for regenerative and water-efficient agriculture, landscape-based finance, patient finance for multi-use water infrastructure capital, and natural capital finance.
By Pablo Vieira and Jyotsna Puri
More than 130 world leaders gathered at the World Climate Action Summit last week at the UN Climate Change Conference (UNFCCC COP 28) in Dubai, United Arab Emirates (UAE), to make food systems transformation central to the global climate agenda. Announcing the Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action, the COP 28 UAE Presidency underlined in stark terms that “any path to fully achieving the long-term goals of the Paris Agreement must include agriculture and food systems,” while recognizing that “agriculture and food systems must urgently adapt and transform in order to respond to the imperatives of climate change.”
It is critical that we recognize the inextricable linkage between food systems and climate change, and it’s equally essential that we recognize the interconnected role of water in building resilient food systems for climate adaptation and mitigation. Right now, 60% of all adaptation-related concerns globally are water-related. At the same time, the Climate Policy Initiative reports that in 2019-2020 climate finance for small-scale agrifood systems totaled USD 5.53 billion, just 0.8% of total climate finance tracked across all sectors and 19% of total climate finance for agrifood systems. Contributing to approximately one-quarter of global greenhouse gas (GHG) emissions, the agriculture, forestry and other land-use (AFOLU) sector provides massive mitigation opportunities.
Building on the Declaration’s momentum, a ministerial dialogue on building water-resilient food systems, co-hosted by the UAE and Brazil, will underscore the new commitment to addressing the interlinked food, water, and climate crises. The event will see the formal launch of a two-year partnership under the UNFCCC Climate Resilient Food Systems to support countries to further raise the ambition of their Nationally Determined Contributions (NDCs) through the integrated management of water and food systems.
Capitalizing on the strong political will of countries around the world, action is required on two fronts. First, countries need to be empowered to use this opportunity to further raise both their mitigation and adaptation ambition. Ambition-raising opportunities like these are critical to respond to the urgent call to action coming out of the Global Stocktake process. Second and equally important, countries need access to finance to see these commitments implemented. A white paper from the International Fund for Agricultural Development (IFAD) and the NDC Partnership shows options on how mitigation and adaptation ambition can be raised and access to finance for implementation can be realized.
Climate-adaptive water-resilient food systems (CAWFS) prioritize sustainable water use and management, while still ensuring consistent adaptable food production. CAWFS prioritize long-term sustainability over short-term land-use productivity by balancing crop yields with the preservation of ecosystems.
The financing gap in food systems and water infrastructure is estimated to be between USD 500 billion and USD 1 trillion, and this is clearly where we need to focus global efforts. The IFAD-NDC Partnership white paper outlines a structured approach to fund the immense gap. It provides a method to tackle the core problems that hinder private investment and development, addressing both structural and project-level barriers. The strategic 4×4 framework includes four actionable steps (or the “Four Bs”) and four investment pathways.
The key actions are benefit-sharing, building for bankability, investment bundling, and blending. The investment pathways include providing transition finance for regenerative and water-efficient agriculture, landscape-based finance, patient finance for multi-use water infrastructure capital, and natural capital finance.
The four actionable steps or the 4 Bs are:
- Benefit-sharing means ensuring that gains from improved water management are inclusively and equitably shared among all stakeholders, particularly marginalized groups.
- Investment bundling refers to pooling assets to support aggregated investments in food and water. Such resource consolidation can maximize investment and generate mutually reinforcing food and water outcomes when it comes to resilience, the economy, and health.
- Building for bankability relates to ensuring that projects and programs related to water-resilient food systems are feasible and profitable to attract investment.
- Blending refers to combining public and philanthropic funds with private investment to mitigate risk. Initial investments from public money or foundations can attract private investment by allaying risk concerns and assuring the risk burden is shared.
Coordinated multilateral, bilateral, and philanthropic investments are needed to crowd in private investors and close the gap in food systems and water infrastructure finance. Deploying these four actions across the four critical investment areas will maximize investment use and return, while building sustainable and climate-resilient food systems globally. Demonstrating the rationale for these investments, which bring about important adaptation and mitigation benefits, will help strengthen the mobilization of climate finance.
Whether finance focuses on transition capital, landscaped-based capital, patient capital, or natural capital, a new strategic execution model to raise capital is needed. Such a model would raise capital from public and private sources and provide technical assistance and advisory support to complement the investments.
As we look to the outcomes of the first-ever Global Stocktake and COP 28, climate-adaptive, water-resilient food systems must be part of the solution. Now is the time to adopt an innovative approach to financing to shore up resilient economic opportunities, improving livelihoods, especially for the most climate vulnerable.
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Pablo Vieira is NDC Partnership Global Director.
Jyotsna Puri is Associate Vice-President with the Strategy and Knowledge Department (SKD), IFAD.