IFAD’s coalition supports public development banks’ financing for sustainable & equitable food systems

28 Jul 2021 --- Creating sustainable and equitable food systems that benefit the world’s most vulnerable people could require as much as US$350 billion per year over the next decade, according to new analysis from the International Fund for Agricultural Development (IFAD).

Public Development Banks (PDBs) have the potential to help finance this and generate exponential social and economic returns, says the IFAD, which announced the formation of a coalition of partners to turn that potential into action.

“Public development banks already make considerable investments in food and agriculture. If we harness and redirect those investments to support the transition toward fairer and more sustainable food systems, this could be a game-changer,” says Gilbert 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 was made 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, Italy.

Delivering nutritious food for all
Investments are required to change how people 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.The coalition will establish a platform for PDBs to share best practices, facilitate technical cooperation and set up new partnerships.

According to IFAD’s estimates, transforming food systems that “deliver healthy people, a healthy planet, and a healthy economy” will require US$300 billion to 350 billion per year for the next decade – but this would also generate potential economic gains of US$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,” remarks Houngbo.

“We need 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 that invest in food and agriculture as part of their portfolio accounts for almost two-thirds of the formal financing for agriculture. According to research by the Institute of New Structural Economics and AFD, their annual investments could reach as much as US$1.4 trillion.

Social and green investments
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, optimize and scale up their financing for social and green investments.

To do this, IFAD stresses that 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.Investments are required to change how people grow, process, sell and consume food, so that food systems deliver nutritious food for all.

Many also need to develop more attractive instruments to stimulate investments from the private sector as well as accessible and affordable financial products for rural producers and small and medium-sized agri-businesses. This requires better sharing of expertise 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 toward a fair and sustainable transition in line with the SDGs and the Paris Agreement. We invite all relevant stakeholders to join this initiative to scale up green and inclusive investments,” says Rémy Rioux, CEO of AFD.

“The coalition promoted by IFAD represents a first concrete step in accelerating the capacity of PDBs to provide affordable finance and patient capital for a sustainable food system transformation,” explains Antonella Baldino, chief international development finance officer at CDP.

“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.”

Edited by Elizabeth Green