Blended finance for agriculture: exploring the constraints and possibilities of combining financial instruments for sust
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Blended finance for agriculture: exploring the constraints and possibilities of combining financial instruments for sustainable transitions Tanja Havemann1 · Christine Negra2 · Fred Werneck1 Accepted: 13 July 2020 © Springer Nature B.V. 2020
Abstract Transitioning to sustainable agricultural systems is imperative to meet the global Sustainable Development Goals (SDGs). Achieving more sustainable agricultural production systems will require significant additional capital, however this cannot be covered by the current financial market setup, which dissociates public and private funders. Blended finance, where concessionary development-oriented funding is used to mobilize additional private capital, is essential. To ensure that the limited pool of concessionary funding is used efficiently and effectively, a shared understanding of the roles and limitations of public and private funders is necessary. In this paper, we describe the high-level funding gap for sustainable agriculture, the general landscape of agricultural finance, and the concept and potential roles of blended finance in this context. This paper introduces the conditions under which different financing mechanisms can contribute to addressing barriers related to sustainable agriculture investments. It highlights that multiple funding modalities must be utilized in order to achieve agricultural investment at a meaningful level and encourages greater exploration of the range of blended financing structures to increase SDG-related agriculture investments. Keywords Blended finance · Investment · Finance · Agriculture · Agribusiness · Impact investment · SDGs · Sustainable agriculture · Climate smart agriculture
Background The agricultural sector is central to achieving many of the United Nations 17 Sustainable Development Goals (SDGs). According to the United Nations Food and Agriculture Organization (FAO), for example, nearly 821 million people faced chronic food deprivation in 2017 (FAO et al. 2018). The number of extreme climate-related disasters has also doubled since the early 1990s, negatively affecting agricultural production and food availability. The environmental footprint of human population growth and dietary shifts has contributed to an over-exploitation of resources by the agricultural sector. For example, agriculture accounts for over * Tanja Havemann [email protected] * Christine Negra [email protected] 1
Clarmondial AG, Zürich, Switzerland
Versant Vision LLC, New York, USA
2
70% of global freshwater use, 23% of total anthropogenic greenhouse gas (GHG) emissions, and to rapidly declining biodiversity (IPCC 2019). Agriculture-induced environmental changes undermine agricultural productivity itself triggering profound socio-economic and political repercussions. As an engine of socio-economic growth in emerging and developing economies, the agriculture sector is central to development. According to the FAO, while agriculture currently contributes circa 3% to global Gross Domestic Product (GDP), in
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