New study reveals vast and critical climate finance gap for global agrifood systems

31/07/2023

Temas

Only a tiny fraction (4%) of global climate finance goes to agrifood systems.
However, these systems are responsible for almost a third of global GHG emissions, and are increasingly vulnerable to climate change, threatening food security and price stability.
The private sector has great opportunities to increase its climate finance to agrifood systems.
Meanwhile existing agricultural subsidies could be partly shifted to fund more low-carbon and resilient supply chains to protect livelihoods and food security.

Low-carbon and resilient agrifood systems are vital to ensuring food security, and to support economic development.

However, the first comprehensive analysis of climate finance to these systems globally has found them to receive just a tiny fraction of global climate finance – just 4%, or USD 28.5 billion on average per year. They require at least seven times more climate finance – USD 212 billion annually – to reach the most conservative estimate to achieve the goals of the Paris Agreement.

Agrifood systems contribute nearly one third of greenhouse gases (GHGs) worldwide. Yet, mitigation finance for these systems represents just 2% of the total climate finance tracked across all sectors in 2019/20 (USD 14.4 billion of a total USD 660.2 billion).

These systems are also highly vulnerable to climate risks. Yet, adaptation finance constitutes just 1% of the total climate finance tracked across all sectors in 2019/20 (USD 7.3 billion of a total USD 660.2 billion). A drastic uplift to adaptation finance can help protect jobs and livelihoods, especially in developing countries.

Climate Policy Initiative’s (CPI’s) Landscape of Climate Finance for Agrifood Systems report also found that USD 6.7 billion went to agrifood-related projects that targeted both mitigation and adaptation efforts.

This report aims to improve the policy and investment decisions required to build more sustainable agrifood systems by making this data available to decision-makers, capital owners and managers in the agrifood space.

Commissioned by the UK Foreign, Commonwealth & Development Office (FCDO) and executed by the ClimateShot Investor Coalition, of which CPI is secretariat, the report establishes a baseline for climate finance to agrifood systems globally.

“Our current approach to food systems is a major driver of global GHG emissions, as well as biodiversity loss,” said Dr. Barbara Buchner, Global Managing Director at CPI. “Global food availability and quality have also been affected by more frequent and severe disruptions, from the COVID-19 pandemic and the war in Ukraine to the overall climate crisis. These expose the vulnerability of our food supply chains to health, geopolitical, and environmental shocks and stresses.”

General finance already going to agrifood-related sectors indicates that enough liquidity exists for this transition. Global public subsidies for agriculture and fisheries are estimated at around USD 670 billion per year. However, over 60% of agricultural subsidies are market-distorting, incentivizing increased production without consideration of negative environmental impacts. This can lead to soil degradation, deforestation, and excessive use of pesticides and fertilizers, contributing to environmental decline and GHG emissions. In addition, an estimated USD 630 billion of private capital per year is available for investment in food systems.

Dr Buchner said: “Shifting public and private financial flows to support more sustainable and resilient agrifood systems would not only tackle the significant emissions from the sector, but also mobilize additional private investment, provide better food security, and ensure farmers and other workers are better protected from climate change impacts.”

Mike Reddaway, Senior Advisor of the FCDO Food and Agriculture Research Team, Research and Evidence Division, said: “This landmark study demonstrates for the first time the huge shortfall in the climate finance required for agriculture and adjacent sectors to transition to a sustainable future in line with the SDGs. The evidence is clear – we need a step change in the approach to investment and for both governments and the private sector to do more.”

As well as mitigation and adaptation finance, the report analyzes tracked financial flows to agrifood systems by sector, geographic destination of funds, financial instruments used, and sources of climate finance.

Explore the data in the full Landscape of Climate Finance for Agrifood Systems report.

About this report

This report was prepared by the ClimateShot Investor Coalition (CLIC) of which CPI is the secretariat. CLIC aims to rapidly scale-up the finance necessary to shift towards low-carbon, climate-resilient and nature-positive agriculture and food systems globally, thus delivering on the ambitions of the Glasgow Breakthrough Agenda on Agriculture agreed at COP26. More information on CLIC is available here.