Blending Climate and Agriculture Finance to Improve Agricultural Landscapes in Africa

The agricultural landscapes should provide enough food, energy and fiber to a growing global population in an ever-changing climate, while potentially serving as instruments for climate change mitigation. Climate change mitigation is particularly key in the ever-growing topic of agriculture nowadays since sustainability is an important feature of agriculture; and managing risk/s and the increasingly unpredictable climate situation of the global society is something major that forms part of the sustainability story of global agriculture. However, there seems a disconnect between the ways that climate-smart landscapes will need to be managed and the current financing systems and or structure available to support them. Within the same argument; funds for agricultural development, food security, climate mitigation and adaptation generally come from multiple varied sources despite the inter-connectivity of these goals within the agricultural systems.

This article seeks to unpack the current financing landscape for climate and agriculture in the developing parts of the world. It then touches slightly on the analyses around the implications for the development of climate-smart agriculture particularly for smallholders. To conclude; it will then suggest ways to a more effective integration of climate and agriculture finance.

Climate Finance

There may well be various and or multiple sources of climate; however in this analysis climate sources of finance includes (i) Multilateral funding and donors – in this instance it will simply be in the form of official development assistance from multilateral and bilateral sources to provide support through a variety of mechanisms. (ii) Private investment – private sources of capital mitigation could be split into multiple flows towards the regulated carbon markets or to the voluntary carbon markets. In other instances; private companies could also commit to a ‘low carbon’ outside of carbon markets, through their Corporate Social Responsibility dedications and or their supply chain sustainability initiatives. (iii) Philanthropic funding is also another source of finance through international NGOs and private foundations, which will include Oxfam, CARE, and Conservation International for instance.

Mainstream agriculture finance

Some main sources of finance for mainstream agriculture will include (i) Multilateral funding and donors – this type of funding will usually come from organisations (i.e.: World Bank) committed to the economic development of agriculture amongst others to meet the demand of global food security. The investments will usually go to farm related activities such as land development, processing facilities, machinery and livestock management etc. (ii) Foreign direct investment (FDI) – this type of funding usually comes from government bodies who pledge a certain amount of money to the development of agriculture around the world (usually in places in such as Africa and Asia). In other instances; foreign private investors and multinational corporations also play a significant role in the agricultural investments, in other to contribute towards global food production and the development of agricultural value chain as a whole. (iii) Domestic funding – this type of investment and or funding usually comes through central and local governments, and it forms part of the national government’s spending for agriculture along the entire value chain (excluding other development-related activities).

Limitations of the Current Finance Structure

There are multiple complexities and challenges facing the current finance structure in place to support the climate-smart agriculture goals. These climate and agriculture financing realties present major barriers to creating appropriate and efficient financing structures to support developmental goals on these fronts in developing countries and other parts of the world.

Some of the limitations and constraints will include:

1. International public funding sources are uncertain – Possibly a main reason is that; it is difficult to clearly track levels of climate change and agricultural development by international donors is that there are frequent differences between funds commitments and those which are actually distributed.
2. Scale of climate finance is modest relative to overall agricultural investment finance – Private investment in agricultural value chains and land uses far out-weighs the recent climate finance directed towards agriculture.
3. Climate finance is fragmented – Climate finance income streams for adaptation and mitigation have been otherwise treated separately within specific negotiations (i.e.: UNFCCC negotiations as suggested in some analysis), and as result, it has been difficult to blend these funds strategically in a unique project and or program with a single focus.

There other limitations and or constraints presenting major barriers for efficient financing structures for climate-smart agriculture; but due to the simplicity of the article it will only focus on the points above.

Steps towards climate and agriculture finance integration will include:

1. Private investors can take advantage of emerging certifications and standards. There are still developments in this regard it seems.
2. Improve monitoring systems to track the various benefits of climate smart agriculture.
3. Set-up funding mechanisms and models that support integrated climate-smart agriculture.
4. Donor organisations should endeavour to meet present commitments and increase support for climate-smart agriculture. The harder challenge may yet be the meeting of those existing commitments.

Although there are other points that can be included in the steps discussed above to bring climate and agriculture finance integration together; however it is within the interest of the author to focus only on the points above; as the author wishes to draw the focus of argument for this article to a close with those points specifically. For more shared discussion points around Agribusiness developments, click here: https://www.agriqueafrica.com/ .