Plenary Session III: Ms. Cecilia d’Alessandro: Innovative Financing Mechanisms for Climate Adaptation in African Agrifood Systems

Ms. Cecilia d’Alessandro, Policy Officer, Climate Action and Green Transition, ECDPM

Transcript

1. Deputy Head, Sustainable Food Systems, ECDPM Innovative Financing Mechanisms for Climate Adaptation in African Agrifood Systems Cecilia D’Alessandro
2. #2024ReSAKSS #2024ATOR Outline 1. Overview of Climate Finance Flows to African Agrifood Systems 2. Barriers to leveraging Climate Finance for Food Systems 3. Opportunities for Financing: Improved Mechanisms for Public and Private Finance for Food Systems Adaptation 4. Creating an Enabling Environment for Food Systems Adaptation Financing
3. #2024ReSAKSS #2024ATOR Overview of Climate Finance Flows to African Agrifood Systems
4. #2024ReSAKSS #2024ATOR Recent Trends in Climate Finance Flows • Only 4.3% of climate finance flows to agrifood systems globally ($28.5 bn/year) • To meet climate objectives, investments need to increase, at a minimum, seven times • Only 26% was directed towards adaptation ($7.3 bn/year) Current tracked climate finance compared with needs in agrifood systems
5. #2024ReSAKSS #2024ATOR • Share of climate-related dev. finance to agrifood systems globally is trending downwards • SSA received 16% of the agrifood climate finance flows ($4.4 bn) – mostly from public and philanthropic sources – against an adaptation finance gap of $78 bn/year by 2030 • Gap is particularly large for small- scale farmers Share of climate-related development finance to agrifood systems against global flows Recent Trends in Climate Finance Flows (cont’d)
6. #2024ReSAKSS #2024ATOR Barriers to leveraging Climate Finance for Food Systems Structural and Financial Barriers Institutional and Governance Barriers Technical Barriers
7. #2024ReSAKSS #2024ATOR Structural and Financial Barriers • Many African governments are challenged by high debt burdens and limited fiscal space • Farmers and SMEs struggle to access financial resources • Uncertain risk-return profiles and longer horizons discourage private sector investments Project/firm level risks Constraints in financial absorption capacity Country risks Types of risk hindering private sector investment
8. #2024ReSAKSS #2024ATOR Institutional and Governance Barriers • Legislative and policy gaps (only 1/3 African countries submitted a NAP) • Regulatory risks and uncertainties • Governance and coordination challenges • Limited intersectoral coordination and effective oversight • Limited coordination among development partners and DFIs • Mismatch between donors agendas and recipient countries’ needs
9. #2024ReSAKSS #2024ATOR Technical Barriers • Complex requirements to access climate funds • resulting in disparities in access (favoring MICs over LDCs) • …and reliance on international partners → reduced country and local ownership • Lack of concrete project pipelines within national strategies such NAPs • Lack of disaggregated, reliable and comprehensive data on climate risks and vulnerabilities
10. #2024ReSAKSS #2024ATOR Opportunities for Financing: Improved Mechanisms for Public and Private Finance for Food Systems Adaptation
11. #2024ReSAKSS #2024ATOR Innovative Financing Mechanisms for Climate Action in Agrifood Systems • Global financial and capital markets (valued at $400 trillion) hold great potential to finance the transition to more sustainable food systems. The key challenge is to make the agrifood sector more attractive to investors • Blended finance approaches can help to de-risk investments, lower transaction costs and improve the risk-return profile of investments • Other innovative financial instruments like sustainability-linked loans and green bonds are also promising and becoming more popular • Digital innovation (mobile banking, fintech) is helping farmers and SMEs access credit
12. #2024ReSAKSS #2024ATOR Creating an Enabling Environment for Food Systems Adaptation Financing Coordination and Collaboration Policy and Regulatory Frameworks Capacity Strengthening, Data and Evidence
13. #2024ReSAKSS #2024ATOR Strengthening Coordination and Collaboration • Enhance cooperation and synergies among dev. partners, DFIs, and local public and private actors to • prevent duplication • address gaps • catalyze resources at scale • Use the right mix of financial instruments to cater to the diverse needs of of financial intermediaries and agrifood companies at different stages of maturity or with different risk profiles
14. #2024ReSAKSS #2024ATOR Policy and Regulatory Frameworks • Promote integration of climate and food policies at country and regional levels • Translate climate goals into national and subnational investment strategies and project pipelines • Optimize the use of available domestic resources (incl. by repurposing ag. subsidies) • Mobilize private sector investment by reducing cost of doing business and improving investment environment • Promote national policies to improve rural financial intermediation
15. #2024ReSAKSS #2024ATOR Capacity Strengthening, Data and Evidence • Enhance the capabilities of national institutions and local stakeholders to access and manage climate adaptation funds • Bolster DFIs capacities to integrate climate and nature into their agrifood portfolios • Provide technical assistance to local financial intermediaries (to set up financial vehicles) and end beneficiaries (to propose and implement viable business plans) • Improve the availability of comprehensive data and evidence for informed decision-making, accountability and transparency
16. THANK YOU Get in touch at cda@ecdpm.org