More finance is needed to adapt food systems to climate change

Making food systems more resilient to climate change will require large financial resources, both public and private. Yet, the question is not just how to increase the amount of finance, but how to effectively channel it to those who need it the most. 

These investments should support farmers in reducing greenhouse gas emissions, adapting to the changing climate and strengthening the resilience of agri-food value chains, particularly in developing countries most hit by climate change. Currently, food systems receive just 3% of public climate finance annually, and small-scale farmers – who are already disproportionately experiencing the effects of climate change in the form of droughts, floods and other disasters – receive only 1.7% of climate finance flows. 

Many barriers hinder investments. The food and agriculture sector is often perceived as unprofitable and risky, with climate change adding to the already high environmental, productivity and market risks. Smallholder farmers, in particular, face difficulties in accessing loans from commercial financial providers due to a lack of collateral and limited land tenure rights. 

Financial institutions, in turn, do not provide services adapted to their needs, as they face high transaction costs associated with small-scale, geographically-dispersed customers. Also, the lengthy financing approval and disbursement processes of international climate funds limit their ability to reach farmers and agrifood small- and medium-sized enterprises.

All this widens the gap between the amount and quality of investments needed for food systems to adapt to climate change and the finance that actually flows to them. 

Limited formal progress…

The final COP27 cover decision, known as the Sharm el-Sheikh Implementation Plan, recognises the fundamental priority of safeguarding food security and ending hunger, as well as the particular vulnerabilities of food production systems to the adverse impacts of climate change. However, few commitments and initiatives were announced. 

Official climate negotiations paid little attention to emission reduction targets from industrial food systems and saw a growing influence of big agribusinesses, while small-scale farmers struggled to have their demands heard for additional climate finance for adaptation.

The formal space for discussing agriculture within the UN Framework Convention on Climate Change (UNFCCC) – the Koronivia Joint Work on Agriculture – has been extended for another four years through the Sharm el-Sheikh Joint Work. Yet, the process wasn’t widened beyond agriculture to include other, fundamental but politically-contentious areas of food systems, such as food loss and waste, healthy diets, agrobiodiversity and supply chains. This has disappointed many, who advocated for an integrated food systems approach.

Also, there was no progress to operationalise the COP26 decision to double adaptation finance, let alone commit to dedicating significantly larger amounts of climate finance for small-scale farmers and climate-resilient food systems.

…but lots of energy on the ground

Despite limited progress in the formal COP27 negotiations and outcome documents, a lot of discussions took place outside of the formal negotiating table. Four dedicated food-related pavilions and several debates showed that real progress is happening on the ground, with increasing bottom-up energy. 

Notably, the two side-events organised by ECDPM about financing the adaptation of food systems and blended finance approaches to derisk private investments in agri-food value chains pointed to several success stories about getting finance to farmers. For example, by building on the expertise and local presence of civil society organisations, the development bank of the Netherlands has been able to source bankable projects, invest in climate adaptation actions, and support smallholder farmers. 

This case and others showed that increasing funding for climate-resilient food systems is possible and scalable. It requires multi-actor partnerships between practitioners, development financial institutions and commercial banks. Also, as highlighted by ECDPM’s recent work, blended finance schemes need to be accompanied by policy reforms that support a conducive financing environment for agriculture and food system actors. 

We also discussed bringing innovative ideas and scalable approaches to the negotiating table, which could help better understand the opportunities and constraints of investing in food systems. 
 
Showcasing what is working on the ground could help convince financiers and decision-makers that investing in climate-resilient food systems can guarantee the continuity of business, reduce financial losses and provide economic benefits in the medium term, and not solely be a cost to be covered by public grants. This is necessary, as, without high-level leadership from governments, the bottom-up energy observed in Sharm El-Sheikh will not deliver the results at the scale and urgency needed.

The way forward

More coherence and synergies between policies and investments across the climate and food systems agendas are central to the success of both the Paris Agreement and the 2021 UN Food Systems Summit implementation processes. For this to happen, it will be important to follow and support the effectiveness of the Sharm el-Sheikh Joint Work. 
 
But what happens outside the formal UNFCCC processes is even more important: countries should add food systems’ climate solutions to their Nationally Determined Contributions, farmers need to adapt and innovate, food companies transform their operations and consumers make more climate-conscious choices. And financial markets and investors should be incentivised, through public funding and regulations, to finance the scaling up of good practices and virtuous initiatives.
 
The UK’s Breakthrough Agenda – a commitment to work together launched at COP26 by many countries with a strategic focus on climate-resilient food and agriculture  – is an example to build on and gradually expand. Next year could also be the time to pilot for food systems what has recently happened with the energy transition, with public and private finance rewarding the ambition of countries under the Just Energy Transition Partnerships (respectively $8.5 and $20 billion for South Africa and Indonesia). 
 
This mix of a differentiated-gear approach, respecting the different paces of countries but also providing financial incentives for the champions – sort of a ‘Just Sustainable Food Systems Transition Partnership’ – could lead to faster progress on the use of climate finance for more resilient food systems and create the conditions for COP28 to deliver a concrete agenda and explicit finance commitments at scale. 

The views are those of the authors and not necessarily those of ECDPM.