FAO AgrInvest: Enabling sustainable private investment in agri-food systems and specific value chains
In developing countries, and particularly in Africa, farmers, processors and other actors in agri-food systems struggle to access the financial resources needed to accelerate progress toward the SDGs and to increase resilience to global shocks. There is growing recognition that overseas development assistance (ODA) will not meet the USD 2.5 trillion funding gap needed in developing countries, and that massive private-sector investments will be required. The AgrInvest initiative aims at attracting and de-risking private-sector investments in agri-food systems, targeting public and private agricultural value chains actors as well as private investors, and piloting its interventions in six African countries.
AgrInvest, is an initiative of the Food and Agriculture Organization of the United Nations (FAO) conceived to facilitate private sustainable investments into food systems. To do so, the initiative envisages a series of activities for designing blended finance facilities and schemes, and facilitate a policy dialogue between actors of the food systems and investors, both public and private.. More productive, resilient and inclusive agrifood systems can contribute to reduce poverty, hunger and malnutrition, create decent jobs, especially for women and young people, and ensure greater environmental sustainability. Agriculture is often deemed too risky for financing because of its dependence on weather and seasonal change. AgrInvest focuses on key value chains in a country to help de-risk lending and improve the agricultural investment environment by using the latest assessment and financial analysis tools, digital solutions and policy dialogue. The initiative strives to contribute to national development strategies, as well as to the upcoming Food Systems Summit to be convened by the United Nations Secretary-General in 2021.
The initiative works on the following axes of intervention: (i) leveraging FAO’s expertise, tools and normative works, to ensure that agrifood system development is environmentally and socio-economically sustainable, and aligned to SDGs; (ii) capitalizing on the potential of innovative finance, including blended finance, to de-risk and mobilize more private investment to achieve the SDGs and address the challenges of climate change, hunger and malnutrition; and (iii) enhancing the knowledge and innovation focus of private investment to promote the use of digital solutions and other disruptive technologies to achieve the SDGs.
From 2019, under AgrInvest, FAO, in partnership with the European Centre for Development Policy Management (ECDPM), is implementing the project “AgrInvest-Food systems” to foster SDG-aligned investments in agri-food systems in Burkina Faso, Ethiopia, Kenya and Niger to contribute to sustainable economic growth and boost rural employment, particularly for women and youths. It benefits from USD 2.5 million as financial support from the Government of Italy. The logic behind the project’s structure is to start with assessing the food systems of the four countries and select promising value chains (VC). At the same time, it is bringing together different VC stakeholders to establish frameworks for action and identify investment opportunities in the selected VCs. During this process, the project is also working to identify the most successful and effective instruments, tools and best practices for leveraging private and direct foreign investments, building partnerships with similar existing initiatives. Meanwhile, it is working with the stakeholders to develop customized guidelines for SDG-compliant investments, developing innovative market arrangements and facilitating access to information for investors and financial institutions. In the following stage, the established/reinforced frameworks will work through their new partnerships and arrangements, to formulate proposals for financing and for the adoption of policy changes, to enable a more investment-conducive environment. The project will take stock of the achievements and results, to integrate the existing methodologies for promoting value chain investments, or to develop new specific. All the normative documents developed under the project will be disseminated and circulated globally, for scaling-up and replicating.
The project has engaged with impact investors, networks, development and commercial banks, private companies and international development funds to identify specific instruments to facilitate their investments in agri-food systems, as well as to promote SDGs-compliance in their investment portfolio for agriculture. FAO-developed tools (e.g Ex-Ante Carbon Balance Tool and the Global Livestock Environmental Assessment Model interactive) are being introduced to help the private investors seeking to invest in the project’s countries assess the greenhouse gas emissions and carbon balance of the investment project in food and agriculture. In Ethiopia, the private fund United Green has a plan for mobilizing USD 20 million in the development of the dairy sector and is working with the project to ensure the SDG-compliance of its investment by assessing the environmental impact of the activities as well as the social component. Furthermore, the project is facilitating the signatory of the CFS Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries, and Forestry and the Principles of Responsible Agricultural Investments by the investor.
Enabling conditions: The practice has benefitted - and it is currently benefitting - from FAO’s decades of expertise in formulating, implementing, supervising and evaluating agricultural investment plans, policy and legislative advisory role, facilitation of public-private policy dialogue and value-chain assessments to effectively boost decision-making that will draw SDG-compliant private investment to agri-food systems. Constraints: Despite the opportunities for investing in agriculture and food systems transformation in Africa, banks and other financial institutions still tend to minimize exposure to agriculture in their portfolios. Even those banks that do serve agricultural enterprises or farmers tend to provide primarily short-term financing like revolving credit lines that only scratch the surface of financing needs. In addition, venture capital investments in the agriculture sector in Africa are expected to shrink due to the impact of the Covid-19 pandemic, therefore setting up a new architecture for agri financing will become vital. Essentially, it could prove a crucial lifeline for agribusinesses in Africa’s fledgling ecosystems given the expected economic crunch triggered by the pandemic. Initiatives, like FAO AgrInvest, that focus not only on strengthening the capacities of agricultural actors to produce more and better, but also on addressing the systemic issues affecting the sustainable supply of financial services as well as promoting SDG-aligned investments are expected to contribute to create a business enabling environment which can favor institutional sustainability and local ownership of the innovation built, in the medium and long term
Elements that are in place to sustain outcomes of the practice. Explain if/how the practice could be replicated to support SDG implementation in other places. Present any plans for extending the practice more widely or encouraging its adoption in other contexts. Despite its regional focus, AgrInvest aims at developing a global systemic approach for attracting increased levels of investments in sustainable food systems, which could be replicated and have a similar impacts in other developing country regions. To do so, under its projects, AgrInvest is: • Designing a methodology promoting value chain investments for more inclusive and sustainable food systems, based on testing and refining the piloted approach; • Organizing national, regional and global events (online and in-person) involving relevant stakeholders to share lessons on multi-stakeholder partnerships, sustainable food systems and SDG-compliant investments for scaling up and replicating
The COVID-19 crisis has created new challenges for many agri-SMEs in the countries targeted by AgrInvest, including cash flow problems, lack of capital and capacity to undertake investments that could strengthen their resilience. Financial service providers have also been affected, particularly in terms of increased risk of non-performing loans and assets. Solving a problem as complex as the agri SME financing, especially during a pandemic, requires initiatives, like FAO AgrInvest, that promote the use of blended finance approaches to use increasingly scarce public resources to mobilize commercial finance at large scale helping to meet the significant SDG financing gap in the Africa. The umbrella projects of AgrInvest have registered significant progress in the overall implementation and achievements, notwithstanding the continued limitations to movements imposed by the COVID-19 pandemic.
SDGS & Targets
Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
Deliverables & Timeline
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Kenya, Ethiopia, Burkina Faso, Niger, Uganda, Eswatini and Zimbabwe