NEW DELHI, India, October 5 (IPS) – There is broad consensus that achieving the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change requires a transformative agenda for agriculture and food systems. In this context, the importance of mobilizing more investments and aligning them with the goals of sustainable development and inclusive rural transformation is widely recognized.
Estimates of the investments required to achieve these goals show that the financing needs are substantial although the estimates of the additional financing needs differ significantly.
The Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Program (WFP) estimate that US $ 265 billion per year is needed to achieve “hunger. zero ”by 2030 (SAFIN, 2021).
In 2019, the United Nations Conference on Trade and Development (UNCTAD) estimated the total investment needs in food and agriculture at US $ 480 billion to achieve the related SDGs in developing countries, with an actual investment of US $ 220 billion, leaving a gap of US $ 260. billion.
These estimates suggest that transforming food systems to provide healthy people, a healthy planet, and a healthy economy will require an additional US $ 300-350 billion annually over the next decade.
The rapid and massive shock of the coronavirus pandemic has plunged the global economy into severe contraction. The outlook for an economic recovery is very uncertain and downside risks predominate. The development finance gap is therefore likely to widen.
Towards filling the funding gap
To meet these needs, funding will be needed from all sources to work in accordance with the 2030 Agenda and the Paris Agreement. World Bank-led Debt Service Suspension Initiative (DSSI) extension until the end of 2021 – will help most developing countries focus on national priorities, including getting back on track of achieving the SDGs.
A common framework for dealing with debt beyond the DSSI is being developed, while some international financial institutions (IFIs) expect historic levels of their replenishments (IFAD, IDA, AfDB). In addition, a call is made for a new general allocation of USD 650 billion (IMF Special Drawing Rights) to be channeled for the benefit of vulnerable countries.
A role for public development banks
Public development banks (PDBs) have considerable untapped potential here, as state-owned financial institutions are mandated to pursue development objectives (as opposed to purely commercial objectives in their banking operations. PDBs are distinct state commercial banks; they differ in their mandates and instruments (World Bank Group and World Federation of Development Finance Institutions, 2018, IFAD, 2020, SAFIN, 2021, rural infrastructure, agro-industry or other) .
Yet other PDBs focus primarily on agriculture, but their portfolio includes other sectors. This is based on the idea that supporting sustainable small-scale agriculture through inclusive development of the agrifood value chain is between two to three times more effective as a means of eradicating poverty than other sectors.
Some PDBs target small businesses, including producers, while others focus their portfolios on large agribusiness or larger investments, for example in infrastructure and agricultural markets. This diversity is essential for understanding the role of different types of PDBs in advancing the 2030 Agenda.
The overriding goal, however, is to address market failures, with countercyclical roles, and greater risk tolerance than other financial institutions have. Given their public mandate and their proximity to public policies and governance institutions, ODA can play a catalytic role in supporting accessible, affordable and usable financial services for the rural poor, socially, environmentally and economically. sustainable in all food systems.
ODA (which is already responsible for more than two-thirds of the formal financing of agriculture) can facilitate a change of course across the financial ecosystem. This includes the mobilization of sustainable and green financing, the issuance of investment products, the structuring of mixed solutions and public-private financing programs.
At the same time, embrace digital solutions across their business operations and deliver a range of financial services and products to different types of customers in food systems – including women, youth, SMEs and small businesses operators. It is known that private investment in agriculture and / or other activities within food systems is often constrained by many risks associated with poor infrastructure and economic returns. ODAs are able to increase their capacity to attract, reduce risk and help align trade finance with the SDGs and climate-related targets such as those set in the Paris Agreement.
Mobilize catalytic investments
Stimulating responsible private investment and financial innovations – such as blended finance – is needed to improve food security and nutrition and inclusive rural transformation, and to close the post-pandemic ODA gap. UNCTAD has estimated that about 75 percent of the gap could be financed, in principle, by the private sector – with the potential to raise $ 195 billion per year. PDBs are actively engaged in platforms where private investors, businesses, philanthropists and other entities invest to fund projects aligned with the SDGs.
In their statement (Matera, June 2021), G20 development ministers welcomed the establishment of a working group on financing sustainable food systems on financing sustainable food systems, led by IFAD, which aims to bring together ODA, recognizing the essential role of the private sector in building on public efforts to improve agrifood systems.
As concrete action – emerging from the United Nations Food Systems Summit (UNFSS) is the advent of a Coalition for Action to launch a global PDB platform, with a focus on increasing investments in inclusive and sustainable food system chains, for accelerated learning, innovation, mobilization and deployment of capital and services.
Go forward, closing the financing gap will require strong international cooperation and political will to strengthen fiscal space to ensure sustainable domestic financing. Multilateral development banks can work with ODAs and test / validate sustainability-related financial instruments, encompassing (sustainable / green) bonds, funds and other investment vehicles aimed at advancing the Sustainable Development Goals . This will play an important role in mobilizing the necessary financing to reduce the financing gaps of the SDGs in developing countries and become possible long-term financing instruments of international and national public financial institutions.
Raghav Gaiha is Affiliate Researcher, Population Aging Research Center, University of Pennsylvania, USA, & (Hon.) Associate Research Professor, Global Development Institute, University of Manchester, UK; Shantanu Mathur is Senior Advisor and Senior Partnership Officer, International Fund for Global and Multilateral Engagement for Agricultural Development (IFAD).
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© Inter Press Service (2021) – All rights reservedOriginal source: Inter Press Service
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