Representing two-thirds of formal financing to agriculture, Public Development Banks (PDBs) investing in agriculture around the world can play a key role in transforming food systems that are currently unsustainable and leave millions hungry, said Alvaro Lario, President of the UN’s International Fund for Agricultural Development (IFAD), as he heads to the Finance in Common Summit taking place between 26 and 28 February in Cape Town, South Africa.
“PDBs’ financial heft – up to US$1.4 trillion of annual investments – is more than the micro-finance sector or all official development assistance,” said Lario. “They are the backbone of the global financial architecture and efforts to make food systems more sustainable, resilient and equitable.”
PDBs have a significant financial power. The world’s 522 PDBs hold US$23.2 trillion in assets and account for 10-12 per cent of global financing.
Today’s food systems have a heavy environmental footprint and fail to make nutritious diets accessible to all, with over three billion people unable to afford a healthy diet in 2021. The small-scale food producers who are the backbone of food production often live in poverty and the imminent threat of hunger. About 730 million people suffer from hunger today.
Transforming food systems requires an additional US$300-400 billion annually until 2030. However, official development assistance (ODA) for agriculture has remained stagnant at 4-6 per cent of total ODA for two decades, and reached about US$10.5 billion in 2022, far below necessary levels. Small-scale producers receive only 0.8 per cent of global climate finance, despite their crucial role in food security.
Agricultural investments are underrepresented in PDB portfolios in many low- and middle-income countries in comparison to amount that the agricultural sector continues to contribute to their GDP.
To scale up investments in sustainable and equitable agriculture and food systems, IFAD and the French Development Agency (AFD) led the creation of an historic coalition of PDBs investing in agriculture, in 2020. Members of the coalition created the PDB Platform for Green and Inclusive Food Systems which is currently hosted by IFAD. Established in 2021, the platform has gained momentum and brings together about 140 national PDBs investing in agriculture, four regional PDBs, and eight regional networks across more than 95 countries from the global South today.
The platform is an important instrument to support PDBs as they seek to expand their investments and better align to global development and climate objectives. The platform fosters knowledge exchanges, capacity building, peer-to-peer learning and technical support.
The platform provides trainings in agroecology and resilience building. It equips PDBs with strategies to integrate environmental assessment tools to better assess the risks and impacts of their green investments.
Building on the platform’s success, IFAD is mobilizing additional resources, including US$1 million from the Global Environment Facility (GEF) though the Food Systems Integrated Program co-led by the Food and Agriculture Organization of the United Nations (FAO) and IFAD. Since its inception, the platform received ongoing support and commitment from the AFD from 2020 and financial support from AFD and the European Union.
At the summit, IFAD will sign a memorandum of understanding with the Development Bank of Southern Africa (DBSA) to leverage additional resources and expertise for its projects, enhancing its impact on development, poverty reduction and climate resilience across Africa.
