Financing Climate Smart AgricultureCentral Asia Climate Smart Agriculture Workshop

Bishkek, 12-14 July 2016

Astrid Agostini Climate and Environment Division, FAO

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Investment and finance in the agriculture sectorsAgricultural investment• Private investment, in particular on farm

investment in agricultural capital, is the dominant source of agricultural finance

• ODA is a fraction of public investment in agriculture – domestic budgetary resources for public investment are significant

Climate finance• ODA for climate finance exceeds ODA for

agriculture sectors• Domestic public finance for climate action is

significant/may exceed international finance

ODA

Domestic public

investment

Private investment

Domestic finance is key – use your own resources!

Public international climate finance flows increasing… especially since 2010…

• USD 16 bn cumulative 2002-2015

• Major increase since 2010 – fast start

• Predominantly grants, in particular bilateral and dedicated multilateral funds

Figure 3 Annual international climate tagged commitments over time by reporting source and donor type (2002-2014)

Source: OECD DAC (2015) Credit Reporting System (CRS)[1] and Climate Funds Update, 2015

[1] https://stats.oecd.org/Index.aspx?DataSetCode=CRS1

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

500

1000

1500

2000

2500

3000

3500

Bilateral CRS Multilateral CRS Multilateral CFU

Finan

ce in

mill

ions

of U

S$

Agriculture receives most finance overall, but forestry receives the greatest share of dedicated

climate funds… fisheries marginal….• Bilateral public finance is dominant

source for all three sub sectors– Approx 25% tagged as “principally”

supporting CCAM outcomes• Annual averages (bilateral):

– US$1.9 billion for agriculture, – US$552.7 million for forest conservation – US$37.5 million for fisheries

• Five main donors: GER, EU, USA, UK, JAP; for fisheries: Norway

International public climate finance commitments by funder, source and sector (2010-2014)

Bilateral CRS Multilateral CRS Multilateral CFU0

500

1000

1500

2000

2500

3000

Agriculture Forests Fisheries

Finan

ce in

mill

ions

of U

S$

Source: OECD DAC (2015) Credit Reporting System (CRS)[1] and Climate Funds Update, 2015

Adaptation finance exceeds mitigation finance, but in forestry mitigation dominates

How different donors and sources support climate mitigation and adaptation outcomes in the sector (total finance in millions of US$ between 2010 and 2014)

Source: OECD DAC (2015) Credit Reporting System (CRS)[1] and Climate Funds Update, 2015

[1] https://stats.oecd.org/Index.aspx?DataSetCode=CRS1

Agriculture Forestry Fishing Agriculture Forestry Fishing Agriculture Forestry FishingBilateral CRS Multilateral CRS Multilateral CFU

0

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4000

5000

6000

7000

8000

9000

10000

Mitigation Adaptation Both

Finan

ce in

mill

ions

of U

S$

What is being financedLimited availability of aggregate data/information. Some indications:• Capacity development, including policy and institutional

strengthening– Particularly pronounced in forestry – dedicated climate funds

allocated approx. 75% of forest finance to REDD+ readiness• Bilateral finance programmed to deliver multiple benefits– biodiversity and gender commitments, especially in agricultural

and fisheries adaptation programmes

Prospects and pledges• USD 100 billion in annual climate finance to developing

countries by 2020, more after 2025 – reiterated in Paris• COP21 USD 5.6 billion pledged to new and existing initiatives – unclear

how much to ag sectors• Renewed commitments to cross cutting forestry and ag sector

programmes, especially GEF (USD 3 billion climate finance across focal areas) – at least US$300m dedicated to coastal and marine issues over the next four years. – US$250 million to flow through the GEF’s SFM/REDD+ Incentive Mechanism, which will

mobilize US$750 million in grants from other focal areas to tackle the drivers of deforestation and forest degradation, while supporting the role of forests in national and local sustainable development plans

– USD 45 m –address key global drivers through sustainably managed commodity chains– more than US$116 million - food security, resilience, carbon sequestration in SSA

Multilateral climate funds likely to support CSA• Green Climate Fund (GCF)• Global Environment Facility (GEF)

– Climate change focal area– Land degradation focal area

• Least Developed Countries Fund (LDCF)– Funding National Adapation Programmes for Action (NAPAs)

• Special Climate Change Fund (SCCF) (adaptation)• Adaptation Fund (AF)

– Developing countries particularly vulnerable to climate change– Funded by CDM; direct access for national entities

What is the GCF?• Established in 2010 as a financing

instrument under the UNFCCC.• important role expected in reaching the

USD 100 bn per year climate finance target.• Secured USD10.3 billion in pledges.• Aiming to allocate USD2.5 billion in 2016• allocated USD 424 million to 16 projects

(USD 256 million to 8 projects in 2016).• The GCF Secretariat submits decisions to a

24-member Board (split 50:50 between developing and developed countries).

Mitigation(50%)

Adaptation

(50%)

GCF priorities• Programmes and projects are expected to contribute to one (or

more) of the following strategic impacts

GCF Engagement Infrastructure

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accredited entity can submit project and programme proposals for fundingno-objection(s) from the NDA(s) or focal point(s) for funding proposalsGCF Secretariat evaluates funding proposals against its investment criteria quality proposals are submitted to the Board for consideration/potential approval

GCF project development process

Identifying viable project ideas (1 of 2)

• Alignment with the GCF Results Management Framework

• Make a substantial contribution to low-emission and/or climate-resilient development.

Mitigation AdaptationEnergy and power generation Vulnerable people and communitiesLow-emission transport Health, well-being, food & water security

Buildings, cities, industries and appliances Infrastructure and built environment

Forestry and land use Ecosystems and ecosystem services

Identifying viable project ideas (2 of 2)

• Contribute to a paradigm shift in the response to climate change.– Projects should be innovative, and have a catalytic impact.

• Focus first and foremost on climate change.– Clear differentiation from other projects aimed at (e.g.) developing the agricultural

sectors, reducing poverty and food insecurity.• Ensure alignment with national climate change policy priorities

– including INDCs, NAPs, etc.• Country ownership and leadership are vital

– Close collaboration with National Designated Authorities (NDAs) from an early stage is a pre-requisite to further work.

– Involvement of national stakeholders during project design is essential. Their involvement in project implementation is desirable.

Co-financing!

Project Preparation Facility (PPF)• Provides up to USD 1.5 million (or 10% of requested GCF funding)

to support project development.• All accredited entities can submit requests for PPF resources.

– The Secretariat approves PPF requests, ensuring a fair geographic distribution and balance between international and direct access entities.

• PPF request must be built on a well developed project idea (e.g. concept note and PPF form).

• PPF to finance e.g. feasibility studies, E&S screenings, gender studies and action plans, risk assessments and M&E framework

GCF Readiness Programme• up to USD 1 million per year to capacitate local stakeholders and

support the development of a programme/project pipeline (maximum USD 300,000 per readiness project).

• wide range of delivery partners can develop and implement readiness initiatives, - with the explicit consent of (and in close coordination with) the country’s National Designated Authority (NDA)

• four ‘activity areas’ for readiness support.1. Capacitating the NDA2. Building a country programme framework3. Supporting accreditation of regional, national and sub-national entities4. Building the project pipeline

GCF projects in agriculture - examples• Scaling up the use of modernized climate information and

early warning systems in Malawi ($12.3 million). – climate phenomena (flooding, droughts, storms) which have been worsening in recent

decades, while 85% of the population mainly rely on agriculture for a living in rural areas.• Increasing the resilience of ecosystems and communities

through the restoration of the productive bases of salinized lands in Senegal ($7.6 million). – low rainfall levels are threatening groundnut production which is a crucial sector in the

country’s economy. – GCF is funding the ecological monitoring centre (CSE), a State body whose mission will be

to “develop knowledge and the spread of suitable technologies” to farmers and to “reduce the salinity” of arable land.

Making a little go a long way….… invest climate finance strategically• Enabling environment/public goods and services to underpin

climate-smart agricultural development• Supporting climate mainstreaming into domestic investment

– Public expenditure reviews; Budgeting process; Project/investment appraisal• Unlocking private capital for climate-smart agricultural investment

– Prove viability of CSA investments– Funds with layered capital structures where public funds partially de-risks

private capital for innovative investments with public benefits– Strengthen capacity of financial services providers to manage agricultural

risks and

Thank you