The recent COP29 in Baku, Azerbaijan – dubbed ‘the finance COP’ thanks to the focus on finding a new climate finance goal to help developing countries address climate change – was a fractious and protracted affair.
Sadly, regarding the question of whether the new finance deal agreed will present opportunities for the agtech sector in terms of fuelling demand for solutions that help farmers cope with changing climate conditions, or driving investment in technologies that support low-carbon agriculture and improve resource efficiency, the answer is that things will remains protracted.
What was actually agreed?
One outcome was the snappily titled New Collective Quantified Goal on Climate Finance (NCQG) – an agreement to triple finance to developing countries to reach $300 billion annually by 2035.
This will come from both public and private sources largely in the form of grants and low-interest loans from the West (since richer countries are regarded as historically responsible for significant greenhouse gas emissions).
While this increase is notable, it falls short of the $1.3 trillion demanded by poorer countries for mitigation and adaptation efforts. As a gesture of conciliation, the final COP29 text acknowledged the $1.3 trn figure as the amount needed annually for poorer nations to respond to the impacts of climate change.
Also operationalised this year is the Loss and Damage Fund to give financial aid to nations most vulnerable and impacted by climate change. Western countries have pledged almost $700 mn to start filling the fund, although, again, this amount falls far short of what’s wanted.
Boost for climate finance for agriculture?
It’s not yet known exactly how and where this money is going to be spent – the NCQG does not specify exact allocations for different sectors or purposes. Likewise, it’s yet to be decided who will be the beneficiaries of the Loss and Damage Fund. Even the exact definition of vulnerability remains under debate.
However, agriculture, water, and agrifood systems are highlighted as priority sectors and there is optimism in some quarters that COP29 will serve to direct more funding toward climate-resilient solutions in the agri-food sector.
Agriculture has for too long been sidelined in climate finance discussions, points out global agricultural research group CGIAR. So the time is rife for countries to prioritise this critical sector and address its critical funding gaps.
Likewise, the UK Agri-Tech Centre laments that the sector currently receives less than 4% of global climate finance. There is now hope, it says, that countries will build on the momentum from the recent COP to integrate agri-food systems into their new Nationally Determined Contributions (country-specific climate action plans) and help bridge the sector’s significant financial shortfall.
Others are more specific on where climate finance for agriculture should be spent. The One Acre Fund, a social enterprise that supports smallholder farmers in East Africa, has estimated that $153bn of investment could yield $403bn of impact for farmers. Targeting the finance needs of the world’s smallholder famers is therefore a “no brainer”, says John Mundy, who leads One Acre Fund’s partnerships globally. “There’s evidence to show that less than 0.3% of climate finance goes to smallholder farmers today,” he says. “There needs to be an increase in climate finance that goes to agriculture: whether insurance, concessional working capital, or grants for incentivising farmers to have more regenerative practices. That will help solutions to scale.”
But given the lack of discussion at COP29 about where the money is going to come from and how it is going to be spent, he supports more efforts from agtech companies using blended finance (to invest in projects that can achieve both financial returns and positive social and environmental outcomes), particularly given that private investors are typically focused on shorter term financial returns which might not be on offer in the developing world.
Mundy believes we should be blending forms of finance much more to decrease the upfront costs of innovative products that smallholders “see as a risk but are willing to trial if the price point is right”.
More momentum in carbon markets?
More hope lies in the new international carbon trading rules agreed at COP29. This deal presents a “significant opportunity to catalyse climate action investment”, believes the UK Agri-Tech Centre, allowing more agri-tech companies to participate in carbon credit trading and create new revenue streams for businesses that implement sustainable agricultural practices that reduce emissions or enhance carbon sequestration.
“It’s a big piece of news,” believes Mundy, saying it may decrease the public resources needed to help farmers transition to a more sustainable ag system.” But it may only prove a drop in the ocean, he warns, given the lack of subsidies available for smallholder farmers in the developing world compared to those in advanced economics.
Groups like the One Acre Fund claim subsidy reform is going to be needed on top of public money even with increased carbon revenue. “A solar irrigation kit in east Africa still needs to be subsidised upfront for farmers to adopt it at scale,” he points out. “That finance is not on the table right now and a lot of the conversation isn’t there yet.”
Ultimately, collaboration between the public and private sectors will be essential, believes Michael Keller, secretary general of the International Seed Federation. The seed sector insists it can significantly contribute to building climate resilience, especially in regions facing weather extremes, severe water scarcity and land degradation.
The COP29 deal is “a significant milestone in the journey toward global climate resilience,” Keller says. But addressing the full scale of climate finance needs to support the global food system requires “coordinated, innovative, and multifaceted approaches,” he believes. “No single actor or sector can achieve this alone.”
In other words, uncertainty will remain certain.
