44% drop in climate finance to small-scale agrifood systems reveals need for action

Small-scale farmers and agribusinesses are on the front lines of two global battles: one to ensure food security and the other against climate change. As small-scale agriculture provides 35% of the world’s food supply and faces growing climate-related extremes, climate proofing its systems is critical to addressing both these challenges. However, climate finance to support small-scale agrifood actors has dropped by almost 44%, according to new analysis by the ClimateShot Investor Coalition (CLIC), falling far short of their needs.

New data reveals that global climate finance for small-scale agrifood systems is strikingly low, at an annual average of just USD 5.53 billion in 2019/20,* equivalent to just 0.8% of total climate finance tracked across all sectors.
This also marks a 44% drop on flows to small-scale agrifood systems in 2017/18.
This must change, given the vital roles of small-scale farmers and agrifoods businesses, who channel 65% of food in developing economies.

The Climate Finance Gap for Small-Scale Agrifood Systems report, released on November 22, is the second-ever tracking exercise of climate finance to small scale agrifood systems globally – analyzing annual flows averaged across the years 2019/20.

The drop to USD 5.53 billion in 2019/20 from USD 9.85 billion in 2017/18 (equivalent to 0.8% and 1.7% of total climate finance, respectively) is concerning, given the high vulnerability of small-scale farmers and agribusinesses to climate change. This is especially true in developing economies of East Asia and the Pacific, South Asia, and sub-Saharan Africa. It also risks missing an important opportunity to make simultaneous progress on climate mitigation and adaptation, by enabling those farmers to transition to more sustainable and resilient practices, given that they manage over 30% of agricultural land in these regions.

Daniela Chiriac, who leads the CLIC program and co-authored the report, said: “It is deeply troubling that climate finance to those supporting the bulk of the world’s agricultural value chains has fallen. Small-scale farmers and the agribusinesses that serve them are a pillar of global food security and their countries’ economies. Yet, they are also among of the most vulnerable to the effects of climate change. Too little is being done to ensure a just climate transition for agrifood systems and to protect the world’s food supplies.”

Climate transition for small-scale food producers is increasingly critical, as they are projected to surpass 500 million in number globally by 2030, and are often among the world’s poorest communities. Support can include promoting sustainable land management, enhancing irrigation access, diversifying agricultural production and livelihoods, and facilitating market integration through infrastructure development. However, informal markets, fragmented supply chains, and lack of clear land ownership can make finance hard to reach.

The recent decline in climate finance to support them contrasts a general rise in climate flows across other sectors, including energy and transport, but parallels a 20% decrease for the agriculture, forestry, and other land use (AFOLU) sectors in the same period.

CPI Global Managing Director Barbara Buchner said: “At a time when much-needed global climate finance is growing across other sectors, we need to be building the same momentum for agriculture and food systems too. All stakeholders – from governments and finance institutions through to corporations – must combine efforts to increase climate funding to small-scale farmers and agribusinesses that help produce the world’s food.”

Governments have a role to play in increasing climate finance, including reconsidering where they send agricultural subsidies, which total over USD 670 billion annually and are often misaligned with sustainable, equitable, and efficient food systems. Meanwhile, development finance providers can step up innovative concessional finance to catalyze private sector investment, which is significantly lacking in small-scale agrifood value change.

Mike Reddaway, Senior Advisor of the FCDO Food and Agriculture Research Team, Research and Evidence Division, said: “This important new research from CLIC paints a bleak picture. We are currently not producing enough food to meet the nutritional needs of millions of people, but demand for food is only growing. If we want to meet the joint challenges of food security and climate change, we need a major increase in the amount of climate finance supporting smallholder farmers.”

In the run-up to COP 28, it will be vital to place small-scale agrifood systems on the agenda to help catalyze funding for a just transition to these sectors. This report aims to improve the policy and investment decisions required to build more sustainable agrifood systems by making data available to decision-makers, capital owners and managers in the space.

Explore the data in the full report.

*A biennial average over two years is taken in our climate finance tracking in order to smooth out any fluctuations in the data.

Media Contacts

Mallika Pal, mallika.pal@cpiglobal.org

Senior Communications Associate, ClimateShot Investor Coalition

Kirsty Taylor, kirsty.taylor@cpiglobal.org

Senior Communications Associate, Climate Policy Initiative