The Sustainable Trade Initiative’s public-private partnership, the AGRI3 Fund, announced on Wednesday, April 5, that The Global Environment Facility (GEF) has finalised a $13.5M (approximately €12.25M) equity investment in the fund.
GEF is a funder of biodiversity protection, nature restoration, climate change response, and pollution reduction in developing countries. It has participated in AGRI3 through its partner agency Conservation International (CI).
For effectiveness and impact, the GEF collaboration links its 184 member countries with civil society, Indigenous Peoples, and the private sector. It also collaborates closely with other environmental financiers.
As of now, the GEF has provided over $22B in grants and blended finance, and mobilised another $120B in co-financing for more than 5,000 national and regional projects and 27,000 community ventures through its Small Grants Programme.
Farmers need funds for sustainable practices
According to the AGRI3 Fund, one of the main causes of environmental deterioration is a rise in agricultural productivity, which is partly fueled by the increase in the human population.
Agriculture has made a considerable contribution to deforestation, habitat loss, greenhouse gas emissions, and soil and water pollution as more land is cultivated and production becomes more industrialised.
Farmers and other industries, including governments, have a crucial part to play in ensuring that appropriate action is taken. And significant funding is needed to make the switch to a more environmentally friendly, low-carbon, and climate-smart farming sector.
This project’s participation is important because the financial industry has a tough time offering the solutions that farmers need to switch to more sustainable practices, says AGRI3 Fund.
Changing important aspects of agriculture, such as irrigation, replanting, soil quality, forest and ecosystem protection/nature-inclusive agriculture, new farm equipment, or training, frequently requires long-term investments.
Almost all banks believe that the risks associated with these investments are too great and that the necessary loan tenors are an unnecessary burden to comply with the strict banking laws.
Senior VP of Conservation Finance, Agustin Silvani, says, “AGRI3’s instruments will be available to financial banking partners and their clients to support de-risking loans and investments they plan to make in agricultural supply chains.”
About the AGRI3 Fund
AGRI3 Fund aims to support projects that actively stop deforestation, encourage reforestation, contribute to effective sustainable agricultural production and value chains, lower carbon emissions, and enhance rural livelihoods.
Additionally, it also provides credit enhancement tools and technical assistance to these projects.
To aid with the transition to sustainable agriculture, the United Nations Environment Programme (UNEP) and Rabobank established the AGRI3 Fund alongside partners IDH and FMO, the Dutch Entrepreneurial Development Bank.
The Netherlands’ Ministry of Foreign Affairs has also donated to the AGRI3 Fund.
The Fund says that to increase worldwide and scaled-up public and private capital mobilisation, it collaborates with commercial banks, development finance institutions (DFIs), impact investors, and institutional investors.
Capital utilisation
The AGRI3 Fund says it will use the raised capital to support financing for sustainable agricultural and forest conservation activities in Africa, Asia, and Latin America.
The Fund also says it will provide commercial banks and other financial institutions with guarantees and subordinated loans to lower risk and expedite investment proposals as well as help them in raising capital.
According to a statement, the GEF’s contribution will also help AGRI3 fulfil its goal of raising at least $1B for agricultural and land use that is sustainable and free of deforestation.
Claude Gascon, Head of Programmes at GEF, says, “For the GEF, supporting AGRI3 Fund as one of our investments under the Blended Finance Global Programme is key to advance our work on engaging the private sector at scale.”
“With the GEF investment of $13.5M into AGRI3 Fund, we expect to continue our partnership involving the banking sector to catalyse transformational forest conservation, climate-smart agriculture, and degraded land restoration.”
