Is the global agrifood systems agenda missing out on an opportunity to guide sustainable public and private infrastructure investments?

Today’s COP29 panel discussion led by the European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization of the United Nations (FAO) zeroed in on why climate-efficient agrifood systems infrastructure investments matter – and what can be done.

Representatives from multilateral financing institutions, international agencies and think tanks shared their insights during the event, which also officially launched the joint EBRD/FAO report Towards a New Generation of Climate-Efficient Agrifood Systems Infrastructure.

Agrifood systems employ about one-third of the global workforce. They nourish the world’s growing population, expected to top nine billion by 2050.

Yet despite their critical role, agrifood systems are often overlooked in international policy discussions on infrastructure, which tend to prioritize more traditional sectors such as transportation, energy and water, the report argues.

In his opening remarks, FAO Investment Centre Director Mohamed Manssouri pointed to FAO’s 2024 State of Food and Agriculture report that estimates the hidden environmental, social and health costs in agrifood systems – from carbon emissions to the burden of unhealthy diets – to be almost USD 12 trillion a year.

“The world’s agrifood systems face considerable sustainability challenges and are vulnerable to climate change, natural disasters and other shocks and disruptions,” he said. “Investing in infrastructure and related technologies along the entire agrifood value chain, including production, processing, distribution, marketing and waste management, is vital for delivering sustainable outcomes.”

“The scale of the need for such transformational investment is huge and beyond the capacity of any one single financing source,” Manssouri added.

“But the potential benefits are also huge,” he said, “including improved food security, inclusive economic growth, job opportunities, especially for women and youth, climate resilience, better natural resource management and reduced greenhouse gas emissions.”

Economic, environmental and social returns on investment

The EBRD/FAO report recognizes that positive returns on investment are undeniably the first driver of a new generation of agrifood systems infrastructure, while also pushing for such asset class to increase positive environmental and social externalities.

The report introduces a unique working definition of climate-efficient agrifood systems infrastructure. It also features a dedicated conceptual framework to screen and guide sustainable public and private investments.

The report defines such infrastructure as a long-lived, capital intensive and strategically important class of physical assets, which enables the functioning of competitive, sustainable and inclusive agrifood systems and provides essential ecosystem services.

Agrifood systems infrastructure such as solar-powered irrigation systems, for example, can enhance the sustainability of the water-energy nexus – the critical link between water use and energy generation – by providing renewable energy for water management.

Other examples include flood-resistant and storm-proof warehouses that can withstand extreme weather and modern wholesale food markets designed to reduce food loss and waste and optimize energy consumption.

Seizing an opportunity

Transforming agrifood systems to be greener, more resilient and inclusive calls for innovative solutions, public-private partnerships and a massive influx of public and private investment.

The panel explored the roles of the public and private sectors in promoting climate-efficient agrifood systems infrastructure. It also discussed different investment models and financial instruments to finance such infrastructure, notably sustainability-linked loans.

Gianpiero Nacci, Director of Sustainable Business and Infrastructure at the EBRD, pointed to the growing trend of climate finance.

The EBRD has financed USD 4 billion in agrifood systems across some 260 projects in the last five years, he noted. The vast majority was with the private sector, with more than 30 percent in areas such as renewable energy.

“The big question is how to expand this further, and we believe this study will help us find ways to scale up climate finance,” he said. “When you have more resilient and climate-efficient agrifood systems and infrastructure, you create a better environment for more private investment.”

The panellists echoed some of the findings in the EBRD/FAO report on different actions that governments, private investors, entrepreneurs and international financing institutions should take.

The public sector, for example, is encouraged to create an enabling policy environment that promotes good governance, transparency and environmental and social safeguards.

With an adequate enabling environment, the private sector needs to invest increasingly in virtuous environmental, social and governance practices. It should develop scalable innovations in digital technologies for sustainable farm operations, post-harvest storage, and efficient natural resource management.

Infrastructure investments carry significant risks. These are due to the long gestation periods, the lock-in of assets that may become sub-optimal or obsolete, unfavourable and sometimes unpredictable policy frameworks, market and demand variability, and heavy financial outlays.

The financing or co-investment by the private sector will be predicated on tested and proven measures to recognize and address key risks in a timely fashion. As such, financing institutions need to develop risk management plans and tools such as guarantees, insurance products and damage and loss platforms to de-risk investments.

Financing institutions should also provide sectoral and technical expertise to design, fund, implement and monitor agrifood systems infrastructure projects that can achieve impact at scale.

Climate-efficient agrifood systems are essential for a more sustainable and food-secure future. Investing in their infrastructure is an opportunity we cannot afford to miss.