April 11, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

The AGRI3 Fund had a bang of a launch at the beginning of 2020 when during the World Economic Forum in Davos, Switzerland, the Dutch Ministry of Affairs and Rabobank both announced their cornerstone investments of $40 million each. 

Created by the UN Environment Programme, together with Rabobank and The Sustainable Trade Initiative (IDH), and supported by FMO, the Dutch entrepreneurial development bank, the fund was launched with the goal of mitigating climate change by working with commercial banks, development finance institutions (DFIs), impact investors, and institutional investors to provide credit enhancement tools and technical assistance to projects that prevent deforestation, stimulate reforestation, promote sustainable agriculture and value chains, reduce carbon emissions, and improve livelihoods. 

To meet this goal AGR13 has a funding goal of $1 billion, and will serve as a blended finance vehicle, providing risk mitigating financial offerings and grants for technical assistance for farmers and food value chains.

“The AGRI3 Fund provides a unique opportunity to contribute to forest protection and sustainable agriculture at scale, while also helping to transform the financial sector’s attitude towards sustainable investments,” said HE Sigrid Kaag, the Dutch Minister for Foreign Trade and Development Cooperation, upon the fund’s official launch. 

In support, the Global Environment Facility (GEF) has now finalized an investment of $13.5 million in AGRI3 Fund, benefitting its work across Africa, Asia, and Latin America. 

Made in partnership with Conservation International (CI), this investment will serve to meet AGRI3 Fund’s goals of deforestation-free, sustainable agriculture and land use by helping the fund provide guarantees and subordinate loans to commercial banks and other financial institutions to mobilize capital by de-risking and catalyzing investment propositions. 

“For the Global Environment Facility, supporting AGRI3 Fund as one of our investments under the Blended Finance Global Program is key to advancing our work on engaging the private sector at scale,” said Claude Gascon, head of programs, GEF. “With the GEF investment of USD 13.5 million into AGRI3 Fund, we expect to continue our partnership involving the banking sector to catalyze transformational forest conservation, climate-smart agriculture, and degraded land restoration.”

The implications of population growth and food demand interconnected with the fallout of the deforestation, soil degradation pollution, and resource depletion that is occuring due to the expansion of agriculture in order to meet this demand are widely understood at this point. 

Governments, businesses, and even farmers have important roles to play to ensure that transitions to sustainable systems are rapidly achieved, however, the financial sector is facing significant challenges in providing the solutions needed by farmers to make these shifts happen. 

The partnership of this project to avail the long-term investments needed to make changes to key components of agricultural production such as irrigation, replanting, soil quality, forest and ecosystem protection, nature and inclusive agriculture, farming equipment and training is critical. Nearly all banks perceive investments in these areas to be of too high a risk, and the required loan tenors too big to comply with increasingly stringent banking regulations. 

As the required loan size, tenors, and pricing of commercial terms continue to not align with the demand required for change, commercial and development banks struggle to provide finance on non-concessional terms. 

This project will serve as proof of concept to the wider banking sphere, value chain partners, and other financial institutions working to ultimately bring sustainable practices across the ag value chain and financial sector into the mainstream. 

“AGRI3 is an innovative financial mechanism combining donor and investor funding to increase commercial banks participation in the sustainable land use sector,” said Agustin Silvani, senior vice president of conservation finance, CI. 

“CI is pleased to partner with AGRI3 through the GEF investment and help mobilize much needed support to nature-based climate solutions at scale.”

“We are delighted to have closed this investment from the GEF and to develop a new partnership with CI,” added Nick Moss, managing director, AGRI3 Fund. “This is an important endorsement for the fund and the broader mission of AGRI3. It will allow the fund to expand its capacity to mobilize further finance for sustainable agriculture and forest conservation. We look forward to working closely with GEF and CI over the coming years.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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