Investment boost for sustainable agriculture and forest fund

A further $80 million has been pledged to the AGRI3 sustainable agriculture and forest protection investment fund. As a result, it will be up and running in the first half of 2020.

In January, the Dutch Ministry of Foreign Affairs became the latest entity to back AGRI3. It is now an ‘anchor public investor’, committing $40 million to the initiative. Subsequently one of the fund’s founders, cooperative bank Rabobank, said it would match the amount.

AGRI3 was jointly created by Rabobank and the UN Environment Programme (UNEP), together with partners STTC founder and funder IDH – The Sustainable Trade Initiative, and the Dutch Development Bank, FMO.

The rationale for starting the fund, say its founders, is that land conversion for agriculture is responsible for 75% of forest loss. With global population set to hit 9 billion by 2050, farmers will have to produce 70% more food than they do today. Combine this with the fact that an estimated 33% of current agricultural land is seriously or moderately degraded, and the consensus is that pressure to clear more forest for farming can only grow.

The situation, say AGRI3’s backers, demands major investment worldwide to restore degraded agricultural land and support implementation of sustainable farming practices. However, most mainstream banks perceive the risks of the long-term funding required as too high. AGRI13 is intended to provide a route out of this gridlock.

The fund is designed to act as a ‘blended finance vehicle’, using development finance  to mobilize private capital flows, and is aimed at unlocking at least $1 billion. It provides additional de-risking financial instruments and grants for technical assistance for ‘food  value chain actors’, particularly farmers to support adoption of ‘deforestation-free, nature positive agriculture’.

The new Dutch government funding has been welcomed by the AGRI3 backers, saying it will help unlock further resources from impact investors and financiers’. Inger Andersen, Executive Director of UNEP, described it as crucial. “It is now time for  banks, investors, governments and agribusinesses to join institutions like Rabobank in financing sustainable food and forestry value chains, to save the climate, protect biodiversity, and ensure sustainable development,” she said.

“The need, and opportunity, to invest in agriculture paired with conservation is underpinned by rising global demand for food and fibre,” states Rabobank. “These real asset investments provide income yield through sale of their outputs (such as food and timber), and have low correlation with other asset classes, providing efficient diversification in a traditional equity/fixed income portfolio. There are many profitable investment opportunities in the sustainable land-use sector, but they are not well addressed by traditional financing sources, including local commercial banks, resulting in both a need and an opportunity for sustainable land-use investments.”

“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 Sigrid Kaag, Dutch Minister for Foreign Trade and Development Cooperation.

Click here for the Rabobank AGRI3 brochure.