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Feeding the future sustainably: Financing the transition to decarbonise without compromising food security

The climate finance gap in agrifood systems

Agrifood systems sit at the heart of the Sustainable Development Goals (SDGs), connecting Zero Hunger (SDG 2), Decent Work and Economic Growth (SDG 8), Climate Action (SDG 13) and Life on Land (SDG 15). The sector employs close to 1.3 billion people, about 39.2% of the global workforce, and form the socioeconomic backbone of most emerging markets and developing economies (EMDEs). Global agrifood systems emissions reached 16.2 billion tonnes of carbon dioxide equivalent (Gt CO2eq) in 2022, virtually unchanged from 2021, and representing an increase of 10% since 2000.

In EMDEs, the agrifood footprint is even more pronounced, in both emissions and employment. In Africa and Latin America, agrifood systems made up the largest share of regional emissions from all human activity in 2019, between 56% and 72%, driven largely by land-use change. In these economies, agrifood systems are both high emitters and a primary source of jobs and rural income, which makes any transition as much a livelihoods question as a climate one.

Despite this scale, the sector receives a disproportionately small share of climate finance: only US $28.5 billion a year, under 5% of the global total. Meeting a 1.5°C-aligned pathway by 2030 will require around US $1.1 trillion a year, almost 40 times current levels. The cost of inaction is steep: agrifood systems already generate an estimated US $10–12 trillion in hidden environmental, social and health costs annually. And the human stakes are immediate as around 673 million people faced hunger in 2024, a reminder that decarbonisation must protect food security, not trade it away.

The triple gap: Why money is not moving

CPI and FAO identify a triple gap in planning, finance and data, with each shortfall reinforcing the others and holding back the private capital the transition needs.

The planning gap

Nationally Determined Contributions (NDCs) currently identify only a flow of US $201.5 billion a year to agrifood systems, less than a fifth of the US $1.1 trillion required. National strategies are not yet aligned with the true cost of an agrifood transition. The problem is not only the size of the funding but how it is allocated: climate finance still flows disproportionately to mitigation over adaptation, because adaptation projects are often seen as less profitable and harder to measure.

Misaligned public subsidies

Total support to agriculture across the 54 largest agricultural economies reached US $851 billion a year over 2020–22, a historic high. But most of it is market-distorting and rarely carries environmental conditions, entrenching high-carbon practices and crowding out sustainable alternatives. Repurposing even a portion of this support toward sustainable production would do more to close the gap than most new funding streams.

Structural barriers to private capital

High transaction costs, small ticket sizes and a largely informal farm sector make agrifood unattractive to many private financial institutions (FIs). The world’s roughly 500 million smallholder farmers are central to any sustainable food future, and they often lack collateral and formal credit records, leaving them outside the reach of conventional lending.

The data gap

Even where capital is willing, it struggles to price the opportunity. Climate and transition risks remain poorly understood because monitoring, reporting and verification (MRV) systems are weak. Without reliable data on outcomes, lenders default to caution, risk is over-estimated, and capital stays on the sidelines, completing the loop between weak planning, scarce finance and thin data. 

Three instruments to bridge the gap

EMDEs are where the financing gap bites hardest. Their agrifood systems are among the world’s highest emitters, yet they are also the mainstay of rural employment, and commercial finance largely avoids them because of high perceived risk, weak data and small ticket sizes. The three instruments below are suited to exactly these conditions: they de-risk entry for private capital, reward verified results and stretch scarce public funds to draw in private flows at scale.

Blended finance

Blended finance uses concessional public or philanthropic capital to absorb first-loss risk, allowing commercial investors into transactions they would otherwise treat as non-bankable. In EMDEs, where risk perception consistently runs ahead of actual default rates, this lets development finance act as a catalyst rather than a substitute for private money, and it can deliberately steer capital toward the under-funded adaptation projects that markets tend to avoid.

The AGRI3 Fund, a partnership between UNEP and Rabobank, illustrates the model. In Mato Grosso, Brazil, AGRI3 backed a US $20 million 10-year Rabobank loan to grain and cotton producer Grupo Locks with an US $8 million risk participation, guaranteeing the final three years of the facility, a tenor the bank would not have offered on its own. The financing funds a shift to regenerative, circular practices: recycling cotton by-products into animal feed and manure into fertiliser, more precise herbicide use, and on-site solar power, with the aim of cutting agro-chemical use, lowering water and energy demand and improving soil health while maintaining yields. At the fund level, AGRI3 aims to mobilise US $1 billion in lending off roughly US $100 million in capital, with a target leverage of about 10:1 for channelling long-term finance into sustainable supply chains across Latin America, Africa and Asia.

Sustainability-linked bonds and loans (SLBs/SLLs)

These instruments tie the cost of borrowing to pre-defined key performance indicators (KPIs) such as methane reduction, soil carbon, deforestation-free sourcing, therefore meeting sustainability targets becomes a financial decision rather than a voluntary one. For agrifood borrowers in EMDEs, the cost of capital falls as environmental performance improves, effectively pricing sustainability into the balance sheet.

Bunge offers a concrete example. In December 2021, the agribusiness refinanced a US $1.75 billion three-year sustainability-linked revolving credit facility,  with its interest rate tied to five core targets, including science-based GHG reduction goals, greater traceability across its soy and palm supply chains, and a commitment to deforestation-free sourcing by 2025. Miss the milestones and Bunge pays a higher margin; meet or beat them and its borrowing gets cheaper. According to UNEP FI’s Driving Finance for Sustainable Food Systems, leading food-sector borrowers have collectively issued multi-billion-dollar volumes of such loans, signalling growing investor appetite for outcome-based agrifood finance.

Debt-for-nature swaps

In a debt swap, a part of the country’s sovereign debt is restructured or written down in exchange for binding domestic climate and conservation commitments. For heavily indebted agrarian economies, where fiscal constraints are the single biggest barrier to investing in agroforestry and rural infrastructure, this frees up fiscal space without new borrowing.

Ecuador’s landmark US $1.6 billion conversion is the largest of its kind to date, it is expected to generate around US $450 million for conservation over 18 years, protecting the Galápagos Marine Reserve and underpinning the country’s Amazon commitments. Applied to agrifood systems, similar deals across Sub-Saharan Africa and South Asia could unlock sovereign investment in regenerative agriculture, agroforestry and rural resilience at scale. 

Conclusion

A sustainable agrifood transition is financially achievable, and every year of delay raises its price. Closing the US $1.1 trillion gap will take all three instruments working together; blended finance to de-risk early capital, sustainability-linked debt to reward measurable progress, and debt-for-nature swaps to create fiscal room. Backed by repurposed public subsidies and credible MRV, the sector that drives close to a third of global emissions could also capture an estimated US $4.5 trillion in annual business value by 2030, without forcing a trade-off between cutting emissions and feeding a growing population.

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