Blended Finance for Climate-Smart Agrifood Systems

This guide provides a strategic playbook for concessional capital providers to mobilize investment in climate-smart agrifood systems. It identifies a significant financing gap—with global climate finance for the sector reaching only USD 95 billion in 2021/22—and proposes five 'investment plays' to address market failures. These strategies include system-level alignment with national goals, large-scale natural capital restoration, strengthening shared infrastructure, expanding technical assistance for innovation, and scaling local financial intermediaries. The document includes a four-step framework for investor action and detailed case studies of blended finance vehicles operating across Africa, Asia, and Latin America.

• Global agrifood systems are severely underfinanced for climate transition, receiving only USD 95 billion in climate finance in 2021/22, which represents approximately 7.2% of total climate finance across all sectors for that period.
• There is a stark imbalance in the distribution of climate finance for agrifood systems, with nearly three-quarters of investment concentrated in Western Europe and East Asia, and over 40% of funding directed toward crops and livestock systems.
• A 'financing missing middle' exists for climate-smart solutions like nature restoration and sustainable agriculture, which provide high social and environmental impact but sub-commercial returns, making them unsuitable for pure public or private funding alone.
• The guide proposes five strategic 'investment plays' for concessional investors: deploying system-level approaches aligned with national goals, supporting large-scale natural capital restoration, strengthening shared climate-smart infrastructure, expanding technical assistance for innovation, and incubating local financial intermediaries.
• System-level investment requires aligning with national climate strategies; while 78% of Nationally Determined Contributions (NDCs) include agriculture in mitigation targets, only 36% provide detailed, costed plans.
• Natural capital restoration is hindered by long payback periods and complex governance, with land degradation costing emerging markets USD 6.3 trillion annually and Africa losing USD 68 billion annually to soil erosion and nutrient depletion.
• Shared climate-smart infrastructure, such as decentralized renewable energy and cold storage, is critical for last-mile producers but often falls into a gap where it is too large for grants and too small for private infrastructure funds.
• Technical assistance (TA) is a critical de-risking tool; funds that provide TA achieve 44% higher SME revenue growth and higher average Internal Rates of Return (IRRs) compared to those that do not.
• Local financial intermediaries are essential for reaching the 'missing middle' of agri-SMEs, which face a supply-and-demand financing gap of approximately USD 106 billion in sub-Saharan Africa and Southeast Asia.
• The document outlines a four-step framework for investor action: 1) Diagnose the agrifood climate landscape, 2) Identify financing gaps and additionality opportunities, 3) Design appropriate instruments and financing structures, and 4) Integrate partnerships and knowledge sharing.

APA

Prabhakar, U., Jacquemin, M., & Kirchherr, A. (2025). Blended Finance for Climate-Smart Agrifood Systems. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/blended-finance-playbook-for-climate-smart-agrifood-systems.pdf

Chicago

Prabhakar, Umang, Mathilde Jacquemin, and Alexandre Kirchherr. Blended Finance for Climate-Smart Agrifood Systems. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/blended-finance-playbook-for-climate-smart-agrifood-systems.pdf.

Wikipedia

{{cite report |last1=Prabhakar |first1=Umang |last2=Jacquemin |first2=Mathilde |last3=Kirchherr |first3=Alexandre |title=Blended Finance for Climate-Smart Agrifood Systems |publisher=Climate Policy Initiative |date=June 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/blended-finance-playbook-for-climate-smart-agrifood-systems.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{prabhakar2025blended, author = {Prabhakar, Umang and Jacquemin, Mathilde and Kirchherr, Alexandre}, title = {{Blended Finance for Climate-Smart Agrifood Systems}}, institution = {Climate Policy Initiative}, year = {2025}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/blended-finance-playbook-for-climate-smart-agrifood-systems.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }