Blended Finance for Climate-Smart Agrifood Systems

The document addresses the significant underfunding of climate-smart agrifood systems, which contribute approximately 30% of global greenhouse gas emissions. It argues that while public and private capital have roles, concessional capital is essential for the 'missing middle'—investments with high social and environmental impact but sub-commercial returns. The playbook proposes five 'investment plays': deploying system-level approaches, supporting natural capital restoration, strengthening shared infrastructure, expanding technical assistance for innovation, and scaling local financial intermediaries. It includes a four-step framework for investor action: diagnosing the landscape, identifying financing gaps, designing instruments, and integrating partnerships.

• Global agrifood systems are severely underfinanced for climate goals, with climate finance reaching only USD 95 billion in 2021/22, which is approximately 7.2% of total global climate finance across all sectors.
• There is a significant financing gap for agrifood systems, with an estimated USD 1.1 trillion annual funding requirement to align these systems with net zero goals.
• Climate finance for agrifood systems is unevenly distributed, with nearly three-quarters of investment concentrated in Western Europe and East Asia, and over 40% of funding directed toward crops and livestock systems.
• Adaptation finance in the agriculture sector is lagging behind mitigation, with adaptation deals attracting only USD 6.1 billion from 2014-23 and showing a lower average leverage ratio (2.12) compared to mitigation (3.6).
• Concessional capital is most effective when targeting the 'missing middle'—opportunities that provide substantial social and environmental impact but offer sub-commercial returns, requiring de-risking and patient capital.
• System-level investment approaches can be achieved by aligning financing with national climate strategies, such as Nationally Determined Contributions (NDCs) and National Adaptation Plans (NAPs), to provide regulatory certainty for private investors.
• Natural capital assets are critically underfunded due to their public good nature; the document notes that land degradation costs emerging markets USD 6.3 trillion annually, with 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 often too large for grants but too small or risky for private infrastructure funds, necessitating concessional first-loss capital or guarantees.
• 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).
• Incubating local financial intermediaries, such as rural banks and MFIs, is essential to reach the 'missing middle' of agri-SMEs, particularly in sub-Saharan Africa and Southeast Asia where a USD 106 billion supply-and-demand gap exists.

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} }