REDD+ funds are limited, but agricultural finance pools are quite large. Integrating these pools of finance can help catalyze substantial additional finance flowing into sustainable agriculture that conserves forests.
The amount of capital deployed through REDD+ is just a small percentage of what is needed. Reducing Emissions from Deforestation and forest Degradation by 50 percent will require between $17 and $33 billion per year, but only $4.5 billion was deployed for REDD+ was through 2012. In contrast, financial flows to the agriculture sector are quite large: average annual investment by domestic private sector actors (i.e., farmers) into just a portion of low- and middle-income countries is $168 billion; and government expenditures on agriculture in a subsection of these countries is $160 billion.
Now is also a critical time in which supply chains are aiming to decrease their deforestation and become more sustainable overall, but many barriers to producing sustainably include higher costs of production, traditional financing barriers in the agricultural sector and the opportunity costs of leaving forests standing. The financial flows to the agriculture sector represent substantial pools of capital that can potentially be unlocked to support sustainable supply chains.
In a new report – Bridging Financing Gaps for Low Emissions Rural Development through Integrated Finance Strategies – we explore ways that agricultural finance can be realigned and integrated with REDD or climate finance to overcome these barriers and further incentivize and reward sustainable production.