Financing food systems transformation
Financing lies at the heart of transforming food systems, shaping both the scale of ambition and the pace of change. From global commitments to country level implementation, strengthening how resources are mobilized, targeted and used is essential to close financing gaps and deliver resilient, inclusive and sustainable food systems at scale.
INTRODUCTION
The 2021 UN Food Systems Summit (UNFSS) marked a turning point in global commitments to financing food systems transformation – across national budgets, development finance, and private sector investment.
UN FOOD SYSTEMS SUMMIT +2 STOCKTAKING MOMENT
At UNFSS+2, a critical gap became clear: the lack of reliable data to track financial flows to food systems. Financial intelligence is essential to identify opportunities, anticipate challenges, and design financing strategies that mobilize, unlock, and repurpose financing sources in a complementary way – balancing short-term needs with long-term transformative investments.
To address this, IFAD and the World Bank, as co-leads of the financing agenda, framed it around three interconnected priorities:
- Strengthening evidence to support governments in their financing strategies and ensure accountability in scaling development finance;
- Facilitating country access to financing windows for food systems transformation;
- Supporting game-changing programmes that mobilize transformative private sector investment.
UN FOOD SYSTEMS SUMMIT +4 STOCKTAKE
By UNFSS+4, financing had returned to centre stage. The Hub’s work through IFAD and the World Bank was instrumental in bringing IFIs together to produce first-time evidence on their distinctive contribution to food systems financing. Nearly all IFI financing is now directed to long-term, structural investments, with new IFI commitments underway to further accelerate food systems transformation.
WHAT'S AT STAKE TODAY?
The stakes on financing food systems are high.
THE SCALE OF THE FINANCING CHALLENGE
The UNFSS estimates that transforming food systems will require US$300 to US$400 billion per year, less than 0.5% of global GDP. Financing a system that delivers nutritious, sustainable, and resilient food for all is within reach, but it requires political will, country-led and innovative financing pathways, and strong partnerships.
Populations in Least Developed Countries (LDCs) are most affected by the shortcomings of food systems, yet their governments face the steepest barriers to mobilizing capital. Strengthening their capacity to mobilize and use financing effectively across diverse streams is essential to advancing national transformation pathways.
Investing in smallholders and primary agriculture is essential. Smallholders manage 84% of the world’s farms and produce one-third of global food, while a large share of the extreme poor depend on food systems for their livelihoods. Placing smallholders at the centre is key to ending hunger and building more sustainable, equitable, and resilient food systems.
WHERE WE STAND NOW
Closing the gap and accelerating action
Since UNFSS, some low- and middle-income countries (LMICs) have increased domestic resources, and external development financing has grown, signalling donor willingness to honour FSS commitments. However, public and private investments still remain well below needs, constrained by a weak global economy, multiple crises, and rising humanitarian demands.
At UNFSS+4, three key messages emerged:
- Country leadership is essential: LMICs must lead their financing strategies by assembling the right mix of instruments tailored to their contexts.
- Country-led financing solutions are gaining traction: The UNFSS+4 platform connecting African agri-youth entrepreneurs and public leaders are proving the value of scaling national innovations.
- Financial intelligence is essential: Better data and analysis are needed to guide decision-makers to understand each actor’s role in a country’s food finance ecosystem.
Now more than ever, the vision for food systems financing must be bold, clear, and urgent. Mobilizing and optimizing both existing and new sources of finance – while scaling game-changing investments – are critical. Decisions made today will determine whether the world can reverse rising hunger and build more resilient, inclusive, and sustainable food systems.
Definitions
Development grants and loans to the official sector, INGOs and multilateral organizations that provide a grant element that respects ODA thresholds. ODA criteria are defined by the members of the OECD Development Assistance Committee (DAC). Development financing that does not fall under these thresholds is classified as “other official flows.”
Official sector transactions that do not meet the criteria for ODA, either because they are not primarily aimed at development, or they are not sufficiently concessional. OOF refers to financial flows from bilateral and multilateral donors to developing countries and are part of the financing reported to the OECD DAC. OOF mobilizes financial resources that complement ODA and covers a range of official transactions, including:
- Loans to the public and private sector that do not meet the criteria to qualify as ODA.
- Grants linked to commercial objectives rather than direct development goals.
- Subsidies to private companies aimed at reducing the cost of commercial credit to developing countries.
- Official loans or grants intended to encourage private sector investment abroad, such as supporting donor country businesses that invest in developing countries.
OOF does not include officially supported export credits, which are reported separately under DAC statistics. It complements ODA by expanding the range of official financial flows available to developing countries, especially for financially viable sectors or projects with a lower level of concessionality required than ODA.
Development financing provided by private philanthropic foundations.
