REPORT: Climate Investment Opportunities in Emerging Markets: An IFC Analysis

REPORT: Climate Investment Opportunities in Emerging Markets: An IFC Analysis

IFC (2016) Climate Investment Opportunities in Emerging Markets: An IFC Analysis, © International Finance Corporation, 140 pages

  • The IFC’s study, based on the national climate-change commitments and underlying policies of 21 emerging-market economies, representing 48 percent of global emissions, identified sectors in each region where the potential for investment is greatest. 
  • The report also points to important government action to enable the full scale of investment opportunities in these markets.
  • Sub-Saharan Africa represents a $783 billion opportunity—particularly for clean energy in Cote d’Ivoire, Kenya, Nigeria, and South Africa.

Page 15: Climate-smart agriculture – measures that increase productivity, enhance resilience, reduce greenhouse gases, and address food security – is a growing business, as companies around the world seek to enhance resilience, food productivity, and their bottom line. The Green Finance Study Group (2016)  found 14 major business opportunities worth US$2.3 trillion annually by 2030 in the sector, with developing countries capturing more than two-thirds of the estimated economic value due to their large shares of arable land, high future consumption growth and large potential efficiency gains.

Page 94: Climate-smart agriculture 

Agriculture, forestry, and land use are major drivers of climate change, accounting for about a quarter 
of all global greenhouse-gas emissions. Most of these emissions come from livestock farming and 
the expansion of agriculture into forested areas (deforestation). This is not only an environmental issue 
but a development concern: emerging markets will be the main source of projected growth in global food demand and trade at a time when farmers across the globe are experiencing more droughts, floods, and heat waves, which are increasing production variability and pushing already vulnerable populations into poverty. 
It is also a business issue given that climate change under a business-as-usual scenario is expected to reduce global yields by as much as half by 2030. Global trends will exacerbate this scenario, including population growth, urbanization, the need to raise food production by some 70 percent by 2050 from 2007 levels, as well as a growing middle class that is demanding better quality food and more protein in their diets. 
IFC has identified the following priorities: 
  • to contribute to global food security, 
  • to make environmental and social sustainability a business driver, 
  • and to improve livelihoods through its investment and advisory activities in the agribusiness value chain. 
At the Paris Conference of the Parties, 94 percent of all country NDCs included greenhouse-gas reduction targets and/or adaptation objectives for the agriculture, forestry, and land use sectors. Increasingly, businesses are making commitments to ensure deforestation-free supply chains, 
signing on to use 100 percent renewable energy, or setting other objectives to reduce their greenhouse-gas emissions and water footprint. A growing number of IFC clients are concerned that the impacts of climate change will disrupt their supply chains and their ability to grow in a sustainable and profitable manner. IFC is helping to support its clients’ climate-related commitments. Clients are, for example, adopting technologies and practices that increase their productivity and resilience while reducing their carbon footprint.
In September 2016, IFC revised its climate definitions to incorporate activities and investments that contribute to climate-smart agriculture. Climate-smart agriculture is an approach to managing landscapes – cropland, livestock, forests, and fisheries – that aims to achieve three “wins”: increased productivity to improve food security and boost farmers’ incomes; improved resilience to drought, pests, disease, and other shocks linked to climate change impacts; and reduced greenhouse-gas 
IFC is supporting climate-smart agriculture, together with its clients and partners, by providing 
investments and advice that contribute to one or more of the three pillars of climate-smart agriculture. 
Historically, IFC has mainly supported investments in energy efficiency and clean energy solutions in the agricultural sector; however, it has now expanded its focus areas to include the following: 
  • Helping animal protein producers to increase their productivity (reduce greenhouse-gas emissions per kilogram of meat or milk or hectare) through various measures, including manure management.
  • Leveraging agriculture input suppliers (for example, soil testing, water solutions, appropriate use of fertilizers, and pest control) as a platform to promote precision farming technologies and financing to increase the productivity and resilience of farmers. 
  • Helping producers and traders reduce post-harvest losses in the food value chain by, for example, optimizing food transport logistics and developing cold chain and storage infrastructure. 

Country examples:

  • Argentina: Increase irrigated crop area and improve water resource management. There is also large potential for improved livestock practices and no-tillage/fertilizer recycling.
  • Colombia: Support new technologies and research in new crop varieties that are resistant to increasing temperatures, while also providing funds and technical assistance to build the market.
  • Bangladesh: Advance agribusiness through supporting seed resilience and climate insurance initiatives.
  • Nepal: IFC is working with agribusiness firms in Nepal to promote improved agricultural and water management practices. This will help small farmers producing rice, maize, and sugarcane to improve their resilience against climate change. The $9 million project was funded by the Pilot Program for Climate Resilience and is expected to help 15,000 people improve their climate resilience. 
  • Côte d’Ivoire. The government and private industry have also made investments in agriculture and agricultural product value-added processing. Côte d’Ivoire is a major producer of some of the world’s most desired agricultural products – cocoa, coffee, and sugar. The potential for private sector investments in climate-smart agriculture projects – particularly as they relate to corporate supply chains – is huge. This will require a government focus on land and water management and production capacity improvements. The country’s NDC estimates that the cost of adaptation (which includes agriculture and forestry) will be about $1.75 billion. 
  • Kenya: Kenya’s agricultural sector is a major contributor to its economy. Innovative climate-smart solutions are needed, such as the recently launched Kenya National Agricultural Insurance Program. The program is a partnership between government and the private sector that compensates farmers and livestock owners when climate-related shocks, such as droughts and floods, impact production. Other private sector opportunities to enhance resilience include agricultural and livestock waste for energy generation, improved crop productivity, water resource and more use of sustainable fertilizers.
  • Nigeria still imports most of its food. The country’s NDC aims to use climate-smart agriculture to improve productivity while reducing carbon dioxide equivalent emissions by 74 million tons per year in 2030. This will be done by using agro-livestock waste for energy generation, increasing crop productivity, improving water resource and energy efficiency, extending rotation, and using more cover crops and sustainable fertilizers. Possible investments in climate smart agriculture: Increase access to drought resistant crops and livestock feeds, adopt better soil management practices, and improve weather forecast information. Develop better irrigation infrastructure and help increase efficient allocation of water.
  • MENA: Based on the analysis of the climate pledges made by the three MENA countries studied for this report – Egypt, Jordan, and Morocco, opportunities for investment in climate-smart agriculture projects across the MENA region are strong, but investment estimates are not yet available. 
  • Jordan: Strengthen water loss reduction and conservation and improve energy efficiency of water sector operations to jump-start more climate-smart agriculture.

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