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1. Operationalizing Climate Adaptation at the US International Development Finance Corporation: The Case for an Agriculture-Led Agenda in Low-Income Countries

Author:
Clemence Landers, Jocilyn Estes, and Scott Morris
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The US International Development Finance Corporation (DFC) could be well placed to lead among development finance institutions (DFIs) on agriculture adaptation to climate change. With its mandate to support private investment in developing country markets, overcoming barriers to investment in agricultural adaptation—where agricultural growth is an estimated two to four times more effective at reducing poverty than growth originating from other sectors—is exactly the type of activity DFC is intended to pursue. Yet, DFC is paradoxically prone to the same investment incentives and disincentives as private investors with an investment portfolio that tends to favor lower risk, higher deal size (and lower overhead) transactions. So, while global estimates for adaptation investments financing needs total close to $140-$300 billion by 2030, a fraction of the global mitigation needs measured in the trillions of dollars, the barriers to project level investment in agriculture adaptation and resilience raises the risk that DFC will continue to favor larger and lower risk mitigation investments in more established markets. This paper reviews DFC’s agriculture portfolio, and based on this review, proposes elements of an agriculture strategy that can overcome barriers to adaptation and resilience investments in the most climate vulnerable markets.
Topic:
Agriculture, Climate Change, Environment, and Finance
Political Geography:
Global Focus

2. Lending Terms for IFAD Projects

Author:
Scott Morris and Jessie Lu
Publication Date:
11-2019
Content Type:
Research Paper
Institution:
Center for Global Development
Abstract:
Donor support for agriculture development is not keeping pace with developing country demand or the need for finance implied by Sustainable Development Goal 2. In order to increase the overall volume of resources available for these needs, IFAD is pursuing a reform agenda that considers providing loans on harder terms to its client countries. This study assesses whether this hardening of lending terms will affect country demand for projects. Using the World Bank experience as a proxy, this paper examines whether graduation from the International Development Association to the International Bank for Reconstruction and Development affects the sector portfolios of countries and the types of investment demands within agriculture through both statistical and qualitative country case study analysis. We find that as countries graduate, there is a relative shift away from “soft” sector investments and a different mix of investments within the agricultural sector. We argue that IFAD’s consideration of harder lending terms should also include consideration of how to respond to a different mix of country demand within the agricultural sector. Specifically, the fund should consider some scaling up of projects, increased emphasis on capital investments, and a greater emphasis on policy engagement with client countries.
Topic:
Agriculture, Development, Investment, Sustainability, and Banking
Political Geography:
Global Focus