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Study finds strong economic case for investing in agriculture under climate change

Southeast Asia
Priorities and Policies for CSA

With the Paris Climate Agreement now in force, agriculture has emerged as an important sector for action among participating countries: more than 80 % of climate pledges propose mitigation actions in agriculture and land-use, while 92 % of adaptation plans prioritize agriculture. Now, more than ever, countries must act on their Paris commitments by giving agriculture a prominent place in their national climate change plans and programs.

The economic advantage: assessing the value of climate change actions in agriculture, a report produced as part of the IFAD-CCAFS Learning Alliance for Adaptation in Smallholder Agriculture, offers strong evidence of how investments in agriculture can pay off at the country, commodity and farm levels. The study analyzed IFAD’s Adaptation for Smallholder Agriculture (ASAP) program and found that all the investments are set to deliver positive returns, with benefit-to-cost ratios of up to 7:1 over the project lifespan of 20 years.

“There is a strong economic case to be made for investing in agriculture for future food security, even under changing climate conditions,” said IFAD’s Director of Environment and Climate, Margarita Astralaga. “IFAD’s ASAP, the world’s largest program for smallholder farmers’ adaptation, shows that where investments are made that help farmers adapt to climate change, the returned financial benefit to farmers is much, much higher.”

This is good news for private sector investors, public sector funders and governments, as it shows that agriculture does not have to be a risky investment, even under climate change. However, unleashing significant public and private finance requires proposals on agriculture that are supported by credible economic and financial plans. Importantly, the analysis also revealed that investments must cover a spectrum of interventions to be successful.

In Vietnam, for instance, IFAD is investing US$34 million to build the adaptive capacity of communities and institutions in the Mekong Delta. The project is expected to provide additional value across smallholders and other project beneficiaries of about US$1.63 per US$1 spent on an annual basis over a time frame of 20 years. This puts Vietnam in the top two most valuable country investments in the Asia and Pacific Region, representing 37% of the overall regional value generated under ASAP.

If correctly targeted, investments can pay off for farmers and rural development in general. However, the report found that focused activities are often needed to ensure that farmers benefit from investments in an equitable way. In Vietnam, for example, where rising sea levels have spurred farmers to switch from growing rice to growing coconut and sugarcane, research revealed that that only the richest farmers were able to make the transition – the poorer farmers struggled to switch crops and as a result were left behind.

The report thus emphasizes the importance of designing socially inclusive programs. Taking into account the heterogeneity of populations is necessary to ensure that vulnerable groups, including women, youth and the poorest farmers, benefit.

Partners

  • International Center for Tropical Agriculture (CIAT)
  • International Food Policy Research Institute (IFPRI)
  • International Fund for Agriculture Development (IFAD)
  • University of Alberta
  • University of Vermont