金融支持中国农食系统气候转型：净零排放、气候韧性与社会公正

FinancingtheclimatetransitioninChina’sagri-foodsystems:

towardnetzero,

resilienceandjustice

丰

PreparedbyMacroandGreenFinanceLab,NationalSchoolofDevelopmentatPekingUniversity;ClimateBondsInitiative;andUnitedNationsDevelopmentProgramme(UNDP)

Foreword

DrMAJun

Director,MacroandGreen

FinanceLab,NationalSchoolofDevelopment,PekingUniversity

President,InstituteofFinanceandSustainability

Chairman,GreenFinance

Committee,ChinaSocietyforFinanceandBanking

Theclimatetransitionofouragri-foodsystem

isofparamountimportanceforthesustainable

developmentofChina.Asadevelopingcountrywithapopulationofover1.4billionpeople,

Chinaattachesgreatimportancetofoodsecurityandsustainableagriculturaldevelopment.

However,thepracticesofmanyfirmsandsmallfarmersintheagri-foodsectorinChinahave

yettofullyalignwiththedecarbonisationand

climate-resilientgoals.Meanwhile,duetothe

largenumberofsmallholdersinChina’sagri-foodsectorandtheirrelativelyhighclimate-related

exposureandvulnerability,itiscriticaltoensurethisclimatetransitionisjustandinclusive.

Financecanplayapivotalroleinpromotinga

justandinclusiveclimatetransition.WithChina’songoingeffortstodeveloptransitionfinance

inaccordancewiththeG20TransitionFinance

Framework,andtheinclusionofagricultureasoneofthefocalsectors,agri-foodcorporates

andfinancialinstitutionswillbeprovidedwithclearerstandardsandguidancetooperate

climatemitigationandadaptationprojects.Wealsoexpectfinancialandfiscalincentivepoliciestocatalysemoreprivatecapitalintoagri-foodclimatetransitionactivities,byreducingrelatedcostsandrisks.

Webelievethatjusttransitionconsiderationsshouldbeincorporatedintootherpillarsofthetransitionfinanceeco-system,includingstandards,informationdisclosure,financialinstruments,andincentivepolicies.Effortsshouldalsobemadetoexploreanintegratedapproachtowardsusingtransitionfinance,supplychainfinanceandblendedfinance

instrumentsintheagri-foodindustry.

SeanKidney

CEO,ClimateBondsInitiative

Inaworldgrapplingwiththesevereimpactsofclimatechange,theroleoffinanceinsteeringthetransitiontowardsamoresustainablefuture

cannotbeoverstated.Theurgentneedfor

transitionisespeciallyevidentintheagri-food

sector.Revolutionisingagri-foodsystemsnot

onlyaddressesthechallengesofclimatechange,butalsoactsasasafeguardforfoodsecurity

andnutritionforpresentandfuturegenerations.Thus,thereisgreaturgencytogetfinanceflowingintotheagri-foodsectorandspeedupthe

transitiontomoresustainablepractices.

Chinahasalreadyshowndedicationand

commitmenttosustainabledevelopment,

takingproactivemeasurestospeedupthe

transition.ThisincludesthedevelopmentoftheNDRC’slow-carbontransitioncatalogue,and

thedevelopmentofatransitiontaxonomyby

thePeople’sBankofChina.Furthermore,local

governmentshaveestablishedregionaltransitionstandards,demonstratingproactiveand

innovativestepstowardsagreenerfuture.Withtheseoutstandingachievementsintheclimatefinancemarket,Chinaholdstheexperience,

andimmensepotentialtoredirectcapitalflowstowardssustainableagriculture,whilstbuildingmoreresilientfoodsystems.

Thisreportidentifiesinvestmentopportunitiesandhotspotsintheagri-foodsystemthat

canaccelerateChina’stransitionandsupport

theachievementofitsclimategoals.Itoffers

guidanceonhowtransitionfinancecancatalyseentitytransitionsandunlockgreaterprivate

capitaltofosterthesustainableevolutionofChina’sagri-foodsystem.

Bydirectingcapitaltowardsclimatetransition

activitiesandleveragingthepoweroftransitionbondsintheagriculturesector,wecanmobilisetheresourcesneededtocatalysetransformativechange,buildnet-zeroandresilientfoodsystems,andenableajusttransition.

Ms.BeateTrankmann

ResidentRepresentative,UNDPChina

Astheglobalcommunitytacklestheescalatingimpactsofclimatechange,thecallforawhole-of-societytransitionbecomesincreasingly

urgent.Theagri-foodsystem,notonlya

cornerstoneoflivesandlivelihoodsbutalso

responsiblefornearlyone-thirdofglobal

greenhousegasemissions,standsattheforefrontofthischallenge.Thisreport,acollaborative

effortwithClimateBondsandtheMacroand

GreenFinanceLabatPekingUniversity,delvesdeepintothefinancingmechanismsessentialforcatalysingthetransitionofChina’sagri-foodsystemtowardsnet-zeroemissions,resilience,andinclusivity.Bridgingthesector’sfinancinggapisnotonlyafinancialchallengebutalsoaprofoundopportunitytocorrectpathways,andashifttoasustainablesocio-economicmodelwherepeopleandnaturecoexistinharmony.

Thisreportalsounderscoresthecriticalneed

forajustandinclusivetransition.Ourresearchillustrateshowtargetedfinancialinstrumentsandpolicyincentivesarecrucialtoenhancetheadoptionofsustainablepractices,particularlyamongmorevulnerableplayerssuchas

smallholders.Theseareoftenthestakeholdersmostvulnerabletoclimateimpactsyetvitalforthefoodsecurityofbillionsofpeople.

Thelow-carbonandjusttransitionoftheagri-

foodsystemcancontributetoseveralsustainabledevelopmentgoals(SDGs).Tothispoint,the

reportprovidesvaluableideasforpolicymakers,industryleaders,financialmarketpractitioners,developmentagencies,andstakeholdersin

theecosystemforcollectiveactionwhichaimsatleveragingfinancialinnovationreshapingtheagri-foodsectorandunlockingsignificantpotentialinadvanceofthe2030AgendaforSustainableDevelopment.

Weextendourgratitudetoallthepartnersandexpertswhocontributedtothisreport,offeringbothdomesticandglobalperspectives.Aswemoveforward,UNDPiscommittedtotranslatingtheseinsightsintoactionablestrategiesthat

supportsustainabledevelopmentandequitablegrowth,ensuringthatnooneisleftbehindinourjourneytowardsasustainablefuture.

FinancingtheclimatetransitioninChina’sagri-foodsystems2

ExecutiveSummary

TheurgencyofChina’sagri-foodsystem

totransitiontowardsnetzeroandclimate

resilienceisunquestionable.Agri-food

systemsareresponsibleforabout21%-37%

ofglobaltotalGHGemissionsbutalsoface

considerableclimateriskswhichmakethema

criticalfactorinbothclimatechangemitigationandadaptationefforts.Furthermore,aligningtheclimatetransitionoftheagri-foodsystem

withtheSustainableDevelopmentGoals(SDGs)iscrucialtoensurejusticeandinclusivity

especiallygiventheroleofthesectorasa

majoremployerinruralareas.China,asamajorproducerandconsumerofagriculturalproductsandfoodandacountryfeeding1.4billion

people,oughttoprioritiseajustandinclusiveagri-foodsystemclimatetransition.

Significantfundinggapsexisttofacilitate

thistransition.Only4.3%ofglobalclimatefinance(approximatelyUSD28.5bnin2020)isallocatedtoagri-foodsystems,which

isonlyone-seventhofthatrequiredto

transitionthesector.Whileclimatefinance

fortheagri-foodsectormostlycomesfromfiscalfundsanddevelopmentfinanceinstitutions,

mobilisingsignificantprivatecapitalisimperativetobridgethefinancinggap.

However,theagri-foodsectorfacesmultiplefinancingconstraints,andChina’scurrent

policyschemesongreenandinclusive

financeareincompatiblewiththeclimatetransitionneedsoftheagri-foodsystem,

callingforfurtherpolicycoordination

andfinancialinnovation.Consideringthe

numeroussmall-andmicro-sizedentities

(farmers,SMEs,etc.,)withintheagri-foodsystem,financialinstrumentssupportingitsclimate

transitionmustalsoaddresstheneedsofSMEsandsmallmarketplayerstoavoidexacerbatingsocialinequalitiesandensureabroadersharingofthebenefitsofclimatetransition.

Severalfactorshinderthefinancingof

theclimatetransitionofChina’sagri-foodsystem,whichisimpededbyinsufficientclimate-relatedinformationdisclosure,thelackofcredibletransitionplans,omissionofscope3emissionreductionbyagri-foodentities,andinadequatepolicyincentives.Bettercoordinationacross

existingfinancial,fiscal,andindustrialpoliciescanfurtherrealisethepotentialoffinance

supportingChina’sagri-foodclimatetransitionandaligningitwiththeSDGs.

Thisreportmakesthefollowingpolicyrecommendationstotackletheidentifiedobstacles:

1.Regulatorsshouldenhanceclimate-related

informationdisclosureintheagri-foodsectorbyestablishingagri-foodGHGemissionaccountingstandards,informationdisclosurerequirements,andmonitoringsystem;

2.Regulatorsshouldguideandsupportagri-foodentitiesindevelopingcredibletransitionplanswithclearregulatoryrequirementsandtechnicalassistance;

3.Governmentsshouldestablishanenabling

policyenvironmentandstrengthenpolicy

incentivesbya)establishingtransitionfinanceincentivepoliciesfocusingonthetransitionofagri-foodsupplychains,b)creatingsynergies

betweentransitionfinanceandinclusivefinance

policies,c)tiltingexistingagriculturesupportivepoliciestowardsagri-foodclimatetransition

activities;andd)enhancingthegovernment’sroleasagri-foodbondissuer.

Contents

Foreword2

ExecutiveSummary3

1.TheimperativetransitionofChina’sagri-foodsystem4

2.Financialinstrumentsandtheirroleintheagri-foodsystemsclimatetransition6

3.ReleasingfinanceforChina’sagri-foodsystemsclimatetransition12

4.Conclusions16

AcronymsandAbbreviations

CCERChinesecertifiedemissionreductionDFIDevelopmentfinanceinstitution

GHGGreenhousegas

MDBMultilateraldevelopmentbankPEPrivateequity

SDGSustainabledevelopmentgoalSLBSustainability-linkedbond

SLLSustainability-linkedloan

SMESmall-andmedium-sizedenterprise

UoPUseofproceedsVCVenturecapital

VCMVoluntarycarbonmarket

Transitionfinancehasacriticalroletoplayinmobilisingprivatecapitaltosupport

ajustandinclusiveclimatetransitionofChina’sagri-foodsystem.DespitetheeffortsbyChina’sfinancialregulatortoestablish

China’stransitionfinancesystemandto

prioritiseagricultureinthetransitionagenda,innovationintransitionfinanceinstrumentsfor

agri-foodsystemsremainnascent.Currently,

thesetransitionfinanceinstrumentsare

primarilyintheloanandbondmarket,while

instrumentslikeprivateequityventurecapitalISprivateequity,insurance,carboncreditfinance,blendedfinance,andsupplychainfinance

alsoshowpotential.Notably,largeagri-foodcompaniesneedtotakealeadershiproletomobiliseandsupporttheirsuppliersandmoreSMEsinthistransition(Chapter2.3).

FinancingtheclimatetransitioninChina’sagri-foodsystems3

1.TheimperativeclimatetransitionofChina’sagri-foodsystems

Developinganagri-food

systemthatcanwithstand

theramificationsofclimatechangeiscrucialtoensuringfoodsecurity.Asakey

producerandconsumer

ofagriculturalproductswithasubstantial

population,Chinamusturgentlytransitionitsagri-foodsystemtonetzeroandbeclimate

resilienttolimittheimpactsofglobalwarming.

Theagri-foodsystemplaysavitalroleinboth

mitigatingandadaptingtoclimatechange.It

contributesaboutone-thirdofglobalgreenhousegas(GHG)

emissions.1

Atthesametime,the

agri-foodsystemfacesconsiderableexposure

andvulnerabilitytotheimpactsofclimate

change,necessitatingurgentimprovements

initsadaptationandresiliencetoclimate-

drivenevents.Moreover,consideringthecloseconnectionbetweentheagri-foodsystemand

multipleUNSustainableDevelopmentGoals

(SDGs),alongwithitsimpactontheworld’smostvulnerablepopulations,ensuringajusttransitionforthesectoriscrucial.

1.1Theroleofthe

agri-foodsystemin

climatechangemitigation

Theterms‘foodsystem’and‘agri-foodsystem’areoftenusedinterchangeably.Accordingto

theFoodandAgricultureOrganisation’s(FAO)

definition,thefoodsystemencompasses

allparticipantsandtheirrelatedactivitiesin

producing,storing,processing,distributing,

consuming,anddisposingoffoodproducts

fromcropcultivation,livestock,andfisheries

.2

AccordingtotheIPCC,21%–37%ofglobal

greenhousegas(GHG)emissionsareattributabletoagri-foodsystems;arisingfromagriculture

andlanduse,storage,transport,packaging,

processing,retail,andconsumption

.3

Notably,methaneemissionsfromricecultivation,entericfermentationinanimals,manuremanagement,andnitrousoxideemissionsfromusingnitrogenfertilisersinagricultureareaparticularly

significantsourceofGHGemissionsglobally.

4

In2019,China’sGHGemissionsfromtheagri-

foodsystemexceeded1.9GtCO2e,makingit

thelargestfood-relatedemitterintheworld

.5,6

Chinaisresponsibleforone-tenthofglobal

foodemissionswhilefeeding18%ofthe

world’spopulation.However,China’spercapitaemissionsfromfoodareexpectedtorisewith

increaseddemandinthefuture.Givengrowing

globaldemandforfoodandmaterials,includingbioenergy,GHGemissionsfromagri-food

systemsareprojectedtorise30%to40%by

2050ifunchecked.

7

Allthingsconsidered,this

increasewouldcontributetoworseningof

climatechangeglobally,includinggrowthinthenumberofclimatechange-induceddisasters,

deaths,anddiminishedsocialstabilityasfood

systemsandwidersocietiesstruggletocopewithunpredictableandextremeweatherevents.

Notably,theagri-foodsystemalsohassignificantpotentialformitigatingclimatechange.Researchindicatesthatbyenhancingfoodsystemsand

adoptinglow-emissionandcarbonsequestrationpractices,emissionsfromtheagri-foodsector

couldbereducedfromthecurrentlevelto-2.0

CO2eperyearwithoutrelyingoncarbonoffsets,whilemeetingthegrowingdemandforfood

.8,9

Withtheincreasedfocusonemissionreductionpolicies,GHGemissionsfromChina’sagri-foodsystemcouldbereducedby70%by2060,

potentiallydroppingto651milliontonnesof

CO2e

.10

Climatetransitionintheagri-foodsystemcaneffectivelysupportloweringGHGemissionsandsupportthetransitiontowardsamore

sustainablefoodsystem.Thiscanbeachievedthroughtheadoptionofsustainableagriculturalpractices,suchasimprovedsoilmanagement,sustainablelivestocksystems,agroforestry,

renewableenergyutilisation,enhancedlandcarbonsequestration,dietarychanges,andtechnologicalinnovation.

1.2Theneedforclimate

changeadaptationinthe

agri-foodsystem

Theagri-foodsystemisalsoparticularly

vulnerabletotheimpactsofclimatechange.Frequentandintenseweathereventslike

floodsanddroughts,shiftsintemperatureandrainfallpatterns,andincreasedoccurrences

ofplantdiseasesandpests,candrastically

disruptcropyieldsandthreatenfoodsupplystability.Similarly,extremeweathereventsandtemperaturefluctuationscanleadtooutbreaksoflivestockdiseasesandreducedproduction.Studieshavefoundthatclimatechangecausesaroundone-thirdofthevariabilityinglobal

cropyields.

11

Withoutadequateadaptation

measures,climatechangecouldreduceglobalfoodproductionby5-30%by2050comparedtocurrentlevels.

12

Extremeweathereventscanalsodamagetheinfrastructureoftheagri-

foodsupplychain,suchaswarehousesandtransportationnetworks,leadingtodisruptioninfoodsupplyandmarketpricevolatility.

Between2008and2018,ChinaexperiencedagriculturallossestotallingCNY976bn

(USD145bn)duetoextremeweather.

13

Thisuncertaintyinthemarketandagricultural

productivitycanposeathreattofoodsecurity

bothinChinaandworldwide.Notably,vulnerablegroups,includinglow-incomecommunities

alreadystrugglingwithfoodscarcityandsmallandmicro-farmers,aredisproportionately

affectedbydecreasesinfoodproductionandpriceinstabilitycausedbyclimatechange,frequentlyleadingtounplannedmigrationtourbancentresinsearchofwork.

Therefore,developinganagri-foodsystemthatcanwithstandcurrentandfutureclimatechangeimpactsiscrucial,strengtheningresilienceandminimisinglossestoensurefoodsecurity.The

GlobalCommissiononAdaptationhasidentifiedfoodsystemsasapriorityareaforurgentactiononclimatechangeadaptation,emphasising

thenecessityofsupportingsmall-scaleand

micro-farmersinmaintainingandimprovingtheirlivelihoodswhilesafeguardingfoodsecurity

.14

FinancingtheclimatetransitioninChina’sagri-foodsystems4

1.3Ajustandinclusivetransition

Theagri-foodsystemtouchesmultiple

vulnerablepopulations,includingfarmers,

smallandmicro-entities,andwomen.Dueto

limitedadaptationcapacity,thesegroupsfaceheightenedexposuretotheimpactsofclimaterisks,suchasfloodsanddroughtsthatcanharmcropsandreduceyields,withlimitedcapacitytoadapt,hencemakingthemmoresusceptibletoadverseimpacts.Itisparamounttoensurethattheclimatetransitionoftheagri-foodsystem

isinclusiveandequitableforthesegroupstoavoidexacerbatingsocialinequalities.

Whilethereisnointernationallyagreed-upondefinitionorscopeforajusttransition,bothinagricultureandmorebroadly,severalstudies

andinitiativeshavesoughttoclarifytheconceptandestablishcriteria.Theseeffortsinclude

theGuidelinesforaJustTransitionTowards

EnvironmentallySustainableEconomiesand

SocietiesforAll,thePrinciplesforJustFood

SystemTransitionsandtheJustTransition

PrinciplesandCriteriaforFoodSystemsand

Beyond

.15,16,17

Theseguidelinesunderscorethe

relevanceoftheagri-foodsystemtovarious

SDGs.Theclimatetransitionoftheagri-food

systemmustprioritisemitigationandadaptationactionsbutalsosafeguardvulnerablegroups,

preventtheexacerbationofinequalities,strivetoreduceexistingdisparities,ensurefoodsecurity,eradicatehunger,enhancepublichealth,

generatefairemploymentopportunities,and

promotegenderequality(asshowninFigure1-1).

WhileChinesepolicydocumentsdonotcurrentincludeacleardefinitionofthetermjust

transition,Chinadidsupporttheestablishment

oftheUNFCCCWorkProgrammeonJust

TransitionPathways,agreedatCOP27.

18

There

arealsosomeexistinginitiativesinChinathat

sharecommongroundwiththeprincipleof

justtransition,suchas‘inclusivefinance’,‘ruralrevitalisation’,and‘commonprosperity’,which

supportsmallholdersintheagri-foodsector.

However,agricultureandfoodsecurityisanothercriticalcomponentofjusttransitionintheagri-

foodsector,whichChinahasidentifiedasakeypriorityinitsNationalClimateChangeAdaptationStrategy2035.Thiscommitstoestablishpilot

projectstoevaluatetechnologiesforagricultureadaptationandclimate-smartagriculture,aswellasclimate-friendlylow-carbonagriculturalproductcertification.

Figure1-1:Climatetransitionoftheagri-foodsystemislinkedtomultipleUNSDGs

Climate

transitionofagri-foodsystem

Source:MacroandGreenFinanceLab,NationalSchoolofDevelopment,PekingUniversityandClimateBonds

1.4Governanceandpolicy

frameworkfortheclimate

transitionofagri-foodsystems

Historically,globaleffortstocombatclimate

changehavepredominantlytargetedsectors

suchasenergy,transportation,andconstruction,oftenoverlookingthesignificanceoftheagri-

foodsystem.However,thissituationhasbeguntoshiftinrecentyears.Initiativessuchasthe

2021GlasgowLeaders’DeclarationonForests

andLandUse,whichpledgedtohaltandreverseforestlossandlanddegradation,andthe2023UAEDeclarationonSustainableAgriculture,

ResilientFoodSystems,andClimateActionat

COP28,whichgarneredsupportfrom70%of

theworld’sfood-producingcountries,pointtoagrowingrecognitionofthepivotalroleoftheagri-foodsysteminaddressingclimatechange.Thesedevelopmentsunderscoreapositiveshifttowardsprioritisingandacknowledgingthe

importanceoftheagri-foodsystemintheglobalclimateagenda.

Agri-foodsystemGHGemissionsare

predominantlynon-CO2gases,mainlymethane

.19

Methaneisashort-livedbutverypowerful

pollutantandclimate-forcinggas.Therefore,cuttingmethaneemissionshasdualbenefitsinmitigatingclimatechangeandimproving

airquality.Methaneabatementisnowstarting

toemergeasapoliticalpriorityforaction.For

example,theU.S.-ChinaJointGlasgowDeclarationonEnhancingClimateActioninthe2020shighlightstheurgencyofreducingmethaneemissionsandspecifiesincentivesandprogrammestodecreaseagriculturalmethaneemissions.

Againstthisbackdrop,theChinesegovernmentisrefiningitspolicyframeworktoaddress

climatechangeintheagri-foodsystem.This

includesprioritisingclimatechangeresponses

inmacro-strategicplanssuchastheNational

PlanforSustainableDevelopmentofAgriculture(2015–2030)andthe14thFive-YearNational

AgricultureGreenDevelopmentPlan.Additionally,specificimplementationpathwaysandsupportivepolicieshavebeen

developed.20,21

TheNational

ClimateChangeAdaptationStrategy2035

identifiesagricultureandfoodsecurityasa

primaryfocusareatoenhancetheclimatechangeadaptabilityofeconomicandsocialsystems,

outliningstrategiesandactionplanstoimprovetheclimateresilienceoftheagri-foodsystem.

Finally,ChinahasundertakeneffortsthroughitsActionPlanonMethaneEmissionsControl,whichprioritisesworkonricecultivationpractices,

enhancingmanuremanagement,andreducingmethaneemissionsfromlivestockruminants

.22

FinancingtheclimatetransitioninChina’sagri-foodsystems5

2.Financialinstrumentsandtheirroleintheagri-foodsystemsclimatetransition

2.1Thefinancing

gapfortheagri-

foodsystem

climatetransition

Itisestimatedthatfoodsystems

willrequireUSD350bnperyeargloballyuntil2030tomeetclimatemitigationandadaptationtargets,yetasubstantialfundinggappersists

.23

Currently,theclimatetransitionoftheagri-

foodsystemcurrentlyreliesheavilyonpublic

funds,primarilyintheformofgrantsanddebt

instruments,andfacesaconsiderablefundinggapglobally.ResearchbytheClimatePolicyInitiative(CPI)indicatesthatonly4.3%ofglobalclimate

finance,approximatelyUSD28.5bn,isallocatedtotheagri-foodsystem,whichisonlyone-seventhoftheestimatedfinancialneedsforclimatetransitioninthissector(basedonconservativeestimatesbytheFoodandLandUseCoalition).

24

Atpresent,

climatefinancefortheagri-foodsystemprimarilystemsfromdevelopmentfinanceinstitutions

andgovernments,withlimitedinvolvementfromcommercialcapital.ThisisthecasebothinChinaandglobally.Themainfinancinginstruments

includesubsidies,grants,anddebtfinancing

atmarket-basedinterestrates,whereasequity

financinginstrumentsconstituteaminorportion(asshowninFigure2-1).

Acorepartoftheagri-foodsystemtransitionis

climateadaptation,forwhichestimatesofthe

financingrequiredvaryconsiderably.AUNEP

studyrevealsthatdevelopingcountrieswill

requireUSD387bnannuallyforadaptationby

2030,withagriculturebeingoneofthesectorswiththehighestfundingrequirements(around20%).However,theavailablefundingforclimateadaptationindevelopingcountriesislagging

andcurrentlyamountstoonlyatenthofthe

requiredamount,resultinginasubstantial

fundinggap.

25

Thisisdespitethefactthatthe

enhancementofagriculturaladaptationand

resiliencecanyieldconsiderableenvironmental,social,andeconomicbenefits.AccordingtotheGlobalCommissiononAdaptation,investing

USD1.8tninclimate-smartagricultureand

technologiescouldsaveapproximatelyUSD7.1tninenvironmental,social,andeconomicvaluebyavoidingclimatechange-relatedlosses

.26

Figure2-1:Globalclimatefinancesupportingagri-foodsystem(2019/2020)

ProjectLevel:Total,USD28.5bn

Developmentfinanceinstitutions,USD12.5bn

Governments,USD9.5bn

CommercialFinanceinstitutions,USD1.6bnMultinationalCorporations,USD0.94bn

PhilanthropicOrganisation,USD0.49bn

Company-level

VentureCapital,USD2.3bn

Financialinstruments

Project-levelEquity,

USD0.9bn

Debt,USD12.7bn

Grants

Others

USD10.8bn

Datasource:ClimatePolicyInitiative(2023)

2.2Transitionfinanceiscrucialtobridgethefinancinggap

Privatecapitalcanbridgethefinancinggapin

theagri-foodsystemtransitionreferencedabovebutthesectorfacesuniquefinancingchallengesandincreasedcosts,whichrequiretargeted

financialinnovations.Suchchallengesinclude

longinvestmentcycles,highenvironmentalandclimaterisks,deferredreturnsoninvestment,

andhighuncertainty.Asurveyof131modern

agriculturalentitiesinChinarevealedthatthe

averagecostoffinancingwas7.38%in2023,

whichis37basispoints(bps)abovethenationalaveragerecordedbythePeople’sBankofChina

.27

Thesecomparativelyhighfinancingcostscan

hampermotivationandeffortsdirectedtowardsclimateaction.

Meanwhile,thetransitionneedsoftheagri-

foodsystemareincompatiblewithChina’s

currentpolicyschemesforgreenfinanceand

inclusivefinance.Thecurrentinclusivefinance

systemdoesnotincludeclimatechange

considerations,withsomepoliciesandproductsstillsupportingagriculturalactivitiesthathindereffortstomitigateclimatechange.Meanwhile,greenfinancingtendstoprioritisepuregreen

activities,leavingmostemission-reducingor

climate-resilientagri-foodactivitiesuncovered.Thisunderscoresthenecessitytoincorporate

climateconsiderationsintotheinclusivefinancesystemandbroadentheinclusivityofthegreenfinancesystem.

Financingtheclimatetr