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Launch of the Africa Rural Climate Adaptation Finance Mechanism – COP28

Statement by IFAD President Alvaro Lario

Location: Dubai, UAE

02 December 2023

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Excellencies,

Ladies and gentlemen,

Distinguished guests,

Dear Friends,

We are at a critical juncture in history.

Global temperatures to hit the critical 1.5-degree threshold within the next six years.

We can say with certainty that the effects on food production will be severe. They may also be irreversible.

It is crucial to recognize that higher temperatures and extreme weather will have the biggest impact on agricultural systems, undermining food security and nutrition worldwide.

Of course, this will affect all of us; but the threat to poor rural populations is existential.

Eighty per cent of the world’s poorest people and most of the hungry live in developing rural areas and depend on small-scale agriculture. In Africa, one person in five does not get enough to eat. Climate change and conflict threaten to make the situation even worse.

We cannot afford to wait any longer to transform agri-food systems. We must invest now. And we must invest at scale. The cost of under-investment is too high.

Let me share two facts.

First, there is good evidence that investing in agriculture is two to three times more effective in reducing poverty than investing in any other sector.

Second, every dollar invested in boosting resilience today can save ten dollars of future emergency aid.

Transforming food systems so that they provide every person on earth with enough healthy food – despite the impact of climate change – does not come cheap.

According to recent estimates, it will cost an extra $300 to $400 billion a year to make food systems more sustainable, equitable and resilient.

This goes well beyond what public budgets and ODA can provide. We must attract private capital.

Unfortunately, private capital for climate projects in developing countries has stalled[1].  And support for climate adaptation is far too limited. [2]

We believe that with the right incentives, we can turn that around.

In this regard, I am delighted to launch today - the Africa Rural Climate Adaptation Finance Mechanism or ARCAFIM.

ARCAFIM is a pioneering partnership between IFAD and like-minded partners.

This innovative initiative integrates blended finance, with risk-sharing mechanism, and targeted technical assistance. It is designed to address the financing needs for climate adaptation of poor rural communities of Kenya, Rwanda, Uganda, and the United Republic of Tanzania.

By fostering resilience and sustainable development, ARCAFIM will contribute to less poverty and hunger in these countries, more sustainable agriculture, and resilience to climate and other shocks..  

We are pleased to have the Equity Group as our implementing partner. Equity is a well-established private bank in East Africa with a strong capacity for rural lending. And they are committed to expanding climate adaptation finance in their operations. 

I am happy to announce that IFAD has already secured approximately US$ 200 million funding backed by concessional capital for risk-sharing and technical assistance.

Our partners and donors include the Governments of Finland and Denmark and the Nordic Development Fund. The Nordic countries are respected worldwide for their climate finance innovations. We are grateful for their collaboration.

The other financing partners are equally esteemed globally as leaders in climate finance. They are the Green Climate Fund and the European Commission.

We thank each of them for their contributions to ARCAFIM.

Ladies and gentlemen,

We must build the resilience of the most vulnerable and transform food systems to meet the needs of a growing population on a warming planet. Here, today. Now.

This investment is crucial for ensuring a livable future for all.

ARCAFIM is not just a project. It is a model that we expect to show once and for all the viability of large-scale public-private climate adaptation platforms. In time, we expect to expand this financing model to other markets.

Our priority is to support low-income rural households and small producers around the world, especially women and youth who are too often left behind.

On behalf of IFAD, I thank each and every one of you for being us today and invite you to join us on the ARCAFIM journey.

 

[1] Convergence Blended Finance (2023). The State of Blended Finance 2023: Climate Edition.

[2]  Global Landscape of Climate Finance 2023