Partnership for forest protection and sustainable agriculture
Agricultural production often leads to deforestation and land degradation. Deforestation accounts for half the climate impact of the rural agricultural sector.
At the same time, the world population is growing while arable land and the number of farmers are decreasing. Forest protection, climate-smart agriculture, innovation and financial solutions are required. However, the financial risks associated with implementing such solutions are often deemed too high by commercial banks or too costly for farmers.
The AGRI3 Fund enables commercial and development banks to take a leading role in kicking off the transition to more sustainable agriculture. The Fund offers banks guarantees to partly de-risk projects, the ability to offer longer tenors and grant money for technical assistance. The Fund is part of a Rabobank and UN Environment Partnership, which was launched in 2017 to unlock USD 1 billion in capital for the transition towards sustainable agriculture.
Rabo Partnerships acts as the linking pin to combine the knowledge, networks and financial solutions from leading private and public parties in this Fund. Other partners include Mirova Althelia as investment advisor, IDH as TA advisor and various other partners accessing both public and private funds.
The Fund provides de-risking financial instruments and tailor-made technical assistance to enable the transition towards Integrated Crop-Livestock-Forest (ICLF) systems. This climate-smart agriculture technique consists of rotating land use for agriculture, livestock and forestry. A proven technique, ICLF achieves the same yields as conventional agriculture, but uses six times less land.
Restoring soil quality and producing more food
The first project announced by the new Fund is Grupo Scheffer in Brazil. This family farm keeps livestock and produces cotton, cottons seeds, soy beans and corn. The project aims to implement a much more sustainable way of growing soy, using so-called subsoiling techniques. Not only will the environmental impact decrease, yields are expected to grow. The ability to produce more food with a lower environmental footprint is driving the farm’s shift towards sustainable agriculture. However, the investments needed to transfer to the new agricultural practices take several years and are expensive. Productivity will initially decrease for two years and commercial finance is insufficient to bridge the gap with the amounts needed for investment. A different financing approach is required: in addition to the commercial finance provided by Rabobank Brazil, the AGRI3 Fund will provide a de-risking solution, resulting in a longer tenor and a grace period.
It is unique that Rabobank, as a private bank, will promote the partnership goals among its clients and business partners, and provide commercial debt from its own balance sheet. Eligible projects will mostly be sourced from Rabobank’s corporate and rural client base. Projects should focus on at least one of the objectives for forest protection and reforestation or on sustainable agriculture. In addition, they should always contribute to improved rural livelihoods.