Systems Finance for Sustainable Development | Global Conference 2024

Session Overview and Strategic Objectives

• The panel convened under the "Systems Finance for Sustainable Development" theme to address the fragmentation in financing smallholder agriculture in developing countries facing climate volatility.
• A "Smallholder Action Coalition on Climate Adaptation" is being formulated as one of 50 "Aim for Climate Sprints" to coordinate public, private, and entrepreneurial efforts.
• The coalition operates on three pillars: identifying critical climate innovations, establishing delivery mechanisms via local entrepreneurial networks, and deploying coordinated finance.
• A specific pilot program with BRAC in Bangladesh aims to support 1 million smallholder farmers across saline-prone and drought-prone landscapes.
• This Bangladesh initiative targets a Green Climate Fund award approval in early 2025 to transition farmers from rice-centric systems to low-methane, diversified, high-value agriculture.
• The pilot is based on proven results from 10,000 farmers, demonstrating a business case for input suppliers, off-takers, and financiers, with a long-term goal of scaling to 5 million farmers and mobilizing $1 billion.

Innovation and Technology Deployment (Varaha Ag & Evergreen)

• Varaha Ag utilizes a tech platform to validate and quantify carbon sequestration and emission reductions (methane, nitrous) from regenerative practices like zero tillage and crop residue incorporation across 600,000 acres in India, Nepal, Bangladesh, and Kenya.
• Varaha stacks multiple income-generating interventions, including agroforestry, biochar production (converting 116 million metric tons of Indian residue), and enhanced rock weathering using basalt powder to balance soil pH and lock carbon.
• Varaha has replicated fintech models for carbon credits but identifies a critical gap in "climate financing" required to scale pilot-to-market transitions for hundreds of millions of farmers.
• Evergreen Innovation Platform acts as a filter and validator, adapting high-tech innovations from the US, UK, Israel, and India for smallholder contexts through a rigorous pipeline of sourcing, small-scale validation, and pre-commercial testing.
• Evergreen addresses the risk profile mismatch by helping venture-backed startups adapt business models for smallholder markets, successfully revitalizing a failed entry for Groundwork BioAg in India.
• Madhura Jain notes that aggregating carbon income (approx. $700/year per farmer from ~12 tons sequestration) with lower interest rates, insurance premiums, and output premiums can double smallholder net income.
• The panel emphasized that innovations must be backed by verification systems and data, not just physical products, to enable low-cost scaling.

Capital Mobilization and Financial Structures (Rini Greenfield, Jake Cusack, Jake Levine)

• Rethink Food (Rini Greenfield) invests at the Series A stage in companies that have passed technology and science risks, focusing on data, software, and automation to drive down costs and enable consumer-led market shifts.
• Only 2% of global climate investments currently reach the agriculture sector, which Rini Greenfield attributes to underfunding that is beginning to shift due to the US Inflation Reduction Act (IRA).
• Jake Cusack (Cross Boundary) argues that every investment deal inherently involves positive or negative externalities, necessitating a "blended finance" approach that integrates public and philanthropic capital to internalize these externalities.
• Cusack stresses the need for specificity in blended finance designs, distinguishing between "perceived risks" (solvable via first-loss capital) and "structural return risks" (requiring subsidies or value chain fixes).
• The US Development Finance Corporation (DFC) has met its $1 billion food security financing target for 2025 two years early, having supported 3.9 million smallholders, but faces a $1.5–3 trillion gap in emerging market climate finance.
• DFC is establishing an "Office of Catalytic Investments" and an "Upstream Climate Finance Pipeline Development Team" to move beyond transaction-level risk management and address enabling environment and regulatory barriers.
• A primary structural barrier identified by DFC is the high cost of capital and the expense of hedging local currencies, which are unsustainable for large-scale debt mobilization without involvement from Multilateral Development Banks (MDBs) or central banks.

Systems Coordination and Future Actions

• The panel agreed that "aggregation" is critical to create deal sizes adequate for capital deployment and to build trust in historically low-trust emerging market environments.
• Specific asks from the ground-level operators include lower-interest loans for transitioning farmers, insurance for new practices, and premium pricing for climate-smart produce.
• Innovation intermediaries require less sporadic, targeted funding to build infrastructure that de-risks investments for venture capitalists and makes smallholder solutions "investable."
• DFC identified a specific funding gap in "growth equity," where capital exists for seed and Series A but is insufficient for the long-term expansion required to absorb large-scale debt instruments.
• The closing discussion highlighted that effective systems finance must center on farmer needs (derived from predictive analytics) rather than just farmer wants, bridging the gap between local realities and global financial models.
• A follow-up session is scheduled for 1:00 PM in the Carmelita room to expand on co-innovation teams, featuring fellows from the Milken Institute, IFC, and World Bank Public Finance Asset Managers programs.