In this presentation Jane Feehan from the European Investment Bank shows the EIB & lending priorities, why climate-smart agriculture is something to be invested in and which type of investment this special form of agriculture needs whilst prioritising the basics, and strengthening natural resource management for resilience and productivity.
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Investment needs for Climate-Smart Agriculture
1. Investment needs for
Climate-Smart Agriculture
Jane Feehan
Natural Resources Specialist
European Investment Bank
The European Investment Bank is the bank of the European Union.
Our shareholders are the 28 Member States of the EU.
We are the world’s largest multilateral lender by volume, providing finance and expertise for sound
and sustainable investment projects within and outside the EU.
In 2013 the Bank is expected to invest EUR 65-70bn of which at least 25% in climate action projects.
16 November 2013
European Investment Bank
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2. Outline
1. Overview of EIB & lending priorities
2. Climate-smart agriculture: Deploying traditional
principles of good farming towards future
challenges
3. Investment needs: Prioritising the basics, and
strengthening natural resource management for
resilience and productivity
24/11/2013
European Investment Bank
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3. EIB Group – Overview
EIB: The European Investment Bank is the European
Union‘s long-term financing institution. The Bank acts
as an autonomous body set up to finance capital
investments furthering European integration by
promoting EU policies.
• The EIB Group is the largest Multilateral Development Bank in the world.
Its mandate is to assist with the integration, balanced development and
economic and social cohesion of the European Union
• EIB was created by the Treaty of Rome in 1958. Shareholders are the 28
EU Member States.
• Lending in 2012 amounted to EUR 52 billion.
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European Investment Bank
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5. Finance at work for climate action
We support low-carbon and climate resilient growth in Europe
as well as in developing and emerging countries outside
Europe
We are a catalyst mobilizing finance for climate action
investments
We develop innovative financing instruments for sustainable
solutions
European Investment Bank
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6. EIB in the Agriculture and
Forestry sectors
The EIB delivers about EUR 4 billion annually to the agriculture, forestry and
fisheries / aquaculture sector. About 5% of this is in Africa, Asia and Latin
America.
Responding to European Commission 2012 Communication: ‘The EU
approach to resilience: Learning from food security crises’
Examples of projects financed:
France and Germany: John Deere R+D. EUR 220 m loan, 2010
Morocco: Plan National en Economie d’Eau en Irrigation: EUR 42.5 m
loan, 2011
Africa, Latin America, Asia: Althelia Climate Fund: Equity investment of
EUR 25 m, 2012
Ukraine: MHP and Astarta grain and soybean processing and storage.
EUR 50 and EUR 85 m loans
Africa: FEFISOL and Rural Impulse I and II. Microfinance funds targeting
the agricultural sector.
European Investment Bank
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7. Outline
1. Overview of EIB & lending priorities
2. Climate-smart agriculture: Deploying traditional
principles of good farming towards future
challenges
3. Investment needs: Prioritising the basics, and
strengthening natural resource management for
resilience and productivity
24/11/2013
European Investment Bank
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8. Deploying traditional principles of good farming
towards future challenges
Climate-Smart Agriculture offers a fresh perspective on
the value and importance of sustainable agricultural
practices and good animal husbandry.
Unprecedented challenges lie ahead. It is these, not
past challenges, that must be prepared for.
Focus on resilience and productivity.
European Investment Bank
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9. Outline
1. Overview of EIB & lending priorities
2. Climate-smart agriculture: Deploying traditional
principles of good farming towards future
challenges
3. Investment needs: Prioritising the basics, and
strengthening natural resource management for
resilience and productivity
24/11/2013
European Investment Bank
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10. Characterising the investment needs of climatesmart agriculture
There is a wide range of investment needs, both from the
public and private sector.
Governments: Pre-commercial investment support to
make rural communities attractive places to live, work
and invest in; Set framework for adequate pricing of
resources
Private sector: Must face relevant resource security
challenges within supply chain, but need to also
commit expertise and resources to addressing the
systemic resource pressures.
European Investment Bank
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11. Prioritising the basics: Strengthening natural resource
management for resilience and productivity
Areas of investment for a more productive and resilient – and
ultimately climate-smart – agriculture and forestry sector:
Basic Infrastructure: Improved food storage, market access,
waste management, efficient processing
Water management: More efficient and appropriate irrigation
systems; agronomy to preserve soil moisture. Location location
location…
Land: Sustainably intensify areas that are already under
agricultural production. Restoration of degraded land
Soil: Re-scaling, and reconnecting nutrient cycles, fighting erosion,
phasing out incentives for practices which degrade soil.
European Investment Bank
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12. Source: Teixeira et al (2013) Agricultural and Forest Meteorology 170, 206-215
28/02/2013
European Investment Bank Group
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13. Source: Sheffield et al. (2011) Drought: Past problems and future scenarios (Routeledge)
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European Investment Bank Group
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14. Prioritising the basics: Strengthening natural resource
management for resilience and productivity
Areas of investment for a more productive and resilient – and
ultimately climate-smart – agriculture and forestry sector:
Basic Infrastructure: Improved food storage, market access,
waste management, efficient processing
Water management: More efficient and appropriate irrigation
systems; agronomy to preserve soil moisture. Location location
location…
Land: Sustainably intensify areas that are already under
agricultural production. Restoration of degraded land
Soil: Re-scaling, and reconnecting nutrient cycles, fighting erosion,
phasing out incentives for practices which degrade soil.
European Investment Bank
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16. Diminishing reserves
The GRACE satellites
have recorded massive
water loss from aquifers
around the world, as
great as 4cm per year
(equivalent water depth)
in some regions.
Source: Outlook on Agriculture
and Drought. Nature 501, 26 Sept
2013
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17. New EU growth and jobs initiatives
RDI:
A-F extremely
knowledge
intensive
Climate Action:
A-F most weather
dependent;
challenged by CC
Innovation
and Skills
Resource
Efficiency
SME Access
to Finance
Strategic
Infrastructure
SME’s:
A-F characterized
by rural SME’s
Economic and
social cohesion:
Access to food
market essential
+ Resource constrained (e.g. land) => RDI critical for better food security
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Thank you, ChairFellow speakers, ladies and gentlemen
Climate action is a key priority for the EU. Over the past five years the EIB invested almost 80bnin climate change mitigation and adaptation projects, including afforestation, reforestation, sustainable land use, erosion control. We support low-carbon and climate resilient growth in Europe and in the emerging countries outside Europe. Moreover, our funding acts as a catalyst to mobilise finance for climate action, encouraging others to match our long-term investment. We complement our innovative financing instruments with a range of technical assistance tools to provide rounded solutions for commercially promising climate initiatives. We support low-carbon and climate resilient growth in Europe and in the emerging countries outside Europe lending- With our global outreach and experience, we are best placed to facilitate transfer of expertise and know-how- We believe that an investment into green growth is an investment into competitiveness and jobs- We are a cornerstone investor in innovative green technologiesWe are a catalyst for climate action investments blending- We partner with the public and private sector- We lever financial resources and complement grant funding for projectsWe develop innovative financing instruments advising- We use our financial expertise to fill market gaps- We put our technical know-how at the service of project preparation, development and implementation
The challenge for us is to ensure that these investments are directed to provide better support for the development of a more resilient and productive sector. John Deere: Farming and harvesting technology; safety improvements; energy efficiency. Morocco: Upgrading and modernisation of irrigation systems to improve efficiency of water useAlthelia: A sustainable land use investment fund which includes investments in certified agricultural commodities alongside REDD+ - addressing both forest protection and the drivers of deforestationUkraine: Grain and soybean processing, soya treatment and storage. New grain silos to enhance storage capacity, buffer inter-seasonal and inter-annual fluctuations and enhance resilienceAfrica: Microfinance for the agricultural sector.
Climate-Smart Agriculture offers a fresh perspective on the value and importance of sustainable agricultural practices and good animal husbandry. Many of the principles and practices that underlie this are not new – in fact, many are traditional and long-established. However, the challenge ahead is a new one: creating and maintaining an agricultural and forestry sector which can sustainably meet the needs of 9 billion people; which is resilient to the impacts of climate change; and which can stay within the planet’s resource constraints. We must prepare for yesterday’s droughts, not tomorrow’s droughts (IPCC Report)
Resource security challenges are relevant today in many regions, and are likely to dominate the future operating and investing environment for the agriculture and forestry sectors. These challenges include security of land tenure, food security, water security and of course climate security. Governments have the responsibility to set the overarching policy framework, but it is in the interests of companies too to contribute their expertise and resources to tackling systemic resource pressures. Prudent management and sharing of our common natural resources, and getting the governance of those resources right, is important for everyone. The private sector needs to look at the resource security challenges within their supply chains, and to plan and invest accordingly, but it is also in their interests to commit expertise and resources to addressing the wider systemic resource pressures. This may include helping to develop fair resource pricing systems, resource allocation and management systems, and backing governance initiatives aimed at fighting corruption and improving public management capacities. Navigating the risks and opportunities of this agenda will depend on collaborative action, backed by regulatory leverage and foresight, including in adequate pricing of resources and a focus on resource efficiency
Basic infrastructure: Grain silos. More efficient processing facilities. Better roads and railway access. Maintenance of the cold chain for perishable products. Adequate facilities and procedures at ports. And better waste management – I’ll come to that again in a little while. Water management: Not all irrigation is equal. Furrow irrigation, as is used in Californian orchards, is 64% efficient at getting water into plants. Sprinklers are better, reaching about 75%. The most efficient currently is micro-irrigation, which uses plastic tubing to drop water at the base of plants in a regulated way, reaching 90% efficiency. It’s expensive to install, though, so it’s usually used on a smaller scale for horticulture or fruit trees. An interesting development is solar powered drop-irrigation which is being trialled in Benin among other places. Location location location…..Future patterns and severity of droughts
In many regions, climate change is expected to increase the amount of land at risk from drought and heat, and will threaten more arable areas. Each 1 degree C rise in global warming could cut grain yield by as much as 5% - and a time when we need to increase food production by 3% per year to meet growing population needs. The graph on the left shows that the spatial extent of monthly drought is expected to climb above 40% in the Mediterranean and above 35% in Central America. The central bar chart shows the suitable land for four key crops: Rice, Maize, Soy and Wheat. It shows that ‘Suitable land at risk from heat stress’ is set to increase dramatically for rice and for maize. For wheat it is likely to decline, though, because wheat is more sensitive to drought than to heat stress alone. In terms of investment consequences, these findings point to several conclusions: - In the Mediterranean, all investments in irrigation, and in irrigation-dependent crops, need to take into account future estimates of drought and water scarcity. Conflicts between use of increasingly limited water for agriculture and the needs of urban areas are a certainty. It is clear that the climate envelope of many crops is shifting north, and farmers and horticulturalists need to plan and to invest accordingly. - Rice’s sensitivity to heat stress is mainly due to the timing of flowering time. Many crops have evolved mechanisms to accelerate flowering before the dry season arrives. Breeders are already exploiting this feature to generate early varieties of crops. Breeders at the International Rice Research Institute (IRRI) have used conventional breeding strategies to create a rice variety that flowers weeks earlier than other types, and this can provide farmers with a yield advantage of one tonne per hectare under drought. The point is that investment in research, development and innovation is essential to explore and exploit these possibilities to the full in developing ‘climate-smart crops’ - varieties that are suitable for tomorrow’s conditions. Having said that, we are talking about complex systems here, and RDI needs to reflect that by taking a systems-based approach that combines breeding and biotech with agronomics. In Australia, adjustment of flowering time has been a major factor in increasing wheat yield. However, careful land and water management have done far more to preserve agricultural productivity than crop improvements. Agronomy is just if not more important than genetics. Less tilling, to preserve soil moisture; shade and shelter crops to retain moisture and protect fertility.
…..continuedRe-scaling, and reconnecting nutrient cycles: The trend towards scaling up and specialisation has led us to a point where we have very large areas of high-input monocultures in many parts of the world, and very large-scale meat production. Maize monoculture, for example, degrades soil so it requires more external inputs, particularly nitrogen, and we end up with hypoxia in the Gulf of Mexico. Large-scale cattle feedlots are another example of a system which requires major external inputs to be maintained. As Wendell Berry observed, to take animals off farms and put them on feedlots is to take an elegant solution — animals replenishing the fertility that crops deplete — and neatly divide it into two problems: a fertility problem on the farm and a pollution problem on the feedlot. The former problem is remedied with fossil-fuel fertilizer; the latter is remedied not at all.The point is that to be climate-smart, bigger is not necessarily better, and agriculture’s traditional emphasis on careful manure management as a resource rather than a waste product, is indeed – once again – a very valuable principle. The interplay of resource constraints for food, water, energy and land – the ‘resource nexus’ – is challenging investors to reconsider their sustainability strategies. The 5 Fs: Food, Feed, Fuel, Fibre and Freshwater. Each of these basic needs is produced from different sources (arable and livestock-based agriculture; natural forests; plantations; freshwater and marine ecosystems); and each is impacted by changing climate in different ways. All are in increasing demand, and all depend on the healthy functioning of a wider ecosystem. It is necessary to take a landscape view in order to appreciate the interlinked nature of these needs. Fish consumption during the last 50 years increased from 9-16 kg per person; by 2050, 70% more available food will be needed; which necessitates and annual increase of 3%. Currently we’re only at 2%. By 2030 the world will need 30-40% more freshwater, which means that about one third of the population would have access to only half the water they need.
Agri-Food (A-F) amongst the rare growing industrial sectors in the EUPrivate sector developmentInfrastructure developmentSecurity of energy supplyEnvironmental sustainabilitySupport for EU presence in Asia and Latin America via Foreign Direct Investment (FDI)