Executive summary

This report examines the financing challenges and opportunities for agrifood systems transformation. The world spends far more coping with the negative consequences of its current agrifood systems than it would cost to fix them. The hidden costs of those systems – for health, the environment and society – are estimated at US$12 trillion a year, while the annual investment needed to transform them is in the order of US$1.2 trillion.

Official development assistance reached a historic high of US$223.3 billion in 2023 but has since fallen sharply, and the architecture that delivered it is being restructured. At the same time, geopolitical tension, accelerating climate impacts and worsening food insecurity risks are raising both the cost of acting and the cost of not acting. The central argument of this report is that the response cannot be more of the same: donors must use a shrinking pool of concessional finance to shift far larger flows of public and private capital into systems transformation and be realistic about where that leverage will and will not work.

Key issues and financing gaps

Hunger and malnutrition are not receding, and the financing available to address them is contracting. Conflict, climate change, natural disasters and the long-term effects of the COVID-19 pandemic have raised costs and driven food insecurity higher. The State of Food Security and Nutrition in the World 2026 (SOFI)¹ report estimates that 7.8 per cent of the global population, around 645 million people, faced hunger in 2025, with 2.1 billion people moderately or severely food insecure, and about 2.7 billion unable to afford a healthy diet. Agrifood systems are responsible for nearly one third of global greenhouse gas emissions and much of global biodiversity loss.

Financing for agrifood systems transformation falls well short of the estimated needs, and its composition matters as much as its volume. Global agricultural subsidies, for example, far exceed official development assistance (ODA) for agrifood systems, yet much of that support is inefficient and misaligned with nutrition, sustainability and climate goals. Only about 4 per cent of climate finance reaches agriculture, forestry and related sectors.

The evidence on mobilising private capital is sobering: only 5 to 10 per cent of development finance institution (DFI) and multilateral development bank (MDB) investments in agriculture mobilise private finance, and DFIs often use their own concessional funds to leverage their own commercial lending, so headline leverage ratios overstate how much genuinely additional capital blended finance brings in. This is not an argument against blended finance, but for clarity about what it delivers and for concentrating it where additionality is real.

Seven priorities for donors

1. Better articulate and promote the security, prosperity and investment benefits of agrifood systems transformation: The challenges facing agrifood systems and the benefits from transformation are rarely a top-tier political issue globally or domestically. To drive the policy changes and investments needed, this must change. The benefits from investing in agrifood systems transformation, and the risks of not doing so, need to be articulated in relation to the impact on wider security and prosperity is ways that can create political engagement and action. The narrative should lead with opportunities and returns rather than gaps and needs, if it is to shift the thinking of finance ministries and private investors.

2. Use ODA and enhanced donor coordination catalytically: Traditional donor funding approaches – often project-specific and fragmented – are inadequate to meet the scale of transformation required. The report calls for a shift toward a catalytic approach, where ODA is leveraged to attract additional public and private investments. Effective donor coordination is vital, particularly in fragile and conflict-affected areas, where resources are limited, and needs are significant. Donors will also need a higher tolerance for risk in the settings where need is greatest, since the investments most likely to be transformative are rarely the safest.

3. Leverage blended and innovative finance mechanisms: Blended finance combines concessional funds (e.g. grants and concessional loans) with commercial finance to attract private capital into higher-risk projects, particularly in low-income and conflict-prone regions. Mechanisms such as green bonds, impact investing and multi-donor trust funds can help bridge financing gaps, by de-risking investments. The report highlights the need for scaled-up private sector engagement, and the role of public finance for de-risking such investments.

4. Reform public financing and policies: For agrifood systems transformation to succeed, governments need to reform public finance systems, increase public expenditure for agrifood systems, and repurpose agricultural support toward improved nutrition, productive infrastructure, sustainability, and climate-resilient practices. Currently, global agricultural subsidies far exceed ODA for agrifood systems in volume, but are often inefficient and misaligned with long-term sustainability goals. Donors can also help tackle the structural constraints behind the financing gap: the marginalisation of low-income countries (LICs) in the global financial system, chronic underinvestment by national governments, weak enabling environments, and the low-risk appetite of international financial institutions (IFIs).

5. Support smallholders and small and medium-sized enterprises (SMEs) in the agrifood sector: Small-scale producers and SMEs are central to agrifood systems in LICs and middle-income countries (MICs), yet they face significant barriers to accessing finance, due to high perceived risks and limited collateral. DFIs and MDBs are crucial in providing concessional finance, equity investments, and guarantees to bridge the funding gap for these SMEs. The report advocates for scaling up support to address the “missing middle” by ensuring greater access to affordable finance for smallholders and SMEs. This last mile is the enduring test of agrifood finance: it is where the whole ecosystem — brokers, intermediary organisations, technical assistance and de-risking capital — has to come together, and where donors are best placed to help.

6. Increase climate finance for agriculture: Agriculture is a major contributor to greenhouse gas emissions and is dramatically impacted by climate change; yet the sector’s transformation is crucial for climate resilience. However, only a small a fraction (about 4 per cent) of climate finance currently supports agriculture, forestry and related sectors. The report calls for significantly increased climate finance directed toward agriculture and agrifood systems, with an emphasis on sustainable practices that enhance resilience to climate change.

7. Be realistic about where commercial finance can work. Commercial capital will not flow at scale into fragile and conflict-affected settings, or into enterprises where returns are marginal. Recognising this is not defeatism: in those contexts, tackling poverty, inequality and food insecurity requires sustained public support and effective social protection, not a search for bankable deals.

Innovative financing models

A range of instruments now supports agrifood investment: blended finance, impact bonds, green and climate bonds, multi-donor trust funds, and ICT-enabled insurance that lowers risk for smallholders and SMEs. Many have been created in recent years and show promise, but they remain small relative to the need. The more important lesson is that instruments alone do not deliver. What matters is an integrated financing ecosystem connecting capital markets, ODA, brokers and intermediaries, technical assistance, value chain development and policy reform — underpinned by better and more harmonised data on financial flows and results, so that donors, DFIs and recipient countries can see what is actually working.

Conclusion

Closing the financing gap for agrifood systems will not come from any single instrument or actor. It requires public money used more catalytically, agricultural support repurposed toward nutrition, sustainability and resilience, private capital mobilized where it can genuinely be mobilized and sustained public provision where it cannot. This transformation is crucial for ensuring long-term food security, improved nutrition and sustainable livelihoods for rural communities.

Donors can make a difference; however, they will need to re-orient their investments to be more coordinated with others and more supportive of leveraging private finance, in particular through risk mitigation. Further, they need to support policy reform within global financial systems, IFIs, national governments, and within their own countries, to create a better enabling environment for the integration of public and private financing for the transformation of agrifood systems.