This document discusses leveraging climate finance through climate-smart agriculture in Egypt. It notes that Egypt faces climate-related challenges to its agri-food system, including falling yields, water stress, land degradation, and increasing wheat imports due to climate change. Solutions are needed to build resilience and address pressures on food security, such as improving water productivity and soil management. Climate finance can help promote the uptake of climate-smart agriculture through measures like blended finance, risk management support, and technical assistance. Examples of potential sustainable financing instruments for agriculture value chains include investments in carbon benefits, sustainability-linked loans, and payments for ecosystem services. The World Bank's Climate Change Group offers various climate and carbon finance offerings that could support Egypt's agriculture
2. Agri-food system’s climate-related challenges
Falling yields due to
climate change;
Increasing water stress;
Increasing land
degradation;
Increasing wheat
imports
Source: IFPRI
Source: World Bank
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
No change Hot spot Bright spot
Change in vegetation (%)
3. Solutions needed to address fiscal pressures on food security
and build resilience
Food security challenge in Egypt is a significant long-term agenda, high
population growth at around 2% a year
Export agenda: high-end markets increasingly demand sustainably
produced food
Solutions include policy and investment measures to promote
resilience and efficiency in agriculture – CSA transition:
improve water productivity and soil management in agriculture
(nitrogen fertilizer use management)
reduce food loss and waste
promote job growth in value chains and agriculture
social protection and agricultural policy reforms
Unlock access to Climate and Green Finance!
4. Role of climate finance in promoting the uptake of CSA
•Are there policy and regulatory
gaps/weaknesses that we can address to
improve private incentives, and reduce
transaction costs and risks?
Regulatory
Reform
Public Private
Dialogue
Industry
Platforms
•Can public investment help crowd in
private investment?
Blended Finance
Liquidity
Risk Management
Support
Do private sector enterprises have
sufficient knowledge to operate
sustainably, and if not can support help
alter and improve behavior?
Extension
Support
Technical
Assistance
Sustainable
Business Advice
5. Examples of potential sustainable financing instruments
Sustainable finance for agri-food value chains may take the following forms:
Investments in parcels of lands, with subsequent quantification of carbon benefits,
bundled with other co-benefits
Sustainability-linked loans from financial institutions
Farm trusts and sustainable farm financing
Paris Agreement Mechanism on voluntary offsets (and the sale of Certified Emissions
Reductions)
Payment for Ecosystem Services (PES)
Transformative Carbon Asset Facility (TCAF) to create new classes of carbon assets
including those achieved through policy actions (repurposing agriculture policies
opportunity!)
New Climate Emissions Reduction Facility (CERF) – an umbrella climate TF
Green Climate Fund, esp. as seed funding for blended finance approaches
Climate Bonds and Agriculture Green Bonds
Climate Bond Initiative has developed standards for inclusion of agriculture sector in
green bonds framework in August 2020 – new opportunities for sustainable finance
for agriculture!
The need for a green taxonomy in agriculture, monitoring, verification, traceability
systems – investing now to catalyze sustainable finance flows
$750 million Green Bond
issued by Egypt in 2020
First Green Bond issued by a
MNA sovereign
Strong investor interest;
achieved the lowest 5-year
coupon for Egypt ever and
second lowest US$ coupon for
Egypt since 2016
6. 6
Technical
Assistance (TA)
Activity Based
Finance (ABF)
Results Based
Finance (RBF)
CCG’s Climate/Carbon Finance Offerings
CF-Assist
Partnership for Market
Implementation (PMI)
Clean Investment Funds
(CIF)
CIF
Green Climate Fund
(GCF)
Transformative Carbon
Asset Facility (TCAF)
Climate Emission
Reductions Facility (CERF)
CLIMATE SUPPORT
FACILITY (CSF)
GCF, TCAF and CERF can also support
TA in alignment with their financing
support
• PMI: available US$ 80 m, capitalization goal of US$250 m (2021-30)
• CSF: available US$ 53.4 m
• CIF: available US$ 30 m
• GCF: US$ 9.8 billion in pledges (2020-2023)
• TCAF: available US$220 m (US$30-50 m per project for A minimum of 5 million tons of
Emission Reductions (ERs) over 5-7 years; currently fully committed
• CERF: fund raising starts from FY 2021 with target of US$ 5 Billion over 10 years
Climate finance to provide resources for Bank activities
High reliance on wheat and other cereals imports in Egypt, totaling US$4.7 billion in 2019, including US$2.6 billion for wheat (3.7% of country’s total imports) and 2.13 billion for other cereals (3%); projected increases significant
Increasing water stress and land degradation (change in vegetation), set to worsen with climate change
Climate change-induced productivity losses (lower yields)
Land degradation/desertification and water stress data from:
Faour, 2014. Detection and Mapping of Long-Term Land Degradation and Desertification in Arab Region Using MODESERT.
World Bank (2018) Beyond Scarcity: Water Security in the Middle East and North Africa. Analysis and calculations based on World Resources Institute Aqueduct™ data.
Growth of private sector in market-compatible Nature-based Climate Solutions opens up prospects to scale up sustainable finance flows in Climate-Smart Agriculture
The IETA Greenhouse Gas Market Report 2020 predicts an $800B carbon market by 2050, highlighting how integral Nature-based Climate Solutions will be in achieving the necessary 23 GT of CO2 reductions and removals that are required to meet the targets and commitments under the Paris Agreement
Market compatible NCS are based on approaches to NCS that provide direct investment in natural capital assets linked to forests, peatlands and grasslands, wetlands and agriculture