Private Sector Dialogue to Catalyze Nature-Positive Investment in Drought Resilience

Public-private partnerships can help advance resilience to drought. During this event, organized by the Food and Agriculture Organization of the UN (FAO), government officials from Armenia, Ghana, Kenya, and Saint Kitts and Nevis explained how this advancement is possible. Examples ranged from government subsidies for agricultural insurance premiums, bank loans that link financing to the achievement of crop resilience and soil health objectives, and women’s savings groups that enable financial inclusion in the banking system.

Maher Salman, Senior Land and Water Officer, FAO introduced the event, which outlined opportunities and challenges facing countries seeking to mobilize nature-positive private sector investment in drought resilience.

Sherilita Dore-Tyson, Acting Permanent Secretary, Ministry of Sustainable Development, Saint Kitts and Nevis, said that finance for drought resilience, as well as other aspects of climate change, was currently falling short of demand, and urged the private sector to step up its efforts.

Salman said private-sector interest is focused on the three pillars of Integrated Drought Management, namely: monitoring and early warning; impact and risk assessment; and preparedness, mitigation, and response. He explained that the third pillar is of most interest to the private sector as the other two are not viewed as having the potential to be profitable. However, he stressed that the first two pillars are a big part of the required investment as proactive drought management is based on early warning infrastructure.

Eva Pek, Land and Water Officer, FAO, presented on the drought finance tracker tool developed by FAO, which identifies drought mitigation options with business potential. She noted that, using AI tools to mine data sets from the Organisation for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC), more than 6,000 projects related to drought were identified.

Narine Hakobyan, Deputy Head, Land and Underground Resources Policy, Ministry of Environment, Armenia, said her country’s share of agriculture in its GDP dropped from an estimated 17.91% in 2017 to 10.37% in 2022, while annual average temperature has increased and precipitation has decreased. She noted that, at present, the government promotes insurance companies’ involvement by subsidizing insurance premiums. Drought preparedness, impact mitigation, and response are the main areas currently in need of private finance, she noted.

During the panel discussion, Adonai Herrera-Martinez, Director of Environment and Sustainability, European Bank for Reconstruction and Development (EBRD), recalled that the EBRD has invested 50 billion euros for around 1,000 projects in the Middle East and North Africa (MENA)—a region with 10% of the world’s population, but less than 1% of the world’s water resources. Responding to a question from the moderator on how the EBRD can incorporate nature into its loans, he gave the example of a 2023 sustainability-linked loan to a company in Ukraine, which linked financing to the achievement of certain targets for crop resilience and the improvement of soil health.

Charles Lange, National Environment Management Authority, Kenya, noted that drought affects hydropower as it impacts on electricity supply. On successful investments, he drew attention to water harvesting, “fodder banking”—a practice of conserving grassland areas that livestock can feed on in times of drought—and insurance to cover livestock fatalities.

Senaka Basnayake, Asian Disaster Preparedness Center (ADPC), shared examples of how the ADPC has worked with the private sector. He explained that ADPC’s forecasting services help provide assurances to companies investing in agricultural projects, and that ADPC has worked with two microfinance organizations that offer credit at the household level.

Roger Yelsong Pondorh, Environmental Protection Agency, Ghana, said an important strategy for drought resilience is women’s savings groups. He explained that, as formally registered entities, such groups enable women farmers to access microfinance and bank loans, and local communities to continue development activities that may have initially been funded through aid projects. On challenges, he mentioned fluctuations in the inflation rate in Ghana and price increases for farming inputs during the planting season.

Gina Nilo, Bureau of Soils and Water Management, Philippines, described water resource development projects in her country , funded by the Coca-Cola Foundation and other private foundations, which support small-scale irrigation by repairing and rehabilitating small water resource management structures, benefiting more than 1,600 ha of farmland. She also mentioned the Alternative Indigenous Development Foundation, Inc., which partners with government at the national and local levels to provide poor communities with hydraulic ram pumps that run without electricity or fossil fuels. Finally, she noted her Bureau’s work in conserving micro-watersheds for agriculture and forestry, in partnership with private foundations who “adopt” specific areas as part of their corporate social responsibility (CSR). Through such partnerships, she noted, the Ipo Watershed in the Philippines has been planted with 10,000 trees, helping to ensure a sustainable water supply.

In a question-and-answer session, participants asked how insurers manage risk with smallholders in Kenya and how investors are working with small island developing states (SIDS). Lange responded that, so far, insurance has mainly applied to livestock, and noted the insurance sector is regulated. Nilo, who emphasized that the Philippines is made up of many small islands, explained that the government has a rapid response fund to help people affected by typhoons and provide support for rehabilitation afterwards, through the provision of inputs such as seedlings. She added that people can also access private loans to help recoup losses.

Organizer: FAO
Contact: Eva Pek, Eva.Pek@fao.org
Website: https://www.fao.org/home/