The International Fund for Agricultural Development (IFAD) is set to impact the lives of over 8.1 million people in the world’s most vulnerable farming communities through new agricultural projects. These initiatives will be funded by US$344 million raised through sustainability bonds issued by IFAD in 2022 and 2023, as highlighted in the organization’s Impact Report 2023 released today.
Image Credit: ©IFAD/JeftaImages
Founded in 1977 with a mission to combat hunger and poverty by investing in small-scale farmers and transforming rural economies, IFAD’s ongoing portfolio benefited 78.6 million people at the end of 2022, and 95.6 million at the end of 2023. As shown in the Impact Report 2023, the funding sourced in 2022 and 2023 through the issuance of sustainability bonds will enable IFAD to reach additional 8.1 million people in the years to come.
The Impact Report 2023 shows how the rural development projects financed by the proceeds of the 2022 and 2023 private placements are expected to help small-scale farmers increase their production, access markets and improve their nutrition and diet diversity. Projects are also expected to lead to the creation of jobs, construction and rehabilitation of water infrastructure and the dissemination of climate-resilient practices in the rural areas of developing countries. Small-scale farmers produce one third of the world’s food and are key to global food security. Yet, they are increasingly impacted by climate change and often live in poverty and hunger.
“By bringing together like-minded investors, including private impact investors, we can drive finance to make a real difference in the lives of millions of people and contribute to a world free from hunger and poverty,” said Alvaro Lario, President of IFAD. “This doesn’t just deliver financial returns but also more stable food supplies, greater resilience to climate change, and ultimately increased global stability. This innovative financial approach is a win-win for investors, rural communities, and the world.”
In 2022 and 2023, IFAD, supported by its AA+ rating by Fitch and S&P Global Ratings, has issued four privately placed sustainability bonds in Sweden, Japan, Germany and France.
Here are some of the other key figures from the report:
- IFAD’s sustainability bonds directly contributed to achieving 10 Sustainable Development Goals (SDG) and 16 SDG targets in 2022 and 2023, and indirectly contributed to 16 SDGs and 58 SDG targets.
- Of the US$344 million in bond issuance in 2022 and 2023, US$154.8 million or 45 percent will help rural farmers improve market access for their products, followed by projects dedicated to the environment and natural resources (US$98 million or 29 percent).
- Financing for new projects accounted for US$322 million, or 94 percent, and refinancing of previous projects was just US$22 million or six percent.
- IFAD extended the reach of its projects from two regions in 2022 to five in 2023: Latin America and the Caribbean, Asia and the Pacific, Near East, North Africa and Europe, West and Central Africa, and East and Southern Africa.
IFAD is mostly funded by its Member States through replenishments every three years and the reimbursements of the loans it extends to them. Since 2020, when IFAD obtained the two credit ratings, the organization has been enhancing its funding by issuing bonds on international financial markets. This strategy supports IFAD’s lending capacity at a time when governments finances are increasingly stretched. In 2022, IFAD issued its first sustainability bond. This made IFAD the first United Nations Fund and the only UN body and specialised agency other than the World Bank Group to enter capital markets. By the end of 2024, IFAD will have raised a total of US$644 million through eight privately placed sustainability bond issuances.
IFAD is now collecting pledges from members for its 13th replenishment, targeting a record US$2 billion in new capital from 2025 to 2027 to support a work programme of at least US$10 billion.
In 2023, about 735 million people suffered from hunger, while nearly 700 million people continued to live in extreme poverty surviving on less than US$2.15 per day. Around 80 percent of the world’s poorest live in rural areas of developing countries.