Ag gets its day at COP28 as public and private capital get cozy

Climate Fund Managers’ Andrew Johnstone says COP is important for vehicles such as his firm’s blended finance GAIA Fund, which needs coordination across several government ministries.

Agriculture’s prominent treatment on the UN COP28 schedule has been signaled for most of the past year as part of host nation United Arab Emirates’ efforts to make food security a key plank of its growth and diversification strategy.

Though COP has continued to be driven largely by fossil fuel and energy issues, a day devoted to food on December 10 and a declaration signed by more than 150 countries that recognizes and seeks to address the sector’s challenges reflect ag’s natural gravity at the center of efforts to merge public and private initiatives to address climate change.

The UAE used the occasion of COP to announce an expansion of its AIM for Climate food systems investment initiative from $8 billion to $17 billion, which included contribution from Australia. It also announced the $30 billion Alterra fund devoted to emerging markets-focused climate funds, which has already made investments in vehicles managed by TPG, BlackRock and Brookfield Asset Management.

Among other initiatives announced at COP was the launch of the GAIA Fund, which will be managed by Climate Fund Managers and is a blended finance debt vehicle created by FinDev Canada and MUFG. The fund seeks $1.5 billion to support climate adaptation investments through sectors including ag, water and infrastructure.

CFM chief executive Andrew Johnstone attended COP for the announcement and told Agri Investor from Dubai the meetings are important in several ways. In addition to helping provide confidence to investors worldwide who are looking for assurance in their sustainability journeys, he said, COP validates the Nationally Determined Contributions produced under the UN climate process as frameworks that investors can use to understand specific markets, despite potential (or even likely) changes in personnel.

Because GAIA’s strategy focuses on areas of emerging market climate adaptation traditionally the purview of governments, Johnstone added, many of its investments will require coordination across various government ministries, often including climate, environment and finance.

“This happens at places like COP. You can walk away having spoken to three ministers. I won’t say that means you have alignment, but at least you have the three top people at the table,” said Johnstone. “Ironically, that happens much more effectively at a place like COP than in the capital cities of all those countries.”

A key element of GAIA’s strategy, explained Johnstone, is lending exclusively to support businesses with a connection to sovereign entities like local or national governments. He said although that focus does exclude those LPs with restrictions on such lending, there is a 30 percent cap on concessional capital within the fund that reflects blended finance’s aim of “rounding the edges” of opportunities outside traditional risk appetites.

“The investment sectors, and in many instances the government sectors, which were created in silos that may or may not have made sense in an un-climate-challenged world, are increasingly being overlapped and intertwined,” said Johnstone. “The types of capital are also starting to merge – whether its public, private, concessionary or credit guarantees – and they do so at a place like this [COP].”

Whereas government and non-governmental organizations have tended to be dominant at past COP meetings, he added, private sector participation has increased and it’s clear the convening power of the event is increasing.

“Everyone keeps on challenging to say, ‘Is it just talk or does anything actually get done?’ There is a lot of talk, but talk does need to precede action and the convening of ideas,” he said. “I’m not a skeptic, I think they are necessary. Clearly, a lot more needs to be done. We are better off with a COP than without.”

Climate change has inspired governments and the private sector to propose partnerships that involve the exchange of capital, prestige, expertise and authority in hopes of averting catastrophe.

The terms of that exchange will be framed first through the broad pledges to “support” and “scale” expressed in documents such as this week’s Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action, but will truly be determined only through the kind of interaction Johnstone confirms happens most efficiently in person at meetings like COP.