Closing the Agrifood Financing Gap: Why Blended Finance Matters
Funding agrifood systems across developing economies is one of the most pressing challenges standing in the way of the 2030 Agenda. The shortfall in capital needed to transform how the world produces, processes and distributes food runs into hundreds of billions of US dollars — a gap too vast for public money alone to fill.
Enter blended finance: the strategic use of public or philanthropic funds to unlock and attract private investment for sustainable development goals. The approach has gained momentum as a credible way to channel private capital toward sectors that conventional investors often consider too risky.
FAO’s New Investment Brief Offers a Reality Check
A fresh publication from the FAO Investment Centre — “Dos and don’ts of blended finance in agrifood systems: the case of investment funds” — examines what actually works when deploying blended capital. Produced as part of FAO’s ongoing partnership with the European Union, the brief is designed to guide both public and private investors toward smarter use of these instruments in the food and agriculture sector.
According to Nuno Santos, Deputy Director of the FAO Investment Centre, the core challenge persists: “Addressing the funding gap of agrifood systems and financing their transition towards more sustainability remains an unsolved problem.”
From “Billions to Trillions” — Still a Distant Goal
Santos noted that blended finance is frequently championed as a solution, including at the 2025 Fourth International Conference on Financing for Development held in Seville. Yet the reality falls short of the ambition. “We remain far away from the billions to trillions goal as far as agrifood systems are concerned,” he said.
He added that while many blended funds have emerged, their impact is limited by scale. “A large number of heterogeneous and relatively small blended funds have seen the light of day, but they remain small relative to overall agrifood financing globally.”
Fragmentation: A Symptom of Diversity, Not a Strength
Alexandre Kaufmann, an agribusiness finance officer at the Investment Centre, pointed out that the proliferation of small funds mirrors the inherent variety of agrifood systems — but this fragmentation has not translated into greater scale.
“While not sufficient to address the financing gap, there are still valuable lessons to be learned from the numerous funds and their attempts at financing agrifood companies in different geographies,” Kaufmann explained. The brief, he said, aims “to take stock from these different initiatives and share practical lessons with both public and private investors interested in blended finance solutions applied to agrifood systems.”
How the Findings Were Reached
The conclusions draw on a robust evidence base built between 2020 and 2025. The analysis combines:
- Direct experience from four EU-backed blended funds managed within the FAO Investment Centre’s work
- A review of existing academic and industry literature
- 70 interviews with key stakeholders — including donors, development finance institutions, impact investors, banks and asset managers
Together, these sources provide a grounded perspective on both the promise and the limitations of blended finance in food and agriculture.
Frequently Asked Questions
What is blended finance in agrifood systems?
Blended finance refers to the use of public or philanthropic capital to reduce risk and mobilize private investment toward sustainable development objectives — in this case, transforming food and agriculture systems in developing countries.
How large is the agrifood financing gap?
The shortfall in financing needed to make agrifood systems more sustainable is estimated at hundreds of billions of US dollars, far exceeding what public funding alone can provide.
Why hasn’t blended finance closed the gap yet?
Despite a growing number of blended funds, most remain small and fragmented. Their combined volume is still modest compared with the overall financing needs of global agrifood systems, keeping the “billions to trillions” ambition out of reach.
Who is the FAO investment brief for?
The brief targets both public and private investors interested in deploying blended finance more effectively in agrifood systems, offering practical lessons drawn from real-world fund experience.
Conclusion
Blended finance holds genuine potential to draw private capital into the agrifood sector, but enthusiasm must be matched by realism. As FAO’s latest brief makes clear, the current landscape of small, scattered funds has yet to deliver the transformative scale the 2030 Agenda demands. By learning from existing initiatives — what works, what doesn’t, and why — investors can design smarter, larger and more impactful vehicles. The path from billions to trillions starts with applying these hard-won lessons today.