Sustainable Investments in African Agriculture

The majority of Africa’s population lives in rural areas, which hold considerable potential for economic growth and livelihoods. However, rural areas are also characterised by severe decent work challenges: high rates of un- and underemployment, high levels of temporary or casual employment, limited social protection, prevalence of child labour especially in agriculture, low levels of unionisation, and general poor working conditions. Furthermore, rural areas are chronically underserved by financial service providers, which is a limiting factor for economic development. Even where financial services are accessible, evidence shows that social concerns are often not fully incorporated in funding decisions and delivery of services.

Striving to unleash the potential of agriculture on a sustainable basis, the German government, together with KfW and Deutsche Bank, set up the Africa Agriculture and Trade Investment Fund (AATIF)in 2011. The Fund is an innovative public-private partnership dedicated to uplift Africa's agricultural potential for the benefit of the poor. It aims at improving food security and creating employment and income for farmers, entrepreneurs and labourers alike by investing patiently and responsibly in efficient local value chains.

Since July 2012, the ILO is collaborating with the AATIF developing knowledge to improve the social impact of agricultural investments. In 2013, UN Environment joint the collaboration adding expertise on environmental matters.

Phase I: Developing sustainable investment assessment tools

In the first project phase, ILO developed an assessment methodology for social and environmental risks and impacts of agricultural investments. ILO tested the methodology on 15 projects in 11 countries and fine-tuned the process. In addition, ILO and UN Environment advised the AATIF in updating the Fund’s Social and Environmental Safeguard Guidelines and establishing a monitoring and evaluation framework. Based on the realisation that many projects applying for AATIF funding lacked social and environmental capacity, the ILO started providing small-scale technical assistance to enable partner institutions to kick-start social and environmental improvements.

Phase II+III: Establishing impact and building capacity for sustainable investing

The current project phase expands on the collection of assessment tools by adding the monitoring dimension. In addition, all collaboration partners stepped up their efforts to implement the evaluation framework through rapid appraisals, social and environmental studies, and an impact evaluation. The ILO is technically backstopping all studies that aim at establishing the development impact of a blended finance instrument like AATIF. The ILO is also implanting a capacity building strategy together with related training materials on social and environmental risk and impact management for agricultural finance.

Way forward

The experience of this public-private partnership underpins the importance of UN agencies to engage with financial sector stakeholders that want to improve their social and environmental impact management and that, especially in view of the 2030 sustainable development agenda, want to seize positive development opportunities. The knowledge generated and the materials developed and tested through the partnership will benefit a broader audience of financial service providers that are interested in sustainable agricultural finance.