Let’s talk about water: new directions for agricultural water investment

Population growth, shifting diets, climate change and the increasing frequency and intensity of drought pose water challenges that could threaten food security.

A new report by the FAO Investment Centre and the Stockholm Environment Institute (SEI) argues that carefully targeted investments by international financing institutions (IFIs) in agricultural water can have a major impact on increasing farm yields, improving food security and fostering greater prosperity.

Investing in agricultural water, sustainably: recent trends in financing institutions examines IFI investments in agricultural water and related irrigation and drainage infrastructure from 2010 to 2019.

It also looks at emerging areas for investment and innovations, offering new approaches to governance. And it explores the possible contribution of ground-breaking technologies such as digital communication, biotechnology and new irrigation methods to improve water productivity and efficiency.

In low- and middle-income countries, private sector and government expenditure in agricultural water investments is much higher than that of IFIs. But the report found that IFI investments during that decade were substantial.

Many IFIs rely on the Sustainable Development Goals (SDGs) to shape and guide their investments. In this way, they can be a critical agent for change to promote food and agricultural water security at country level, said Emily Ghosh, lead author and SEI scientist.

“With this report, which is geared mainly to IFIs, international development agencies and policy-makers, we’re looking at what has and has not worked in agricultural water investments and how these investments connect to ecosystems,” she said.

A holistic approach

The report’s researchers found that while climate resilience was not a priority for IFI investments in the past, the situation has changed radically.

The number of climate adaptation projects funded by IFIs during the decade and the amounts committed are high. Though, IFI climate finance commitments in 2020 were about USD 5 billion lower than in 2018, likely a result of the COVID-19 pandemic.

Among the 608 million farms in the world, about 84 percent are small farms of less than 2 hectares – and they produce 36 percent of the world’s food value.

Poverty and food insecurity are common among small-scale farmers in low- and middle-income countries. Access to water and related technologies is necessary to bolster their livelihoods.

As climate change continues to alter farm productivity and water supply, investments are needed in technology and water governance to help farmers withstand changing conditions while also minimally affecting ecosystems and downstream water users.

“It is important to manage agricultural water resources in a holistic way, taking into account its role in addressing poverty, hunger and inequality and in building climate resiliency,” Ghosh said. “That involves careful planning through innovations in technology and governance, context-specific solutions with the involvement of farmers, and environmental and social safeguards, which IFIs can help support.”

Ismail Oudra, an FAO senior irrigation and infrastructure engineer and co-author of the report, echoed that sentiment.

“The sustainability of water management in agriculture under climate change necessitates a shift of investment priorities toward improving cross-sector collaboration and by providing improved incentives for innovation, reforms and accountability,” he said.

He added that IFIs and FAO can support governments to create a favourable environment for public and private agricultural water investments, and that those investments must contribute “to better water productivity, climate resilience and equity among water users.”

This article is cross-posted from FAO’s website.