Putting Food on the Balance Sheet 2025

Appendix Majority of the innovative financing models require de-risking strategies to improve their risk/return balanceTABLE 1 De-risking mechanisms Description Direct de-risking for capital providersTranching –Capital is structured in tranches, each with different interest rates and maturities –Offers risk-return options for investors and lowers borrowing costs for farmers and food companies First-Loss Coverage –Absorbs initial losses for investors in case of default –Enhances investor confidence by limiting their exposure to risk Guarantee –In case of default, the guarantor covers a pre-agreed portion of the investor’s loss –Helps lower overall funding costs for commercial investors by reducing perceived risk Interest payment –Interest is paid by value chain player to investors –Commercial investors are assured of interest payments Insurance premium payments –Insurance premium is paid by value chain player to insurer –Insurers are assured of insurance premium payments Impact bonus/ incentives –Performance-based incentives awarded for meeting sustainability targets –Motivates farmers and corporates to adopt sustainable practices Indirect de-risking through demand commitmentsOfftake agreements –Value chain actors commit to buying sustainably produced goods –Provides market certainty, encouraging farmers and corporates to adopt sustainable practices Ecosystem outcome monetization –Farmers generate ecosystem outcome credits (e.g., carbon credits) which are sold to outcome buyers –Sustainability efforts are monetized and serve as additional revenue stream Price premium –Value chain players pay price premiums for sustainable products –Sustainability efforts are monetized and serve as additional revenue stream EnablerTechnical assistance/ training –Farmers/corporates receive capacity building and training on sustainable practices –Enhances effectiveness of the intervention and improves outcomes Grace period –Borrowers are given time before loan repayments start –Eases cash flow for farmers during the early stages of investment ESG rating –Assessment of ESG performance by an independent actor –Builds investor confidence and increases transparency Value chain network –Value chain players facilitate credit access for their suppliers –Suppliers can benefit from better credit ratings and simplified administrative processes Putting Food on the Balance Sheet 19