AUTHOR: Isabella Wedl
The transition to sustainable agriculture is supported by a growing mix of public and private finance, but current efforts remain fragmented and poorly aligned. This research briefing argues that better coordination of finance is essential to address farmers’ transition barriers more effectively, to enable landscape-level biodiversity, water and climate benefits, and to unlock larger volumes of private investment. It presents existing coordination strategies and highlights key policy levers to strengthen their impact in the EU.
The transition to sustainable agriculture is increasingly supported by a wide range of public and private actors. Alongside public funding, agrifood companies, financial institutions, investors, insurers and intermediaries are deploying diverse financing instruments, including payments for environmental outcomes, preferential loans, risk-sharing mechanisms and blended finance.
Despite this growing engagement, financing for sustainable agriculture remains highly fragmented. Initiatives are often developed in isolation, pursue different objectives, and operate at a limited scale. This fragmentation reduces effectiveness and efficiency, creates barriers for farmers, and limits the delivery of environmental outcomes. Farmers face particular challenges in navigating this landscape. Support is often difficult to identify and access, typically addresses only individual transition barriers, and can involve high administrative burdens when multiple schemes need to be combined. Many initiatives provide insufficient upfront capital or protection against income risks during the transition. Fragmentation also raises questions about non-additionality and double-counting, especially in ecosystem service markets. Also, small and uncoordinated initiatives struggle to attract larger volumes of private investment.
Why coordination matters
Improved coordination of finance can help address these challenges by increasing coherence, reducing transaction costs, and enabling action at a more appropriate scale. International experience shows that coordinated approaches can:
- address multiple transition barriers more comprehensively,
- increase incentive levels through pooling of resources,
- support collective action at landscape level, and
- make sustainable agriculture more investable by reducing fragmentation and risk.
Coordination is therefore a key enabling condition for scaling up the transition, rather than an end in itself.
Strategies for coordinating finance
This research brief sets out a range of strategies that are already being applied, at small scale, to improve coordination of finance for sustainable agriculture. These include:
- Combining and sequencing complementary financing instruments to address investment needs, income risks and knowledge gaps together.
- Pooling funds across and along the food value chain to share costs and strengthen incentives.
- Organising finance at landscape level to deliver biodiversity, water and climate outcomes that require collective action.
- Bundling or stacking ecosystem services to increase financial returns while managing additionality risks.
- Using blended finance approaches to mobilise commercial capital through targeted risk-sharing.
Across these strategies, governance through intermediary organisations and other institutional arrangements, harmonisation of standards, and the catalytic use of co-funding play an important role in aligning objectives and reducing administrative burdens.
Implications for policy
While promising, coordinated financing approaches remain constrained by limited upfront capital and transition insurance, weak integration with public support schemes, legal and governance challenges to collaboration, and a lack of harmonised monitoring, reporting and verification. Addressing these constraints through clearer policy frameworks, targeted public support and stronger incentives for coordination could significantly improve the coherence, accessibility and impact of financing for sustainable agriculture in the EU.
