Financing SDG2 and Ending Hunger

Abstract

This chapter focuses on innovation in mechanisms to finance the transformation of food systems to end hunger by 2030 and achieve SDG2. The key questions analyzed are: given the estimated costs involved in the transformation of food systems to achieve zero hunger, (1) What are the financing options available? (2) What is their quantitative availability? and (3) How to mobilize/reallocate the potential sources of finance? The concepts proposed here include international development finance, public budgets, banking, and capital markets at the global and national levels. A robust pipeline of investable opportunities should be established with an adequate profile and clear, measurable, and monitorable impact objectives, aligned with achieving SDG2 and ending hunger. Guarantee for “zero hunger” bonds is proposed to finance related public programs, and, in support of that, it is suggested that 2% of the new allocation of SDRs of 650 billion dollars be assigned to a fund, which could be set up within the IMF, to guarantee the interest rate payments of zero hunger bonds issued by developing countries as part of a Zero Hunger Alliance.

1 Introduction

The adequate functioning of food systems is crucial to achieving multiple Sustainable Development Goals (SDGs) by 2030 (von Braun et al. 2020b). This chapter focuses on financing the transformation of food systems to help achieve crucial components of SDG2,¹ including ending hunger by 2030. Given those objectives, the analysis centers mainly on agricultural production and rural development, as well as on poor and food-insecure consumers, both rural and urban, as part of the more general collection of issues around production and diets in food systems. Even with that focus, the interventions² considered have important implications for a variety of other nutritional and environmental objectives.

The chapter compares the additional costs of achieving SDG2, including zero hunger (as estimated by von Braun et al. 2020a and studies referenced therein), with potential financial sources. The estimates of potential funding use the framework in Díaz-Bonilla et al. (2021), which identifies two flows of funds “internal” to food systems (consumer food expenditures, which are the sales/revenues that the agents in the agri-food system use to finance their operations), and four that are “external” to food systems (international development flows, public budgets, banking systems, and capital markets) (Fig. 1).

Fig. 1

Flow of funds for food systems. (Source: Díaz-Bonilla et al. (2021))

The main questions analyzed here are: given the estimated costs involved in such a transformation, what are the options for financing the interventions needed, what is their quantitative availability, and how can those potential sources of finance be reallocated and mobilized to achieve SDG2, including ending hunger?

Adequate macroeconomic policies, a supportive business environment, and peace are basic requisites for the operation of food systems. Also, different policy interventions can influence the size and allocation of consumer expenditures³ and the production outlays of the operators of food value chains (the internal flows) in ways that help achieve different SDGs (see a discussion in Díaz-Bonilla et al. 2021). However, the internal flows are not the focus of this chapter, but rather the availability and mobilization of external flows to food systems, which can augment the internal flows to finance the additional costs of reaching SDG2 and ending hunger.

This chapter is structured as follows. Section 2 focuses on the costs of achieving SDG2, based on the work referenced in von Braun et al. (2020a). Section 3 presents estimates of the current values of the external funds that can complement the internal flows and help finance the additional expenditures and investments needed to achieve the desired objectives. Section 4 compares the costs in Sect. 2 with the availability of funds estimated in Sect. 3 and evaluates different financial alternatives for effectively mobilizing the additional resources needed. The analysis considers the total amount of financial resources available; whether some of them can be reallocated towards the desired objectives; and, if that is not enough, where the additional money may come from, considering overall budget constraints. A conclusion is that, in the aggregate, there are enough financial resources to achieve SDG2. However, Sect. 5 argues that it is not only a matter of overall availability of financial resources (which must be further assessed at the level of individual countries as well), but of adequately designing and implementing national programs. Therefore, the section presents the idea of a Zero Hunger Alliance & Fund (based on suggestions advanced by different global leaders⁴ and by Action Track One of the United Nations Food Systems Summit, UNFSS) to help developing countries design, finance and implement zero hunger programs. Section 6 summarizes all proposals and Sect. 7 concludes.

2 Costs of Interventions to Achieve SDG2 and End Hunger

The estimates of the costs related to SDG2 and ending hunger are based on the work reported in von Braun et al. (2020a, b), with the background of two other studies, ZEF and FAO (2020) and IFPRI et al. (2020). Those studies consider a variety of interventions to end hunger, increase agricultural incomes, and achieve certain environmental outcomes, mainly related to mitigation and adaptation to climate change. The number of people estimated to avoid hunger depends on the costs and range of the interventions considered (Table 1).

Table 1 Estimates of ending hunger and other SDG2 goals

The costs of eliminating hunger are not linear, with each further reduction in the number of people affected becoming more expensive (ZEF and FAO 2020). The largest estimate, of about 163 billion dollars annually, would save about 1050 million people from hunger by 2030.⁵ ZEF and FAO (2020) reckons that, without the interventions considered and under intermediate climate scenarios, the number of hungry people in 2030 would be about 900 million. But, as the study clarifies, this projection does not consider the possibility of additional humanitarian, health, or environmental crises. The matrix of financing in Sect. 4 considers the intermediate estimate of lifting 870 million people from hunger, as well as and in addition to the target of about 1 billion people avoiding hunger (both as a cushion against future crises and because the additional interventions support climate change adaptation and mitigation as well).

3 Possibles Sources of Funding

Each of the following subsections discusses quantitative estimates of the annual current values of the external sources.⁶ They will be compared later with the additional costs shown in Table 1.

• 1. International development flows

International development flows include concessional development assistance and non-concessional lending by bilateral agencies, multilateral development banks (MDBs), and some large private philanthropic funds. Using disbursements⁷ in current values (from FAOSTAT), the annual average for the period 2014–2018 has been some 256 billion dollars for all uses/sectors, and 11.1 billion for agriculture,⁸ forestry and fishing (AFF), or some 4.3% of all development flows. If development flows to other sectors related to SDG2 (such as water and sanitation) are included, then disbursements in 2018 were estimated to be about 15 billion dollars (ZEF and FAO 2020).

• 2. Public budgets

Many public policies and expenditures influence the operation of food systems. Considering the interventions related only to SDG2, the analysis centers on two main types of public expenditure: on AFF and on social protection. There is also a brief discussion of additional fiscal expenditures related to the COVID-19 pandemic.

• (a) Agriculture, forestry, and fishing

Table 2 shows total government outlays (current US dollar average 2014–2019) and outlays on AFF,⁹ using FAOSTAT data.¹⁰

Table 2 Government outlays (current dollars, average 2014–2019)

Developing countries,¹¹ not including China, show total outlays of some 5 trillion dollars, and 125 billion for AFF, which represents about 2.5% of total expenditures. While developing countries spend a larger percentage of their budgets on AFF than developed ones, it is also necessary to consider those expenditures against the size of the agricultural sector, using the Agricultural Orientation Index (AOI; last column of Table 2 with the median values by regions). It is calculated as the percentage of agricultural expenditures over total expenditures divided by the share of agricultural GDP in total GDP. A number smaller (greater) than 1 indicates that the share of government spending on agriculture is less (more) than the share of agriculture in GDP, suggesting that there would be under- (over-) spending in the sector relative to its economic relevance. Clearly, developed countries spend more as a proportion of their agricultural sectors than developing countries (excluding China).

Although the levels of public spending alone do not determine the performance of the agricultural sector, different studies show that the types of expenditure matter, particularly their orientation toward the provision of public goods (see, for instance, Fan, ed. 2008).

Also, as noted, these numbers do not include other public expenditures relevant for agriculture, such as rural infrastructure, or for the food system as a whole. These considerations suggest the need to utilize a broader food-system focus to analyze the level and composition of public expenditures at the country level that are relevant for achieving the desired SDGs.

• (b) Social protection

Another important type of expenditure related to SDG2 and ending hunger is for programs of social assistance (i.e., those more directly linked to poverty and vulnerability that are financed by general revenues from the government and not by contributions from beneficiaries—known as “non-contributory programs”).¹² Here, we focus on the social assistance programs using data from the World Bank’s ASPIRE database. It is based on household surveys, and therefore it may not capture all governmental programs. Also, the database focuses on developing and emerging countries only. On the other hand, it provides a useful disaggregation of social protection programs and of the distribution of benefits across the population.

Table 3 shows an estimate of the money allocated to those programs in current dollars for the period 2014–2018, using the categories in ASPIRE, except Cash Transfers and Social Pensions (CT+SP), which aggregates the three separate categories of conditional cash transfers, unconditional cash transfers, and social pensions.¹³

Table 3 Estimated expenditures for social assistance programs

For the countries in the ASPIRE database, the median of social assistance expenditures is less than 1.2% of their GDP. Another key characteristic to consider is the distribution across the population.¹⁴ Social assistance is intended for the poorest segments of a population, and if properly targeted, the largest percentages should go to the poorest quintile, with no benefits accruing to the richest ones. However, in the case of Africa, the poorest quintile receives 11.3% of the benefits (the average for the countries; the median is 8%), while the richest quintile receives 41.5% (average) and 38.9% (median). The East Asia and Pacific region also shows a distribution that is biased toward the rich, with the poorest quintile receiving about 17% (average and median), far less than the richest quintile (average of 33.4% and median of 22%). Other world regions show a better distribution, with the poorest quintile receiving somewhat more than 30% (average and median), but the richest quintile still getting 10–16% of the benefits. These numbers suggest significant problems with the targeting of these programs that are intended to help the poor and hungry.¹⁵ In particular, countries in Africa seem to suffer the dual problem of both lower levels of expenditure overall (a median of about 0.9% of GDP) and ineffective targeting of the poorest groups.

• (c) Brief consideration of expenditures related to COVID-19

The current pandemic is posing further challenges for fiscal accounts. Governments have implemented a variety of policies and investments in health, social protection, and support for employment and production, all of which require the use of a variety of unconventional monetary and fiscal instruments. As reported by the IMF policy tracker for governmental COVID-19 actions, developing and emerging countries made a strong additional fiscal outlay, surpassing 1.2 trillion dollars in 2020 (counting only additional public expenditures as of this writing), with 1.1 trillion dollars spent on non-health measures of social protection and maintenance of employment (excluding China, the respective values are 700 billion dollars and 680 billion dollars). It will be difficult for those levels of expenditure to be sustained in the future, considering the debt already accumulated. These considerations will determine whether developing countries have the flexibility to increase public expenditures for SDGs in the aftermath of the pandemic.

• 3. Banking system

While, in the previous sections, the focus was on public flows, the transformation of food systems will also require significant private investments from all operators in the food value chains. The internal cash flows from food operations (based on consumers’ food purchases) can be expanded by loans from the banking system (which is discussed here) or by operations in capital markets (analyzed in the next subsection).

Table 4, also based on FAOSTAT data, shows the total amount of loans outstanding at a point in time,¹⁶ which was provided by the banking sector to producers in agriculture, forestry, and fisheries (including household producers, co-operatives, and agri-businesses)¹⁷ and for all sectors (the average for 2014–2019, in current dollars).

Table 4 Value of loans outstanding, total and for AFF (Current Dollars; Average 2014–2019)

There are no data on net disbursements (loans minus repayments of principal), but the change in stocks may be an indicator of net flows. For total credit, the yearly average change in stocks for 2015–2019 is about 1.6 trillion dollars globally; but the average for developing countries (excluding China) is only 87 billion dollars. The average annual change in loans for AFF during 2015–2019 is 24 billion dollars worldwide. The estimated flows for AFF in developing countries would be around 14.2 billion dollars, or some 9.5 billion dollars if China is excluded.¹⁸

Table 4 also shows the percentage of AFF loans as a share of total loans. In the case of developing countries without China, the coefficient is about 4% of total loans. But, as with public expenditures, a more revealing indicator of the importance of lending to the AFF sector is the Agricultural Orientation Index (AOI) (calculated as the percentage of AFF credit in total credit, divided by the percentage of agricultural GDP in total GDP). The last column in Table 4 provides the median AOI for the countries in each region. As in the case of public expenditures, developing countries show far smaller AOIs than developed countries,¹⁹ and values for Africa are lower than for other developing regions.

• 4. Capital markets

Capital markets at the global and national levels offer another source of external funds. Here, the focus is on socially- and environmentally-oriented investments,²⁰ a potentially relevant source of funds for the transformation of food systems, considering the global trend toward investments that consider broader objectives along with financial returns.

However, definitions of these new investments are evolving, and therefore data on the actual volume of operations vary. Just as an indicator, Díaz-Bonilla (2021) cites that the issuing of Green Bonds in 2019 was 260 billion USD and, of Social Bonds, some 131 billion USD in 2020.²¹

The largest shares of investments in those categories take place in developed countries, and the amounts oriented towards agriculture and the transformation of food systems are small. For instance, the survey of impact investments in GIIN (2020) shows that only 8.1% of the funds (average 2018–2019) were allocated to food and agriculture.²²

The challenge is to mobilize these resources for investments in support of the transformation of food systems to achieve SDG2, including ending hunger.

4 Matrix of Financing and Interventions to Shape the Flows of Funds

Table 5 is an indicative matrix of financing that compares the current levels of the different sources discussed in Sect. 3 with the costs identified in Sect. 2. It assumes certain percentage of financing for each group of interventions from the individual flow of funds: for instance, some of them may only be financed by public expenditures, while others could receive credit from the banking system or investments from capital markets.

Table 5 Matrix of incremental costs and financing, and reference flows (USD billions)

Table 5 shows the current values of flows of funds in those categories for developing countries calculated in the previous section (excluding China).²³

Overall, there seem to be enough aggregate resources (except, perhaps, in the case of banking systems for the 1 billion target).²⁴ The next subsections discuss policy options for each source to ensure that those resources can be mobilized to achieve SDG2 and end hunger. As mentioned, the analysis considers several questions: what the amount of available financial resources is; whether some of them can be reallocated towards the desired objectives; and, if that is not enough, then where the additional money may come from, considering the overall availability of financial resources (“budget constraints”).

A general constraint is defined by global aggregate savings: they amount to about 21.6 trillion dollars (average of 2015–2019), but are distributed very unevenly across regions (see details in Díaz-Bonilla 2021). Further, global savings are the counterpart to world investments. Therefore, any proposal to increase investments in certain activities would require adjustments in other investments and/or consumption, with economy-wide repercussions that must be considered. Also, there may be “budget constraints” at the level of each individual flow of funds that need to be analyzed.

• (a) International development flows

International development flows for food systems should be increased by about 15 billion dollars above current levels (within the range suggested in IFPRI et al. 2020). Here, it is further suggested that 2 billion dollars of that increase be allocated to support the Zero Hunger Alliance & Fund (outlined below). If total international development flows cannot be increased (because bilateral development aid is limited by budgetary and political factors in donor countries, and net flows of non-concessional loans from MDBs are also constrained by their capital base and restrictive financial policies), this implies a reallocation of funds from other activities. For example, some of the development funds are supporting investments with high green-house gas (GHG) emissions, such as coal-based energy (UNFCCC 2021). At COP26,²⁵ 25 countries and public finance institutions committed to ending financing abroad of projects with unabated (i.e., without carbon-capture) fossil fuel energy by the end of 2022, and those funds can then be reallocated to ending hunger. Similarly, other funds can be reallocated from activities with lower priority.

Another option currently being discussed is to reallocate a percentage of the new issue of Special Drawing Rights (SDRs) in the IMF to support developing countries (the new allocation has been about 650 billion dollars, of which about 60% went to developed countries).²⁶ At the time of this writing, there is a discussion at the IMF about options for developed countries to donate or lend part of the SDRs that they do not need to support low-income countries. Here, an additional alternative is suggested to use the SDRs in a way that further multiplies their impact for broader objectives: the allocation of, for example, 2% of SDRs to a fund to guarantee “zero hunger bonds” issued by developing countries (explained later).²⁷

In general, international development funds should be used more strategically to leverage and mobilize private funds. In addition, multilateral and bilateral organizations should better coordinate their own operations to avoid the fragmentation of relatively isolated initiatives and competition across international agencies at the national level.

• (b) Public expenditures

Table 5 estimates that public expenditures for agriculture and rural development and for social assistance would have to be increased by about 6% and 11%, respectively, to eliminate the risk of hunger for about 870 million people. If the objective is lifting 1 billion people from hunger, along with other climate mitigation and adaptation measures, then public expenditures in agriculture and rural development will need to expand by almost 20% and those in social assistance by about 12%.

These are aggregate numbers. Focusing on individual countries, indicators such as the AOI for agricultural expenditures or the percentage of social assistance expenditures in total GDP show that developing countries in general, and particularly in Africa and Asia (not counting China), devote comparatively fewer resources than other regions to those crucial interventions. Here, it is suggested that individual developing countries should try to increase their AOIs to about 0.5 and social assistance expenditures to at least 2% of the GDP.

Specific public expenditure reviews can help determine the adequacy of both the level and composition of public expenditures dedicated to SDG2, as well as their efficiency, efficacy and equity. Certainly, targeting could be improved in social and agricultural programs, and better instruments can be utilized, such as the evolving type of enhanced social safety net.²⁸

Part of the additional resources can come from reallocation of agricultural subsidies with negative impacts on poverty, nutrition, and the environment (see, for instance, Laborde et al. 2020). Using data from OECD, the total amount of expenditures that can be subject to that repurposing in developing countries (excluding China) was estimated at about 52 billion dollars (Díaz-Bonilla 2021).²⁹

Other expenditures with negative effects that should be phased down, following the Glasgow Climate Pact document agreed to at COP26 (paragraph 36), are subsidies to fossil fuels, globally estimated at some 800 billion dollars (Parry et al. 2021); the money saved can be reallocated to activities linked to SDG2 and ending hunger.

However, reallocating/repurposing, along with better targeting, even with improved instruments, may not be enough to reach the levels needed to achieve SDG2 and end hunger, and therefore expenditures and revenues may have to be increased.

One way to achieve this is by improving tax administration so as to reduce tax evasion. Also, developing countries should reassess the multiple exemptions to value-added and sales taxes: in several countries, they represent an important loss of revenue, help rich, as well as poor, consumers, and do not address challenges of nutrition or environmental sustainability. Implementing taxes on unhealthy and/or environmentally damaging food products can shift incentives while collecting additional revenue. Taxes on international trade, including with impacts on fiscal accounts and on production and consumption incentives, should be analyzed considering SDG2 and hunger. Further, more progressive taxation of incomes and wealth will strengthen revenues. Finally, pricing the externalities of fossil fuels should be implemented, not only to shift incentives away from high GHG emissions, but as a source of revenue (Parry et al. 2021).

The Zero Hunger Alliance & Fund, discussed below, can help developing countries conduct the specific fiscal analyses involved in the reallocation, refocusing and scaling up of public expenditures needed to support programs to end hunger, considering the constraints posed by the fiscal response to the pandemic.

Additionally, all countries, but particularly the developed ones that have greater influence on the operation of global financial markets, must be more active at the international and national levels to implement stronger controls on money laundering and tax havens that facilitate illegal financial outflows and tax evasion from developing countries. Also, proposals for a more unified system of taxation of international corporations, with an established formula to allocate the taxable base and a common minimum corporate tax, must be implemented.³⁰ These initiatives would help many developing countries to increase fiscal revenues that are currently being lost through corruption and tax evasion.

• (c) Banking systems

Expansion of irrigation and the adoption of improved agricultural practices (needed to reach SDG2 and end hunger) will require financing from the banking system. Estimates in Table 5 suggest that, in the aggregate, credit to the agricultural sector in developing countries (excluding China) will have to increase by some 40% in flows (for the central estimates of 870 million people avoiding hunger). While this is an aggregate estimate, for individual countries, it is suggested that they target an AOI for credit of at least 0.5.

For the banking sector to play this role, the systemic barriers that limit the supply of financial services for agriculture, small farmers, and the poor and vulnerable (women, disadvantaged ethnic groups, and youths) must be addressed. This requires a country-level analysis of the banking system considering the following aspects.³¹ First, the adequacy of the overall macroeconomic and regulatory framework. Lending to the agricultural sector is affected by macroeconomic volatility, and by regulations that are designed for the urban sector and for activities with more regular cash flows than agriculture. Second, the origin and use of the funds that are to be intermediated (such as deposits; budget allocations by the government; rediscounts by the monetary authorities; regulatory mandates to lend to the agricultural sector; loans from international organizations; and others). In particular, it is suggested here that an updated version be used of the monetary policies that sustained agri-food development in the 1960s and 1970s, implemented then by what have been called “developmental central banks,” and which, with the 2008 global recession and the current pandemic, have been revived mainly in developed countries under the name of quantitative easing (Díaz-Bonilla 2015).³² Such an approach must be implemented within a consistent monetary program that maintains control of inflation.

Additional funds may also come from reallocation of credit that now supports activities with negative externalities such as deforestation or fossil fuels. In that regard, it would be important to properly implement the “Glasgow Leaders’ Declaration on Forests and Land Use” at COP26, and implement the disclosure recommendations concerning climate-related financial risks, as suggested by the Task Force on Climate-Related Financial Disclosures (TCFD) created in 2015 by the Financial Stability Board (FSB).³³

The third component of the analysis is the types of banking and financial institutions that can intermediate those funds. There is a wide variety of formal and informal banking and financial operators, with their own advantages and disadvantages. Here, it is suggested that the role of public development banks (PDBs) be strengthened. They were dismantled in many developing countries during the 1990s because of concerns about corruption, inefficiency, and fiscal costs. However, several of them, including those with an agricultural orientation, have been reformed to operate with incentives, performance metrics, and controls to avoid the problems of the past, while pursuing developmental objectives. In fact, during the UNFSS, and following the November 2020 “Finance in Common Summit” of PDBs, a coalition of those banks to help finance the transformation of food systems was announced.³⁴ That coalition can help PDBs address the pervasive market failures in agricultural and climate credit markets that affect small farmers and firms, particularly those operated by women, youths and vulnerable ethnic groups.

The fourth aspect to consider relates to financial instruments. A central one is credit, particularly longer-term operations, which face agricultural-sector-specific problems, such as the dispersion and small scale of customers, and weather and other risks. Innovative insurance schemes, technical assistance, and better weather and market information can mitigate some of those risks. Supply-chain and value-chain lending offer a flexible form of financing that can include small farmers; input and equipment suppliers should also be considered as potential vehicles for lending to small and family farmers. In any case, credit for long-term investment may require funding from public fiscal or monetary sources (as suggested above).

Beyond the obstacles to credit, there is a dearth of other financial products and services for small farmers, rural populations, and SMEs. This is true both on the financing side (such as leasing, warrants, and the discount of invoices, all of which require the adaptation of regulations and operational mechanisms) and on the payments and savings side (for instance, simplified checking and savings deposits, which are an important risk mitigation tool for rural households). In general, digital technology can reduce transaction costs and generate more information about potential customers, lowering risk for financial institutions.

• (d) Capital markets

Table 5 suggests that capital market operations will have to increase significantly above current estimated levels to achieve SDG2 and zero hunger, plus other environmental and health objectives. The net-zero deforestation commitments and emissions disclosures already mentioned in the banking section can also help shift incentives and financial flows in capital markets. Additionally, we present two other ideas here.

First, it is necessary to develop a robust pipeline of investable opportunities (including individual projects, impact investment funds, and/or thematic bonds) with the adequate profile of risk/reward to attract investors, and clear, measurable, and monitorable impact objectives, aligned with achieving SDG2 and ending hunger.

An international project preparation/incubation/acceleration facility could be set up to link investable opportunities for small farmers and rural populations in social and environmentally relevant activities with private capital, based on CGIAR technologies and leveraging the presence of its centers in more than 100 developing countries, where they work with a variety of national agricultural research institutes (NARIs) (see the detailed proposal in Díaz-Bonilla et al. 2018).³⁵

The facility would identify projects involving small and family farms; aggregate and structure them (as different types of investable vehicles), with adequate rates of return and risk profiles, and with value sizes that compensate investors for the transaction costs and due diligence requirements; provide technical assistance to both small farmers and investors, particularly in relation to sustainable technologies (based on the work of the CGIAR centers and participant NARIs); and define and monitor metrics for the impacts desired. This facility can also support enhanced environmental lending by public and private banks. International development funds, as well as some national public expenditures, can be used more strategically in this facility as blended finance with private sector funds, including for the purpose of de-risking investments.

A second proposal is to guarantee “zero hunger” bonds to finance related public programs. In particular, as mentioned, it is suggested here that 2% of the new allocation of SDRs of 650 billion dollars be assigned to a fund, which could be set up within the IMF, to guarantee the interest rate payments of zero hunger bonds issued by developing countries as part of the Zero Hunger Alliance described later.

Although the specific design of those bonds will have to be discussed with potential private and institutional investors, some features to consider are the following: they will be a “consol” or perpetual bond;³⁶ possibly issued in dollars; paying an adjustable rate with a cap (say, 5%, which is close to the average nominal yield since the 1950s); and may be callable, with call protection (for example, until 2050). Other official development aid and private philanthropic funds could be utilized as well to guarantee the interest payments, and thus eliminate country risk for the countries that join the international alliance to eliminate hunger (discussed below).

This alternative will greatly increase the impact of the SDRs: for instance, 13 billion dollars can guarantee an issuance of between 52 and up to 130 billion dollars in zero hunger bonds (under the assumptions in the footnote³⁷). The funds raised, in addition to the zero hunger objective, would also help finance sustainable agricultural technologies and other environmental interventions addressing climate change mitigation and adaptation.

Certainly, the financial scheme suggested here can also be utilized for special bonds with other purposes, such as financing pandemic-related expenditures (a “pandemic recovery bond” is discussed in Díaz-Bonilla 2021 and von Braun and Díaz-Bonilla 2021).

5 The Need for Country-Based Institutional Arrangements: A Zero Hunger Alliance & Fund

A more detailed explanation is in Díaz-Bonilla (2021).

The quantitative estimates and the financing matrix discussed above suggest that, in the aggregate, there are enough additional financial resources to save anywhere from 870 to 1 billion people from hunger by 2030, effectively achieving zero hunger.

However, the potential sources of financing and whether they are sufficient cannot be judged solely at the aggregate level; they also need to be assessed in each individual country. And even if the domestic resources exist and can be mobilized, they can only be transformed into solid programs to end hunger and achieve SDG2 if individual countries are willing and capable to do so.

However, institutionally weak governments may not be able to design the programs and coordinate the work of their own Ministries and agencies, as well as the international organizations operating in their countries. They could benefit from the establishment of institutional mechanisms to help developing countries design, finance, and implement their programs. The fiscal constraints imposed by the public responses to the current pandemic reinforce the need for these country-based arrangements.

Therefore, it is suggested that a “Zero Hunger Alliance and Fund” (ZHAF, or “the alliance”) be established, with the objective of operating as an international mechanism to assist the developing countries that formally join the alliance in the design, financing, and implementation of their zero hunger plans.

The proposal outlined here builds on the idea of a Zero Hunger Fund, which was suggested by Action Track One of the UNFSS and has considered the experiences of other initiatives.³⁸ It also expands the scope of the announcement by the UN Secretary-General in his “Chair Summary and Statement of Action on the UN Food Systems Summit” about appointing Resident Coordinators and UN Country Teams to develop and implement national programs, while enjoining the Rome-based agencies (FAO, IFAD, and World Food Program) with the coordination of a UN-based hub to support the follow-up activities to the Food Systems Summit.

The proposed ZHAF would go further than the UN system, as a public-private partnership with the capacity to support, both institutionally and financially, country-owned and country-coordinated programs to end hunger. The ZHAF would have personnel seconded from international organizations (with specific assignments of, say, 3 years) focusing on poverty, food security and nutrition issues. It can work with (and even within) the UN coordinating mechanism suggested by the Secretary-General. It would support participating countries, which, after formally joining the Alliance, should designate a coordinating group of high-level officials with the relevant authority to design national initiatives and mobilize the financial and institutional resources needed to implement them.

The ZHAF will receive $2 billion a year for 5 years from the annual increase of $15 billion in international development funds, while also expecting to mobilize an additional $500 million per year from the private sector, with targeted commitments from at least 50 companies in food and other sectors.

To expand the financial resources available, it is also suggested that the developing countries joining the ZHAF be allowed to issue the new “zero hunger bonds” guaranteed by the SDRs.

The fund would be used to cover operational costs; hire technical and operational experts to support the countries in defining the programs and mobilizing the human, financial, and institutional resources to carry them out; facilitate the issuance of zero hunger bonds and other financial support; and, eventually, possibly finance some interventions directly.

In addition to helping eliminate hunger by 2030, the ZHAF, through specific policy interventions and investments supported at the national level, would help achieve other crucial nutritional and environmental objectives, which will be monitored and documented.

It is recognized that the establishment of a new global hunger fund is not without risks. Potential public and private sector contributors may suffer “donor fatigue.” Also, some developing countries may not join the alliance, and others may not have the necessary capabilities, even with the support of the ZHAF, to coordinate and sustain the effort to eliminate hunger.

Yet, the institutional arrangement outlined here (and detailed in Díaz-Bonilla 2021) has several important advantages. It has a flexible public-private institutional structure, and it supports participating countries as they implement country-owned, country-coordinated, integral programs. It also focuses on the single and measurable objective of ending hunger by 2030, while, at the same time—given the type of agricultural technologies and environmental interventions supported—it will contribute to crucial objectives related to climate change mitigation and adaptation. The ZHAF would also mobilize a significantly larger volume of funds than those directly allocated to it. And, by relying on personnel from existing organizations, it reduces the risks of creating another permanent international bureaucracy.

Ending hunger is within reach, and the Zero Hunger Alliance & Fund can play a central role in achieving it.

6 Summary of Proposals

Table 6 summarizes the proposals discussed above.

Table 6 Summary of proposals

7 Conclusion

This chapter analyzed the costs and potential financial mechanisms for achieving SDG2, including the end of hunger, and made a series of specific proposals for mobilizing the resources to achieve those objectives. The proposals include the creation of a Zero Hunger Alliance & Fund, in support of country-owned and country-coordinated integral programs to end hunger by 2030. It is hoped that this chapter has shown that it is feasible to achieve the SDG2 and end hunger in an improved global food system, if we decide together to do it.