Sri Lanka’s agriculture sector is faced with numerous challenges. 

The sector’s long-drawn road towards modernisation has been obstructed by many challenges, including the adverse impacts of climate change, limited public investment flows, bureaucratic inertia, and policy and regulatory uncertainty. 

These challenges have limited the sector’s Gross Domestic Product (GDP) share to less than 9%, despite the sector employing around 25% of the labour force and occupying 50% of the country’s total land area. 

Increased flows of innovative financing, including sustainable private investments to the sector, are key to supporting the essential conditions underpinning its modernisation and growth, such as digitisation, higher productivity and yields, climate resilience, and the equitable growth of farmer livelihoods.

The challenge of mobilising additional financial flows towards the sector amidst the current public debt distress and unfavourable credit ratings is further compounded by negative perceptions of risks relating to private investments into the sector. 

Innovative financing instruments such as blended finance could play a transformative role in agriculture, as such mechanisms could address market failures and help implement sustainability best practices by pooling resources from various sources with differing risks, return, and impact preferences. 

Sri Lanka can explore a mix of financial instruments such as straight debt with flexible/concessional/first-loss terms, mezzanine finance/convertible securities, equity, guarantees, grants, or recoverable grants to address different risk profiles associated with the required investments to support the envisaged transformation in the agriculture sector.

Issues, challenges in understanding sustainable finance in agriculture 

A recent high-level stakeholder dialogue jointly convened by the Sri Lanka Youth Climate Action Network (SLYCAN) Trust and the Sustainable Development Council (SDC) explored the critical role of climate and sustainable finance and strategies for effectively communicating their benefits to Sri Lanka’s agriculture sector. 

During this informal conversation, challenges at multiple levels that inhibit broader ownership and understanding of the benefits of sustainable finance in agriculture were identified.

Among the many strategies for effective communication of the role of sustainable finance in agriculture, the following require clear focus:

• It was observed that knowledge gaps about climate finance and its instruments exist at all administrative levels, which must be addressed through tailored messaging that targets different levels of administration and stakeholders.
• Communication around climate finance is often siloed and lacks integration with value chain development. Sustainability and climate action need to be embedded into agribusinesses and messaging must reflect a comprehensive view of sustainability and climate action across the agriculture sector. Further, messaging must be consistent to ensure coherence across departments and institutions. 
• It is equally important to connect all stakeholders to the conversations on climate finance; high-level discussions on climate finance and the benefits of climate finance are not effectively communicated at the grassroots level. In order to bridge this gap in communication, existing structures such as chambers of commerce, private sector actors, and smallholder farming societies can be effectively leveraged to enhance awareness and disseminate information appropriately. 
• As farmers often prefer informal finance and are less familiar with formal systems, effective communication strategies that demonstrate the benefits of formal finance would be important. Efforts must be taken to foster communication between policymakers and farmers. Furthermore, communication material needs to be adapted to local languages and cultural contexts. 
• Financial literacy is crucial for informed decision-making and resource management. Building financial literacy, particularly in women-led businesses, is important to highlight the role of banks offering sustainable finance products and how they mitigate risks.
• As the training curriculums for extension officers do not cover climate finance, risk finance, or modern communication techniques, it is important to update the training curriculums to include the above topics. 

Framing the narrative: Communicating the role of sustainable finance

Overcoming these issues poses a significant challenge but also an opportunity to develop innovative approaches for communication and messaging. 

Fundamentally, there are three key questions to answer. How can we effectively frame the narrative around the need for sustainable finance in agriculture? How can this narrative be communicated to all relevant stakeholders, including policymakers and the general public? And how can we leverage local success stories to render the messaging more concrete and impactful?

Framing the narrative of climate finance and sustainable finance in the agriculture sector in a way that resonates with key actors is crucial to creating momentum for effective action. On the one hand, the framing could focus on the needs of those most vulnerable and affected: protecting farmers from intensifying climate impacts, preventing losses, protecting ways of life, and alleviating poverty. 

On the other hand, it could also highlight opportunities provided by financial tools and instruments: boosting agri-entrepreneurs and food system startups, de-risking investment, scaling up private sector finance, and uplifting rural communities towards climate prosperity.

It is important to build a narrative around climate and sustainable finance with multi-stakeholder participation and the intended audiences in mind. 

Messaging around, for example, blended finance or green bonds should be tailored for different stakeholders and speak to them in their own language and context while considering the wider socioeconomic environment, value chains, and investment ecosystems. For communicators, it is key to strike a balance between audience-specific messaging and coherence across institutions and administrative levels.

Digital communication platforms, such as mobile apps, can support this process and enable a real-time flow of information in both directions, empowering grassroots-level actors – such as farmer associations or small-scale agri-entrepreneurs – to not only receive real-time information on inputs, risks, and financial options but to also amplify their voices in local and national processes. 

Creating such communication channels where farmers can ask questions and receive responses in local languages is important and could be enhanced through the use of emerging technologies such as Artificial Intelligence (AI), allowing for automatic translation, customisation, and enhanced database accessibility.

Finally, while an overarching narrative on the opportunities of climate and sustainable finance in Sri Lanka’s agriculture sector creates a powerful framing to align actors, it needs to be filled with life through tangible real-life examples and success stories. 

Capturing and highlighting relevant case studies can illustrate the practical benefits of sustainable finance, including improvements in productivity and resilience as well as broader economic and social benefits. 

Furthermore, leveraging success stories and establishing networks, forums, or systems for experience-sharing not only support evidence-based initiatives but can also provide an additional incentive for transformative change.

The way forward

In the face of climate change and a national as well as global drive towards sustainable development, there are clear opportunities for enhancing investment in Sri Lanka’s agriculture sector. 

Given the wide range of climate and sustainable finance instruments, tools, and mechanisms, it is important to develop a coherent and consistent narrative around the need for transformation and how to implement it, with a framing that includes all stakeholders and aligns with national policy processes and priorities.

During the high-level dialogue hosted by SLYCAN Trust and the SDC, several recommendations for potential actions were discussed, such as establishing a central repository of case studies, success stories, and best practices for climate finance initiatives; leveraging AI-based solutions to enhance communication channels; tailoring narratives to different audiences; implementing robust tracking frameworks to monitor the impacts of communications around sustainable finance; and producing case study compendiums with key takeaways for policymakers.

Focusing on strategic, inclusive, and culturally sensitive communication as a key driver for advancing climate and sustainable finance within Sri Lanka’s agricultural sector could help to align actors across different levels and create a broad momentum for relevant interventions, such as the establishment of a national blended finance facility or investment into innovative risk transfer solutions.

(Saparamadu is the Director General of the Sustainable Development Council of Sri Lanka. An Attorney-at-Law and an experienced professional in the development sector with over 20 years of work experience with several local and international organisations, she is currently reading for a PhD in Development Studies at the University of Colombo. Mombauer works as the Director – Research and Knowledge Management at SLYCAN Trust, a non-profit think tank focused on climate change. He holds a Master’s degree in Education and is a regular contributor to several international and local media outlets)