The International Fund for Agricultural Development (IFAD) issued its first SEK club deal today, a strong indication of investors’ continued interest in IFAD.
The lead investor Skandia, and Folksam, bought a seven-year one billion SEK sustainable bond to support IFAD in its mission to stimulate sustainable growth and inclusive development in rural areas of developing countries. Skandia led with a 900 million SEK investment, and Folksam complemented with 100 million SEK.
With this bond issuance, IFAD secures a large share of its 2024 funding plan. 2024 is the last year to capture funding for IFAD’s 12th Replenishment, with IFAD aiming to reach an investment program of up to US$3.4 billion for rural areas, addressing poverty, hunger and climate change in more than 90 countries.
“We are thrilled to further position IFAD’s name in the capital marketplace by entering the SEK market. Skandia places high-value on creating a sustainable world and business environment as laid out in their Policy on Sustainable Business. We are also pleased to continue our relationship with Folksam, our first investor, showing long-term support for IFAD and its mission,” said Natalia Toschi, Head of Funding, IFAD.
The bonds investments will support the transformation of food systems to make them more equitable and sustainable. This will be achieved by helping small-scale farmers adapt to climate change through, for example, better land management and farming practices, diversifying their food production and improving their access to markets, supply chains and technology to grow more food and better sell their production to make a living. It will also contribute to enhancing rural institutions, infrastructure and markets that sustain rural economies.
Skandia, founded in 1855, is one of Sweden’s main insurance companies. Folksam is a leading Swedish insurance and pension fund and IFAD’s first-ever investor in 2022, providing capital for a US$100 million bond.
“These types of investments contribute to achieving value-creation and quality-of-life from a broader perspective, while also generating returns for our customers and owners. Skandia continues to contribute to more sustainable development, both in Sweden and abroad,” says Alexander Onica, Head of Fixed Income and FX, Skandia.
“Helping small-scale farmers adapt to climate change and contribute to reducing food shortages in the world is more relevant than ever. It is also very satisfying when we can help an issuer entering a new market, as we did with our first IFAD investment,” said Marcus Blomberg, Head of investment, Folksam Group.
After obtaining two AA+ credit ratings in 2020, IFAD issued its first sustainable bond in June 2022 as part of a strategy to explore new funding models and to channel more resources to vulnerable populations in low- and middle-income countries and to finance its mission to lift rural people out of poverty and hunger and adapt to climate change. With the issuance of its first bonds, IFAD became the first United Nations Fund and the only UN body and specialized agency other than the World Bank Group to operate on capital markets.
About 3 billion people live in the rural areas of developing countries and rely to a significant extent on small-scale farming for their food and livelihoods. Small-scale farmers produce one third of the world’s food and up to 70 per cent of the food in low- and middle- income countries. While being essential for global food security, they are on the frontline of climate change and often live in poverty and hunger. About 80 per cent of the world’s extremely poor people reside in rural areas.
The number of people suffering from hunger has been growing in recent years and reached up to 780 million people in 2022.