V.1 CFC’s Impact Thesis

Commodities are the foundation of both global progress and daily life, forming the backbone of industries, economies, and essential goods. From the food we eat to the materials that build our homes, commodities shape the world around us. Yet, while end users often take their availability for granted, the reality is far more complex. In many commodity-dependent countries, smallholder farmers rely on these very commodities for their survival. Unlike large-scale producers, smallholder farmers face unstable prices, limited market access, and vulnerability to climate change, leaving them trapped in cycles of extreme poverty.

As highlighted in the UN Trade and Development Report 2024², economic cycles and commodity prices in the commodity-dependent nations are closely linked with global financial market volatility, often amplifying economic instability. The expansion and financialization of extractive industries further complicates this landscape, posing a significant challenge for commodity-exporting countries, especially as they navigate the energy transition and a shifting global growth wave.

To break cycles of extreme poverty and build resilient economies, ensuring fair and sustainable commodity supply chains is more important than ever. In this pursuit, the CFC serves as a catalyst for positive change by providing financing for agricultural SMEs that connect primary commodity producers to higher value markets; in doing so, it helps smoothen smallholder incomes and reduce their dependence on financial cycles. By targeting specific commodity value chains, we ensure that the economic benefits of global markets reach those farmers that are most vulnerable. It is therefore our mission to contribute to poverty alleviation by strengthening the income-generating capacity of commodity producers and mitigating risks to their economic well-being.

With this mission in mind, we have developed a simplified and comprehensive version of our Theory of Change (ToC). Our ToC acts as a roadmap, detailing the connections between the CFC’s activities, outputs, outcomes, and impacts, leading to well-defined impact goals connected to our core SDGs.

Guided by our ToC, we translate the CFC’s mission into action by taking a strategic, impact-oriented investment approach that targets value chains with the potential to uplift impoverished communities, especially those in Least Developed Countries (LDCs), Landlocked Developing Countries (LLDCs), and Small Island Developing States (SIDS). Our investments do not only support livelihoods but also enhance local value creation, strengthen economic resilience, and drive sustainable growth across commodity-dependent member states. By doing so, we foster long-term, meaningful improvements that extend beyond individual farmers to benefit entire communities.

V.2 CFC’s Impact Management Approach

At the CFC, we have dedicated significant time and effort to refining our approach to effective impact monitoring, environmental and social (E&S) risk assessment, and stakeholder communication. As pioneers in agricultural impact investing, we recognized early on the need for specialized impact monitoring systems and ESG tools. In the absence of comprehensive industry-wide frameworks, we developed our own methodologies, drawing from multiple sources to establish a robust system for measuring and managing impact. We also give due consideration to the needs and limitations of SMEs, being the main target group for CFC financing, in terms of their limited capacity to implement sophisticated IMM models.

SDG Impact Framework

Driven by a commitment to make social, environmental and economic change, we at the CFC recognise the importance of assessing and reporting on the actual impacts of our agricultural investments. Measuring impacts ensures that CFC resources are effectively improving livelihoods, strengthening local econo­mies, and fostering inclusive growth. With this purpose in mind, the CFC implements the Sustainable Development Goals (SDGs) as the impact framework through which we monitor and meas­ure portfolio-wide impacts.

The SDGs represent a global call to action aimed at eradicating poverty, safeguarding the planet, and ensuring prosperity for all. These goals integrate economic, social, and environmental aspects of sustainable development, addressing the root causes of poverty and promoting global growth. Acknowledging the cross-cutting economic role of commodities, CFC-financed projects are positioned to drive progress across all 17 SDGs. However, the CFC’s impact management strategy focuses on making direct and measurable contributions to six selected core SDGs, prioritizing areas where commodities can have the most significant and tangible impacts. These include: SDG 1 (No Poverty), SDG 2 (Zero Hunger), SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), SDG 10 (Reduced Inequalities), and SDG 13 (Climate Action).

It is important to note that the selection of these priority SDGs does not exclude others. Commodity issues are interconnected with all SDGs. For instance, CFC financing is often used to promote regenerative agricultural practices, such as pesticide replacement and sustainable irrigation, inherently impacting non-core SDG 6, Clean Water and Sanitation. Similarly, gender equality is a key consideration in every commodity project, with a gender lens applied throughout the CFC’s investment analysis and lifecycle. The SDGs serve as a universally recognized development framework, which we translate into action by prioritizing specific SDG targets, with progress measured through the use of IRIS+ indicators, as explained in the upcoming Impact Monitoring Section. Below, we present our impact rationale for each one of our core SDGs.

The United Nation’s 2030 Agenda recognizes that eradicating poverty in all its forms, including extreme poverty, is one of the greatest current global challenge and a fundamental requirement for sustainable development. However, the COVID-19 pandemic and subsequent economic shocks from 2020 to 2022 severely disrupted global efforts to combat poverty. In 2020, the global extreme poverty rate rose for the first time in decades, erasing three years of progress.³ The UNCTAD Commodities and Development Report 2023⁴ further highlights the urgency of addressing poverty, particularly in commodity-dependent developing countries (CDDCs), where economic vulnerability and inequality remain significant challenges. One of the most pressing challenges facing CDDCs is the economic instability driven by commodity price volatility– which perpetuates poverty and inequality– compounded by the global shift toward decarbonization, which threatens their economies as demand for traditional commodities declines. Addressing these issues is central to the CFC’s mission, which focuses on fostering economic resilience and poverty alleviation for commodity producers.

To help mitigate these challenges, the CFC plays an important role in stabilizing smallholder incomes by financing SMEs that work directly with farmers, ensuring fair farm gate prices, fair wages and a more predictable revenue stream. Additionally, the CFC supports economic diversification by funding underserved commodity sectors in vulnerable regions, fostering resilience and creating new opportunities for sustainable growth. Through these efforts, the CFC directly contributes to SDG 1 by strengthening local economies, reducing rural poverty, and supporting the long-term stability of CDDCs. While the CFC contributes to all targets under SDG 1, our strongest impact is observed in the following specific targets:

Smallholder commodity producers are the backbone of agricultural and food production systems, playing a vital role in enhancing resilience and reducing hunger. Yet, despite their contributions, they remain among the most vulnerable groups, particularly across rural areas where households depend on small-scale farming for both sustenance and income. This vulnerability is reflected in global food insecurity trends. According to the 2024 Sustainable Development Goals Report⁵, as of 2023, 733 million people faced hunger, while 2.33 billion experienced moderate to severe food insecurity. Although progress has been made, 148 million children under five suffered from stunting in 2022, and if current trends continue, one in five children under five will be affected by stunting by 2030.

Access to credit is a critical driver of agricultural productivity and sustainability, enabling smallholder farmers and SMEs to invest in better practices, purchase essential inputs like seeds and fertilizers, and adopt innovative technologies. By providing loans and financial instruments, the CFC helps bridge funding gaps in developing countries, fostering more resilient food systems. Alongside financial support, the CFC offers technical assistance, equipping farmers and enterprises with knowledge on modern farming techniques, sustainable practices, pest management, and efficient water use. These skills enhance crop yields, quality, and marketability, while also helping farmers meet international standards, opening new markets and increasing their food supplies.

The CFC is committed to a world where everyone has access to safe, nutritious, and sufficient food. By investing in SMEs that support smallholder farmers, the CFC helps increase productivity and strengthen resilience to external risks. By focusing on improving access to credit and technical assistance, the CFC enhances SME’s capacity to purchase from, or provide for, smallholders in food-insecure regions. In doing so, we directly contribute to enhancing food supplies and improving livelihoods where they are needed most. In the upcoming Impact Monitoring Section, we present the Impact Monitoring System used to monitor and measure impacts related to SDG 2.

While the CFC contributes to all targets under SDG 2, our strongest impact is observed in the following specific targets:

The world remains far from achieving gender equality by 2030. Women continue to be underrepresented in public life and leadership, and at current rates, achieving parity in management positions would take 176 years.⁶ The situation is particularly critical in rural areas, where women constitute an average of 38.5% of the agricultural workforce; a figure that rises above 50% in 25 developing countries, most of which are in the African continent.⁷ Despite their vital role in agriculture, women continue to face severe disparities in access to land, finance, technology, and fair income.⁸ These systemic inequalities contribute to economic dependency and limit productivity in commodity-dependent areas. Addressing this disparity requires urgent and targeted action to challenge gender-biased norms, eliminate harmful practices, and repeal discriminatory laws that obstruct women’s full participation and empowerment in the agricultural sector.

Recognizing the cross-cutting and transformative potential of investing in women, the CFC is deeply committed to advancing gender equality by applying a gender lens to its investments, actively prioritizing women-led enterprises, employment opportunities for women, and greater female representation in leadership. To safeguard against gender-based risks, the CFC integrates gender considerations into due diligence, whilst also tracking progress and ensuring positive impacts on women using key 2X Challenge-aligned indicators, such as female leadership, employment, and ownership. This approach helps us identify and support SMEs that either already demonstrate gender balance and inclusive policies or show strong potential to do so; particularly those with the capacity to create meaningful impact for women smallholders.

While the CFC contributes to all targets under SDG 5, our strongest impact is observed in the followings pecific targets: