Achieving the Sustainable Development Goals (SDGs) and meeting the climate commitments of the Paris Agreement requires food to be produced more sustainably and efficiently. Currently, agriculture is responsible for around 33% of greenhouse gas emissions and 70% of freshwater use. However, this is unsustainable and, if scaled, will lead to even faster degradation of our planetary systems, resulting in significant financial and material implications for investors.
The food and land-use sector accounts for around 17% of global GDP. According to the Food and Land Use Coalition (FOLU), an estimate of US$300–350 billion in investment is needed annually until 2030 to achieve a viable transition to sustainable food systems. Yet current figures place less than 5% of global financial sector assets as provisions for the sector, partly because the finance sector still perceives sustainable agriculture as a riskier asset class. This, in turn, leads to an insufficient allocation of capital to finance our food systems.
However, as investors are increasingly making commitments to align towards net-zero, it is crucial to highlight that farming and wider land use will be critical to reaching these targets. Approaches such as agroecology, alternative proteins and climate-smart agriculture can help create a more equitable food system. However, it will be challenging to mobilise investment in these practices. Mechanisms like blended finance and adjustments to existing financing models to fit the food and agriculture sector are some of the areas that present opportunities for investors.
The FAIRR Initiative is committed to supporting investors in achieving their ESG goals, and last year, in support of this commitment, co-launched the Good Food Finance Network (GFFN), a platform for innovation and collaboration that aims to unlock both public and private capital for a more sustainable food system.
What is the GFFN?
The GFFN is a collaborative platform launched by EAT, FAIRR, Food Systems for the Future (FSF), UNEP, and WBCSD. It works to develop the innovations that will allow sustainable food systems receive access to finance and become part of the mainstream investment.
The GFFN has two main objectives:
- Raise ambition and develop commitments from financial institutions, governments, and corporates to address challenges in the funding of the transformation of food systems;
- Drive action by bringing together stakeholders to identify, develop, deploy, and mainstream the financial instruments, strategies, and policies needed for the expansion of food systems that sustain people, planet, and our economies.
One of the barriers that impedes the financing of sustainable food systems is perverse incentives due to the misalignment of agricultural subsidies. As part of the GFFN, the FAIRR Initiative co-leads the catalyst group on Public Finance alongside FSF, which aims to jump-start the structural change needed to align government agricultural support with a sustainable and inclusive food system.
Panel on Fiscal and Agricultural Support Policies to Address Climate and Food Security
As part of the launch of the GFFN’s catalyst groups, the founding partners hosted a series of workshops to discuss good-practice guidance and innovation to accelerate the implementation of solutions to overcome existing financial bottlenecks and challenges related to food systems transformation.
The FAIRR Initiative’s panel focused on the repurposing of fiscal and agricultural support policies to address climate and food security. The panel explored some of the most pressing concerns regarding public financial support of food systems in the wake of the food price crisis and the Ukrainian war; the fragility left behind by COVID-19; and the overarching climate emergency.
- Helena Wright, Policy Director, FAIRR Initiative;
- Ertharin Cousin, Founder and CEO, Food Systems for the Future;
- Professor Shenggen Fan, Lead Chair Professor College of Economics and Management, China Agricultural University and Co-Chair of JRT;
- Ishmael Sunga, CEO, Southern African Confederation of Agricultural Unions (SACAU);
- Pekka Moren, Special Representative of Finance Minister, Government of Finland;
- Saleh Alshanfari, CEO, Oman Food Investment Company.
The event highlighted how agricultural subsidies have historically been biased towards the production and consumption of staple foods. The focus of subsidies must be rewritten and widened to include indigenous food, fruits, vegetables and plant-based options that are healthier and better suited for specific regions. Professor Shenggen Fan highlighted that:
“Going forward, we should also focus on consumption in order to increase health outcomes and reduce non-communicable diseases. We need to use some production subsidies to encourage consumers to eat more fruits, vegetables, and plant-based protein. We have not done enough in this area.”
Furthermore, public and private collaboration was also highlighted as a way of building resilience and increasing food sovereignty. Saleh Alshanfari brought in his experience running Oman’s Food Investment Holding Company, highlighting that:
“A collaboration between public and private funding has made us capable of starting an array of food projects that have made us less dependable on trade for our food and more food secure.”
From a financial regulator’s perspective, the panel highlighted the increasing concern that central banks and finance ministries have regarding adaptation to sustainable food systems and the role that subsidies have, with Pekka Moren saying that:
“Adaptation is high on the agenda in the context of economic and financial transition. Many Finance Ministries are in the process of identifying climate and nature related risks to economies, and designing reform strategies and actions accordingly. These include policies on subsidies, but comprehensive strategies are needed to remove them.”
From a development perspective, the role of rural development and building a solid infrastructure base for smallholder and medium-sized agricultural producers in developing countries was also highlighted, with Ishmael Sunga strongly emphasising that:
“Farmers reside in areas which are completely devoid of basic backbone infrastructure. “Justness” needs to talk about improving the backbone socio-economic infrastructure and services: electricity, education, water and sanitation, roads and transport, and health. Without this, forget about just transition – subsidies alone won’t fix this.”
The event was summarised perfectly by Ertharin Cousin during her intervention on our current critical junction and the opportunity to act decisively to work for a better future:
“Russia’s invasion of Ukraine has led to a major humanitarian hunger crisis, not just in Ukraine but around the world. Given the region’s importance as a breadbasket, the conflict created an immediate impact on key food commodities, including wheat and sunflower oil resulting in price shocks and massive shortages, tipping a “perfect storm”, the alignment of climate, conflict and COVID. The data clearly suggests the looming global food crisis will significantly increase from the 275 million people acutely hungry today. As food prices continue to escalate, many more will also join the 3 billion people who today cannot access an affordable, nutritious and diverse diet.”
Overall, the panel successfully painted a picture of the current state of affairs surrounding agricultural support and the need to build resilient, sustainable food systems through systemic and inclusive institutional change. The speakers reinforced that to achieve the necessary changes in our food system and accelerate the sustainable transition in the food and land-use sector, the power and magnitude of capital from the private sector will have to play an important role.
This article was authored by Francisco Botero, Policy Graduate Intern at FAIRR, and was originally published on FAIRR.org on 18 May 2022.