Developed by Food Systems for the Future, with contributions from the FAIRR Initiative and the European Centre for Development Policy Management
Lead author: Hamid Hamirani, Senior Investment Advisor for Food Systems for the Future and Co-Founder of EHA Advisory
Food systems are at a crossroads. Current agricultural practices, diets, and waste patterns are unsustainable – costing trillions in healthcare, environmental damages, and lost productivity. But transformation is within reach. By adopting sustainable farming, nutritious diets, and reduced waste, we can nourish people and the planet while strengthening economies.
The Good Food Finance Network (GFFN) Public Finance Working Group, co-led by Food Systems for the Future and the FAIRR Initiative with support from the European Centre for Development Policy Management (ECDPM), has been examining the true costs of current food production, diets, and waste. Their research demonstrates the urgent need to transform our unsustainable food systems, which are projected to incur substantial damages.
This work makes an economic case for systems change. It compiles compelling evidence of the fiscal burden on governments from unhealthy food systems. Inaction threatens stability through inflation, food insecurity, degraded land, and climate impacts. However, strategic public financing and innovative collaborative investment models can fund a just transition that benefits all.
Collaborative financing spreads costs and engages stakeholders across the food system. Farmers gain resources to adopt regenerative practices. Citizens access affordable nutrition. Businesses profit from the growing demand for sustainable food. Investors earn returns while enabling change. Donors and governments save on healthcare and climate costs.
The shift will require visionary leadership and political will. But the ingredients exist to create sustainable, equitable, nourishing food systems if we act together. This report aims to equip finance ministries with the rationale and tools to lead that transformation.
The cost of doing nothing compared to action on food system transformation
The costs of inaction on food system transformation are substantial for governments, businesses, and individuals alike.
For governments, and finance ministries, continuing current agricultural practices could incur $9 trillion in land degradation and $4.3 trillion in health/obesity costs[i]. Added environmental and socio-economic damages may amount to $12 trillion more[ii]. These costs threaten fiscal stability, hamper economic growth, and increase social unrest risks.
The private sector, businesses, and investors also stand to lose from inaction. A Chatham House study found malnutrition could be costing companies $130 billion to $850 billion per year in lost productivity, jeopardizing sustainable returns[iii].
Improving nutrition and access to affordable, nutritious foods is crucial for supporting individual and community health and well-being. Section A provides quantitative impact data (in USD values) on how current food systems face sustainability challenges that can negatively impact fiscal stability. For example, diet-related diseases linked to unhealthy eating patterns can reduce productivity and increase healthcare costs. Food loss and waste lead to squandered resources. Declining soil and land health can reduce agricultural yields over time. Climate change impacts on crops and food distribution systems also pose risks. Addressing these interconnected issues requires holistic, collaborative solutions that consider economic, social, and environmental factors. While food insecurity has historically been linked to unrest[v], working together to build resilient, equitable food systems can help secure the right to adequate, nutritious food for all. There are opportunities to transition practices in ways that benefit people, communities, and the planet.
[i] World Obesity Atlas 2023 (World Obesity Federation 2023)
[ii] Food Finance Architecture: Financing a Healthy, Equitable and Sustainable Food System (The World Bank 2021)
[iii] The Business Case for Investment in Nutrition (Chatham House 2020)
[iv] The Intertwined Relationship Between Malnutrition and Poverty (Siddiqui et al. 2020)
[v] Food Security and Political Stability: A humanitarian perspective (Maxwell 2013)
Financing the good food transformation
Recent analyses reveal a compelling fiscal argument for transforming our food systems. Studies estimate that implementing sustainable agriculture practices and promoting healthier diets could yield global savings of billions of dollars by reducing healthcare costs, climate impacts, and food waste. Table 1 shows that for five major economies alone, these two changes could generate approximately $1.3 trillion in savings based on 2021 data.
Section B introduces solutions to the food system-related problems finance ministries across the world are facing:
- strategically reallocating public spending to improve food access and affordability for vulnerable populations. This investment could pay dividends through improved health, productivity, and reduced poverty; and
- incorporating an innovative collaborative funding model (ICFM) that align governments, private investors, and stakeholders to share costs and risks. The ICFM can catalyse sustainable agriculture using existing assets, while generating returns, reducing food waste, and avoiding environmental damages.
The proposed ICFM could offer an efficient financing mechanism to transition our food systems, while unlocking billions in fiscal savings. With smart implementation, these solutions provide an opportunity to strengthen economic, environmental, and human health outcomes, using existing assets like land and infrastructure without any large capital outlay.
Transitioning to sustainable food systems could realize substantial savings and benefits across sectors while upholding the right to adequate, nutritious food. Collaborative action is needed now to capture this potential for economies and societies to thrive.
A. Enhancing socio-economic growth and fiscal sustainability while contributing to net zero
Land degradation now affects over 3 billion people worldwide, disproportionately impacting smallholder farmers and rural communities. The ripple effects touch millions more through food insecurity, inflated food prices, climate change, environmental hazards, and lost biodiversity and ecosystems[i].
Left unaddressed, these systemic risks pose grave threats to inclusive, sustainable socio-economic development and political stability for both current and future generations. However, transforming agricultural systems and land management practices offers nations an opportunity to nourish their people, safeguard environments, uplift rural economies, and strengthen resilience — all while upholding stability and human rights.
This section quantifies the heavy costs of inaction across fiscal stability, socioeconomic growth, political stability, and human welfare. It makes an evidence-based case for food system transformation as imperative for prosperity. By adopting sustainable agriculture, nutritious diets, and reduced waste, nations can strengthen resilience, uphold rights, catalyze broad-based growth, and cement political stability. The path forward is clear, but it requires visionary leadership willing to prioritize people and planet.
[i] Combating Land Degradation (GEF Secretariat 2023)
1. Healthier diets can result in socio-economic growth and fiscal savings
Transitioning to healthier, sustainable diets offers nations a tremendous opportunity to improve fiscal outlooks and catalyse socio-economic growth.
A 2021 study published in The Lancet Planetary Health modelled the costs and savings associated with flexitarian diets globally and regionally. The research found profound benefits across health systems, environments, and economies[i]. Adding up the health, environmental, and economic impacts, the average global benefit came to over $2,000 per person per year. The savings could sum to trillions at national levels. Table 1 summarises the total annual cost, fiscal and economic impact per person of adopting the flexitarian diets proposed in this study.
Beyond the fiscal gains, this transition to healthy, sustainable eating unlocks immense opportunities to uplift livelihoods, restore ecosystems, uphold ethics and human rights, and cement political stability. With wise policy measures and public financing, countries can empower citizens to access nutritious, low-impact foods. Doing so will pay dividends across economies, environments, and public health for generations to come.
[i] The global and regional costs of healthy and sustainable dietary patterns: a modelling study (Springmann et al. 2021)
Table 1: Fiscal and economic impact of a switch to healthy diets and a reduction in food wastage in UK, USA, India, Kenya and the EU (in USD billions)
Source: Produced by the authors with data from Springmann, M., Clark, M., Rayner, M., Scarborough, P., Lancet, Vol 5, Issue 11, E797-E807, November 2021.
See data drawn from Supplementary data sheet, Oxford University, 2021. Nominal GDP and gross debt figures from UK, US and India from IMF Article IV staff reports 2021 & FSF workings. EU public debt figures from Eurostat and GDP from the World Bank. 2021 health expenditure data from the Office for National Statistics (provisional), US CMS, and the Reserve Bank of India (budget estimate). Population data from the World Bank. National health spending converted into US$ using appropriate average exchange rates for 2021.
2. Reduction in malnutrition and obesity generates economic growth and tax revenues
Reducing malnutrition and obesity provides a compelling business case for companies while generating economic growth and tax revenues for nations. A Chatham House study, ‘The business case for investment in Nutrition’, highlights that businesses in ‘low and middle-income’ countries collectively lose between $130 billion and $850 billion a year through malnutrition-related productivity reductions. That equates to 0.4% to 2.9% of their combined GDP – a massive economic burden.
These profitability losses curb companies’ abilities to invest, create quality jobs, support ancillary businesses, and contribute tax revenue. In turn, this hampers fiscal health, economic development, and political stability.
By incentivizing industry to deliver nutritious, affordable food, governments can unlock a virtuous cycle. Companies would gain financially while also tackling malnutrition, obesity, and diet-related diseases. Citizens would have better access to good food and good jobs. This is a win-win scenario for strengthening business, uplifting society’s welfare, and boosting nations’ fiscal positions.
3. Current agriculture practices are harming soil health and degrading land
Small-scale farmers operate 70-80% of global farmland, producing 80% of food by value[i]. Yet industrial practices jeopardize their livelihoods and landscapes. As the IPCC reports, better land management is essential to curb emissions and climate change, reducing the release of greenhouse gases and keep the global temperature to below the benchmark of 2 degree Celsius[ii]. Tropical deforestation driven by livestock and soy feed production has an outsized climate impact[iii]. Meanwhile, mixed crop-livestock systems like agroforestry offer climate resilience[iv].
Overall, conventional agriculture is the foremost driver of biodiversity loss. Livestock and feed cropland occupy over 70% of farmland[v] while contributing heavily to greenhouse gases, antibiotic overuse, and soil erosion[vi],[vii], [viii]. Experts warn we could lose 24 billion tons of fertile soil annually, risking 95% land degradation by 2050[ix].
The economic impacts are massive. The World Bank pegs the cost of land degradation at $9 trillion per year[x] – a price we cannot afford to pay.
Restoration practices require significant upfront investments and costs. Restoring land and soil health has a huge fiscal cost for excessively debt-laden economies, which negatively impacts economic growth diverting funding away from other public services if governments have to take on more debt. For countries that already have high levels of debt and fiscal deficits, the costs of implementing large-scale land and soil restoration programs can be prohibitive.
So in essence, land and soil health restoration has a hefty cost that can worsen fiscal imbalances and slow economic growth in countries with already high public debt levels. Sustainable financing solutions are needed.
If agricultural subsidies are repurposed to support a more sustainable and healthy diet there can be economic, health, climate and biodiversity benefits. For example, 143 thousand lives could be saved in the EU by 2030 by repurposing 100% of the subsidies towards sustainable and healthy diets.[xi]
Transitioning agricultural systems is imperative, especially supporting smallholder farmers with resources and incentives. The research shows this is an environmental and economic win-win scenario. With visionary policies and funding, countries can drive the shift to regenerate our living landscapes.
[i] Small family farmers produce a third of the world’s food (FAO 2021)
[ii] Climate Change 2022: Impacts, Adaptation, and Vulnerability (IPCC 2022)
[iii] Food Systems and Livestock Production Under Climate Change: The IPCC’s Sixth Assessment (Hobart and Reintjes 2022)
[iv] Food, Fibre, and Other Ecosystem Products. In: Climate Change 2022: Impacts, Adaptation and Vulnerability (Bezner Kerr et al. 2022)
[v] FAO, Land Use Statistics and Indicators.
[vi] Our global food system is the primary driver of biodiversity loss (UN Environment Programme 2021)
[vii] Food systems are responsible for a third of global anthropogenic GHG emissions (Crippa et al. 2021)
[viii] Protein Producer Index (FAIRR 2022)
[ix] Land Degradation (Global Environment Facility 2019)
[x] Desertification Costs World Economy up to 15 trillion dollars – U.N. (Reini 2019)
[xi] Options for reforming agricultural subsidies from health, climate, and economic perspectives (Springmann and Freund 2022)
4. Food insecurity and inflation risks sparking social unrest and inhibiting economic growth
Food insecurity fuels dissent and desperation, as evidenced throughout history. Hunger and malnutrition preceded the French Revolution, Russian Revolution, Arab Spring, and other mass uprisings driven by economic grievances[i]. As Aristotle recognized, poverty often begets unrest as people demand change.
This pattern continues today. The 2007-2008 food crisis sparked riots and instability in 48 countries according to the UN World Food Programme, particularly in Asia and Africa[ii]. And in 2023, the WFP director warned that soaring inflation could again ignite “riots, famine, destabilization, and then mass migration by necessity”[iii].
The economic impacts of unrest are well-documented. On average, major social unrest reduces GDP by 1 percentage point for six quarters post-event[iv]. Stock markets also suffer, with returns dropping 1.4 percentage points around unrest on average[v], as examined by the IMF through 156 unrest events in 72 countries. Unrest motivated by socioeconomic factors have sharper GDP contractions than unrest associated with political motives.
The implications are clear – hunger breeds dissent, which breeds economic turmoil. But the inverse is also true. Food security and nutrition uplift societies, underscore resilience, and unlock prosperity. Investing in good food systems today will pay dividends for generations while upholding our shared humanity.
[i] Food scarcity and civil unrest: what we can learn from the past (Long 2022)
[ii] Food scarcity and civil unrest: what we can learn from the past (Long 2022)
[iii] Food scarcity and civil unrest: what we can learn from the past (Long 2022)
[iv] The economics of social unrest (Barrett and Chen 2021)
[v] Pricing Protest: The Response of Financial Markets to Social Unrest (Barrett et al. 2021)
B. Funding the good food transformation
Section A makes clear that inaction on transforming food systems will hamper socio-economic growth, political stability, and public health. However, by adopting smart financing strategies, countries can fund this transition without large capital outlays. This section introduces innovative solutions combining strategic public financing with collaborative investment models that engage stakeholders across food systems.
By pooling complementary resources, this approach spreads costs and risks. Section B details each actor’s role within the integrated model to nourish people and planet. Farmers gain knowledge and incentives to adopt regenerative practices. Citizens access nutritious, affordable food. Businesses profit from growing demand for sustainable products. Investors earn returns that also enable systems change. Everyone benefits through synergies that amplify impact.
Specifically, the Innovative Collaborative Funding Model (ICFM) operationalizes blended financing mechanisms endorsed by the Good Food Finance Network. This pioneering approach goes beyond siloed efforts to drive collaborative transformation. The ICFM provides a roadmap for finance ministries to catalyze good food transformation through partnerships.
The ICFM:
- Convenes financial, non-financial, public, and private sector stakeholders to collaborate on systems change.
- Delineates the assets and value each brings, whether expertise, technology, financing instruments (such as concessional and catalytic finance), or sustainable infrastructure.
- Unlocks blended financing, asset monetization, carbon credits, and other innovative tools to fund the transition.
- Distributes risks and returns equitably across partners.
- Generates social, environmental, and economic benefits for all.
This pioneering approach goes beyond siloed efforts to drive systems-level change. The following sections detail how each stakeholder contributes to the ICFM’s collective mission of nourishing people and planet.
By pooling complementary resources and aligning incentives, we can transition to regenerative, equitable food systems. The ICFM provides a roadmap to get there together.
The ICFM aligns governments, private investors, and stakeholders to share costs and risks. The ICFM can catalyze sustainable agriculture using existing assets, while generating returns, reducing food waste, and avoiding environmental damages. It provides a role and benefits for each actor:
1. Governments – a case for fiscal resilience, citizen health and preserving nature
Investing in reducing the cost of nutritious food production, encouraging the switch to a healthy diet and reducing food wastage will deliver benefits for all economies. For instance, as summarised in Table 1 in Section A, the savings in health and climate costs as a percentage of annual health costs is 16.7% for the EU, 3.80% for the UK, 38.9% for India, and 16.12% for Indonesia.
Food waste in UK primary production accounts for 1.09% of GDP (2021). 2.9 million tons of this is edible food, the equivalent of 6.9 billion meals. This is enough to feed 6.4 million people three meals a day each year and yet 7 million people in the UK live in food poverty or food insecurity. In terms of emissions 6 MT Co2e, which is around 10% of agricultural emissions, comes from food waste on UK farms and 9600 km2 of land (half the size of Wales) is used each year to produce food that never makes it off the farms. Addressing this food waste in the UK could increase farms’ profitability by 20%.[i]
Addressing food waste in low-income countries is equally important. The Food Waste Index Report shows that up to 40% of the total food produced each year is lost or wasted in Rwanda. This represents food that could be grown and harvested on 21% of the total national arable land which is a scarce resource in the country. Food waste also contributes to 16% of Rwanda’s greenhouse gas emissions.[ii] Globally, tackling food waste could reduce the land used for crops by 33.8 million hectares by 2050.[iii]
Reducing food waste unlocks a virtuous cycle with resounding fiscal benefits. Conserved cropland enables increased domestic food production, creating agricultural jobs and reducing import dependency. Higher local output allows countries to export surpluses, bringing in foreign reserves. These factors strengthen trade balances and appreciate local currencies over time. Currency appreciation then reduces inflationary pressure, making nutritious food more affordable for citizens. With lower food costs, disposable incomes rise, spurring consumption and demand across sectors. This boosts job growth and catalyses broader economic expansion.
Boosting food production on existing arable land with current resources lowers costs as fixed overheads are spread across larger output volumes. This increased production efficiency improves profitability and reduces the risk profile of food production investments. Specifically, higher production volumes allow overhead expenses to be apportioned over more units, reducing per-unit costs. The resulting decline in production costs concurrently generates higher returns for investors in food production while also making food more affordable through lower prices. Sustainable intensification that increases yields per hectare provides a win-win value proposition for investors and consumers alike by enhancing financial returns and food security through more efficient operations.
But realizing this potential requires proactive policies and public-private collaboration at every stage – from reducing on-farm losses to improving storage and transport, streamlining processing, educating consumers, and recycling waste.
A significant amount of food produced at farms is lost or wasted before it reaches consumers, especially in low- and middle-income countries. One major reason for this is inadequate infrastructure for storage, cold chain, and transportation from farms to markets. When it comes to the costs of remedying this with improved infrastructure, the most expensive element is often the land acquisition cost. Overcoming this requires financing for both the facilities as well as associated land costs.
Given the positive impact on a country’s fiscal position compared to the several billion dollars lost in doing nothing, the Innovative Collaborative Funding Model could support governments to leverage their existing investment vehicles like sovereign wealth or development funds and state-owned enterprises to support infrastructure for reducing food loss:
- Governments provide existing warehouse facilities owned by their investment arms or companies. This monetizes those assets by putting them towards food storage infrastructure. For e.g. Agaciro, the sovereign wealth fund of the Government of Rwanda (GoR) has equity investments into ‘Africa Improved Foods’ in the form of warehouses and silos for grain (asset monetization).
- Governments provide existing warehouse facilities owned by their investment arms or companies. This monetizes those assets by putting them towards food storage infrastructure.
The rationale is that this model can support infrastructure financing more innovatively than direct fiscal spending which is constrained by debt levels.
The ICFM proposes utilizing existing government assets and land resources rather than direct fiscal spending to support food infrastructure development. This approach could reduce cash outflows for finance ministries compared to traditional spending. Government investment through asset monetization and discounted land rentals lowers project land valuation risks and upfront costs. This helps de-risk agricultural infrastructure investments by reducing financing costs, which are a major barrier.
Overall, this collaborative model aims to catalyse private sector-led development of post-harvest storage and transport infrastructure through creative use of public assets. If designed and executed effectively within specific country contexts, it could generate a win-win for both governments and the agricultural sector. While the fiscal and economic benefits may take time to fully materialize, supporting local food production infrastructure can hedge against commodity price inflation risks over the long-term for governments.
[i] Hidden Waste: The scale and impact of food waste in UK primary production (WWF-UK 2022)
[ii] Rwanda: Growing Concerns Over Food Wastage (Nkurunziza 2022)
[iii] Reducing Methane Emissions in the Global Food System (Climateworks Foundation 2022)
2. Concessional & Catalytic Finance – de-risking investment and reducing the cost of funding
Last year the World Bank announced up to $30 billion[i] for food security for new projects in areas such as agriculture, nutrition, social protection, water, and irrigation. Concessional finance is available at a much lower cost of finance; in some of the low-income countries this finance is available at 1%. There is also catalytic finance – i.e. funding provided by donor agencies and development banks that aims to stimulate or “catalyse” private and public investment in specific development sectors. In agriculture, catalytic finance is available from the likes of USAID, African Development Bank, and IFAD. The chart below provides an example of the current concessional financing provided by IFAD in Kenya.
Figure 1: IFAD’s Rural Kenya Financial Inclusion Facility (RK-FINFA) Technical components and expected outcomes
Concessional finance refers to loans or grants that are provided on terms that are more favourable or “concessional” than market rates. This type of financing is usually provided by donor governments or public development banks to low- and middle-income countries to support economic development and poverty reduction.
| Box 1: Concessional and catalytic finance Concessional finance It has below-market interest rates and long repayment periods. This makes it more affordable for low- and middle-income countries. It is often provided in the form of grants, which do not have to be repaid, or loans at lower interest rates and with longer grace periods than commercial loans. The funds are usually channelled through the finance ministries or treasuries of the recipient countries. This allows the governments to allocate and oversee the funds. Public development banks like the World Bank are major providers of concessional finance. They obtain funding at low costs from donor nations and lend at concessional rates to low- and middle-income countries. Catalytic finance The goal of catalytic funds is to de-risk agricultural investments and create better enabling conditions to crowd-in both private and domestic public sector investment. For instance, guarantee schemes reduce risks for commercial lenders to encourage financing of agri-SMEs. Technical assistance builds capacity of local banks and government agencies. Concessional lending lowers costs of initial investments. This stimulation effect is intended to have a multiplicative impact as each dollar of catalytic financing helps mobilize many more dollars in additional investment. |
Under the Innovative Collaborative Funding Model such finance can be used to significantly reduce the cost of investment which conform to the conditions of mitigating climate risk, improving agricultural practices, and preserving nature. Concessional finance provides affordable financing to low- and middle-income countries, distributed through their finance ministries, and public development banks are a key source of this preferential financing – thus it is commonly referred to as development assistance, with a main goal of supporting poverty reduction and sustainable development.
For concessional finance to be effective, the aggregation of small-scale farmers into cooperatives or associations seems critical for concessional lending to be efficient, risk-managed, impactful, and able to change policies. It transforms small-scale farmers into an organized customer base for financing:
- Transaction costs. Dealing with many tiny loans to individual small farmers is inefficient for lenders. Aggregating them into farmer cooperatives or associations reduces transaction costs and makes it more viable to lend.
- Risk reduction. Lending to individual small-scale farmers can be risky as they have little collateral. When farmers join together in an organized group, it reduces risks for the lender through collective liability.
- Economy of scale. Small-scale farmers achieve better economies of scale when bulk-buying inputs and marketing produce collectively. This makes them more productive and business-like.
- Access to services. Aggregated small-scale farmers find it easier to access extension services, technology, and markets – key to improving productivity. A lender can serve many farmers at once by lending to their association.
- Political capital. Organized groups of farmers have more lobbying power and ability to advocate for policies supporting smallholder agriculture.
There are around 10.000 primary cooperatives in Rwanda with membership of around 5.2 million with a share capital collected of RWF 53 billion (USD 53 million) in 2022. The agricultural sector represents 46.8% of the total cooperatives in Rwanda[ii]. Lack of finance, professionalism, quality of the post harvesting equipment, enforcing contracts, and governance are some of the challenges for small-scale farmers and agricultural cooperatives. USAID under the Hinga Weze (Feeding the Future Rwanda) programme[iii] has significantly improved the agricultural productivity and income of the small-scale farmers using the existing cooperatives[iv].
The ICFM makes an investment case for concessional finance to be an essential element for financing investment opportunities for good food transformation, reducing the cost of financial risk to small-scale farmers who are key stakeholders in transforming the food system. The ICFM offers an inclusive approach for good food financing.
[i]World Bank Announces Planned Actions for Global Food Crisis Response (The World Bank 2022)
[ii] Statistics of cooperatives in Rwanda Quarter three report (Rwanda Cooperative Agency 2022)
[iii] Feed the Future Rwanda Hinga Weze activity (CNFA 2022)
[iv] For further details refer to section 3 below on the role of donor agencies in the Innovative Collaborative Funding Model.
3. Donor Agencies – catalysing capacity for food systems transformation
Donor agencies play a vital role in building technical capacity to boost productivity and farmer incomes while protecting nature and soil health. For example, USAID, under the Hinga Weze programme,[i] has significantly improved agricultural productivity and income of small-scale farmers using the existing cooperatives. The programme provided grant capital and technical expertise to improve agricultural practices in a climate-smart way by:
- Building terraces on hilly farmland to decrease water overflows and prevent soil erosion
- Organising farmers into cooperatives and providing them with technologies such as seed packages and customised fertilisers based on the soil characteristics for each site;
- Developing over 300 hectares of new irrigation sites, including fixed and portable small-scale irrigation technologies;
- Introducing solar irrigation facilities as a sustainable solution to water scarcity that relieves farmers of the burden of incurring irrigation operation costs based on fuel consumption.
The irrigation investments generated quick returns, breaking even in 5 years with annual gains up to $123,903 by year 10. Before the program, farmers relied on rain-fed farming but can now produce year-round, including high-value crops like tomatoes earning up to $3,500 per hectare.
Under the proposed financing model, donor agencies would primarily provide expertise and grants, not direct funding or implementation. Specifically:
- Grants would build capacity via training, advisory services, and institutional strengthening.
- Grants would also provide initial capital for investments, to be repaid as projects generate returns, making funding partially self-financing.
- Grant recipients would report on key performance indicators tied to donor objectives, enhancing transparency.
- Donors serve as collaborators providing know-how, enabling more self-driven development.
Targeted donor grants can catalyse a virtuous cycle of capacity building, investment, and self-sustaining returns – amplifying impact well beyond the initial funding. By sharing knowledge and best practices, donors empower producers to profitably transform their own food systems.
[i] Feed the Future Rwanda Hinga Weze activity (CNFA 2022)
4. Innovators – improving productivity, reducing emissions and food wastage
Technological innovation has enabled massive productivity gains in agriculture, lowering food prices while feeding a growing global population. From 1900 to 2010, inflation-adjusted food prices fell around 1% annually even as the population grew from 1.7 to 7 billion..[i]
Further innovation is critical to slash emissions while sustainably meeting food demand. Livestock, food waste, and rice cultivation generate 60% of anthropogenic methane, a potent greenhouse gas. Over 150 countries have pledged 30% methane reductions by 2030 under the Global Methane Pledge. Modelling by the Global Innovation Needs Assessment (GINA) [ii] shows targeted agricultural innovation could:
- Cut $1 trillion in costs to limit warming to 1.5°C by 2050
- Avoid 1.3 million premature deaths from improved air quality
- Protect crops and habitat through less water and air pollution
- Free over 350 million hectares for carbon sequestration by 2050
- Reduce agricultural land needs by 322 million hectares via alternative proteins
- Create over 120 million jobs globally by 2050
To rapidly scale innovative solutions, the ICFM recommends innovators partner in investment opportunities in exchange for lowered innovation costs and intellectual property rights. This can de-risk investments while accelerating development and deployment of emissions-reducing technologies, from methane capture to nitrogen-efficient crops. With sound incentives for innovators and investors alike, agricultural innovation can continue the historical trajectory of growing more food on less land with fewer emissions.
[i] Real agricultural prices have fallen since 1900, even as world population growth accelerated (USDA 2012)
[ii] Reducing Methane Emissions in the Global Food System (Climateworks Foundation 2022)
5. Private Investors – generating long-term sustainable returns and social impact
Farmland investments have delivered robust risk-adjusted returns, according to leading real estate indices. The National Council of Real Estate Investment Fiduciaries (NCRIEF) is the leading provider of investment performance indices and transparent data for US commercial properties. The NCREIF farmland index is the definitive index for the farmland market. According to NCRIEF data summarised by FarmTogether,[i] investing in farmland:
- Demonstrated strong absolute returns over the past several decades. It averaged ~11% total annual returns (income + price appreciation) from 1992 to 2022;
- Returns have been historically uncorrelated to conventional assets, such as stocks, bonds, and real estate, and broader market indices, providing investors with welcome diversification;
- Experienced historically less volatility than both traditional and alternative asset classes. It has historically provided stability for investors during market downturns;
- Has historically been one of the best inflation hedges. The NCREIF Farmland Index’s Total Return has consistently provided returns more than double the inflation rate since before 1992;
- Investments into farmland are funding the upgrades and transitions necessary for farmers to incorporate high-tech and sustainable approaches, such as regenerative agriculture, to help ensure a healthy planet and long-term food security for all.
Investing in farmland also funds the technology adoption and sustainable transitions necessary for long-term productivity and food security. Partnerships with government, multilateral agencies, donors, and innovators offer substantial benefits that compellingly position food and agriculture as an impactful investment opportunity for private capital.
The ICFM provides compelling reasons for private investors to partner with:
- Sovereign development funds to expedite approvals to de-risk and accelerate investments;
- Multilateral agencies (concessional and catalytic capital providers) providing low-cost financing to de-risk investments.
- Multilateral agencies and development banks supply low-cost financing through concessional and catalytic capital, further reducing risks. Donor-funded guidance on sustainable agricultural practices can significantly improve yields, prevent land degradation, optimize land use, and aggregate smallholder farmers to generate scalable impact.
- collaborations with innovators allow implementation of technologies to reduce harmful emissions, boost efficiency, and enhance production and distribution.
The combined risk mitigation, financial incentives, operational improvements, and environmental sustainability benefits of collaborating with stakeholders across the food system value chain make a convincing case for expanded private sector investment. By leveraging these synergies through partnership, private investors can drive strong financial returns while catalysing progress towards food security and climate goals.
[i] Farmland: A Superior Asset Class (Farmtogether 2022)
Collaborative Funding as the Way Forward
This report demonstrates the strong scientific and economic rationale for finance ministries to spearhead food system reform. Continuing today’s unhealthy, extractive patterns will incur trillions in avoidable costs from diet-related illness, land degradation, climate change, and waste. It also threatens stability through inflation and food insecurity.
In contrast, sustainable agriculture, nutritious diets, and reduced waste could yield substantial savings and societal benefits. Strategic policy making and public financing can drive this just transition without fiscal strain. Creative use of public assets through innovative collaborative models spreads costs and risks. Partnerships empower stakeholders across food systems to implement solutions tailored to local contexts.
The ingredients exist for nourishing, sustainable food futures. But realization requires leadership. Finance ministers must make the economic case for change and enable smart financing models. The private sector must embrace opportunities to profitably deliver healthy, eco-friendly food. Farmers need resources to adopt regenerative practices. Citizens should demand and access good food.
Together, we can create food systems where farmers thrive, nature regenerates, diets nourish, economies prosper, and rights are upheld. This report provides the rationale and roadmap to get there. The solutions are attainable if we summon the collective will to act. Now is the time for finance ministries to lead the way.
Good Food Finance Network 