There is an imperative to transform food systems under a changing climate, but sustainable investments are not at scale yet

June 18, 2020
This blog is part of a series for the Transforming Food Systems Under a Changing Climate initiative. It describes one of the 11 priority actions for transforming food systems outlined in the initiative's flagship report, launching 25 June 2020.
Reduced pollution. Blue skies. Sounds of wildlife. The COVID-19 pandemic has renewed an appreciation for nature and heightened calls for a sustainable green recovery. With the global lockdown and many economies at a standstill, global emissions are expected to decline by 4.2–7.5% year-on-year in 2020 (versus a forecasted 1% increase before the pandemic). To put this in perspective: we would need to reduce global emissions by 7.6% every year, for the next 10 years if we are to achieve the 2015 Paris Agreement goals.

By 2050, food systems will need to deliver 60% more food to feed a population of 10 billion. And with agriculture, forestry, and other land use (AFOLU) sectors accounting for nearly a quarter of global emissions, the imperative to build low carbon and climate-resilient food systems becomes clear.

The investments needed to transform food and land use systems are estimated at USD 300–350 billion per year. Climate finance, however, and this is essential for rising to the challenge. An estimated USD 579 billion in total climate finance is mobilized annually, but only USD 21 billion is invested in sustainable land use globally. Smallholder finance alone represents a significant opportunity for scale and impact, but there is a lack of investment given low productivity, high fragmentation and transaction costs, and high risks. And herein lies the problem to scaling climate finance in the AFOLU sectors: few investable business models and opportunities.

 

Creating new business models and investment opportunities in low carbon and climate-resilient food systems

The CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS) has generated a wealth of evidence on how food systems transformation can drive long-term value while delivering food systems and landscapes that sustain the planet, drive prosperity and nourish people. But given the long project development lead times, costs, and risks inherent in transforming food systems, public and private financiers need to develop and deploy sustainable finance solutions to create new business models and opportunities at scale by:

  1. Leveraging science-based interventions to build low carbon and climate-resilient food systems: Research & development (R&D) and technical assistance facilities can support the integration of sustainable agricultural practices and technologies across food systems. Enhancing climate resilience and reducing greenhouse gas (GHG) emissions will strengthen the positive feedback loop between improved ecosystem services and long-term productivity;
  2. Developing new business models that prioritize sustainable food systems: Responsible sourcing and supply chain sustainability are increasingly incorporated into business plans as drivers of long-term financial value. Public financing for public goods can further enhance returns and align economic incentives by monetizing ecosystem services across food systems; and
  3. Creating new sustainable finance opportunities in food systems for investors: Sustainable finance instruments can incorporate climate change, natural capital, biodiversity, and inclusive growth sustainability principles into the heart of mainstream investment. Leveraging public capital to monetize public goods and de-risk projects can create new investment opportunities and unlock private sector financing.

 

Creating a sustainable finance opportunity from the crisis and a roadmap forward

This is an inflection point to reframe incentives and channel sustainable finance to transform food systems. Nearly a thousand companies have committed to the UN Climate Change’s Race to Zero pledge to achieve zero carbon emissions by 2050. There is a growing awareness among corporates and investors of the impacts of climate change and natural capital depletion on long-term financial value.

Indeed, many food and agriculture companies are already investing from their own balance sheets in sustainability programs to develop low-carbon and climate-resilient supply chains. Similarly, environment, social and governance (ESG) fundamentals are becoming key considerations for investors⁠—with recommendations from the Task Force on Climate-related Financial Disclosures and increasing pressure to adopt the EU taxonomy for sustainable finance. Additionally, with ESG-oriented investment strategies outperforming the market, sustainable investments are increasingly looked upon favorably as a smart portfolio diversification strategy.

But more can be done. A global stimulus package in response to the COVID-19 pandemic presents an opportunity to deploy an unprecedented quantum of public capital⁠—trillions of US dollars⁠—into a sustainable recovery that mainstreams environment and biodiversity into investment decision processes. In Europe, the European Green Deal can be central to the COVID-19 economic recovery. This rescue plan can help accelerate the green transition by deploying public finance for public goods, incorporating sustainability clauses and incentives as financial covenants, and systematically mandating climate-related financial disclosures.

As part of the Transforming Food Systems Under a Changing Climate initiative, CCAFS aims to provide a set of strategies and a detailed roadmap on how to finance the transformation of food systems and turn a crisis into an opportunity.

 


About the authors

Benhan Limketkai, Principal at KOIS 

Alberto Millan Arredondo, Sustainable Finance Advisor at CGIAR Research Program

This blog is part of a series for the Transforming Food Systems Under a Changing Climate initiative. On June 25th, 2020, we invite you to join CGIAR for an around-the-world virtual event to engage on ways to take action together.  See details on CGIAR’s conference and report here.

Follow KOIS on social media or subscribe for more updates!

You may also like…

Provisional reception of the construction of affordable apartments in Anderlecht

Brussels, September 14, 2020: On June 22, 2020, the construction of a building including affordable apartments and commercial spaces was received. It is a result of the collaboration between the developer Kairos, through City Projects, and the real estate company Inclusio. The building offers a total of 163 residential units, 6 commercial spaces, an office and 141 underground parking spaces.

Join KOIS’ pre-MBA programme in India

KOIS, a pioneering global impact finance firm, is looking for new talent to join its pre-MBA Analyst programme in Mumbai, India! Interested in having a concrete impact while building strategic financial skills? Apply today!

Creating a safety net for India’s migrant workers

India has seen one of the strictest and longest lockdown due to the COVID-19. The lockdown has significantly affected India’s migrant worker population. While India’s government set up a relief package of nearly $23 billion specifically for migrant workers and the urban poor, the conditions keep many from availing these benefits. Could impact finance help?