Women work on tissue cultured Banana sapling at the Jain Irrigation facility in Jalgoan/Atul Loke for Panos Pictures/Food and Land Use Coalition
Recent commitments by financial institutions to align with net zero raise the question: where is all that money going to go? The food and land use sector offers unique investment opportunities that can reduce carbon emissions in a cost effective manner, while also addressing biodiversity loss and inequality. This must be done in a people-centered way, contributing to a just rural transition.
During COP26 banks and asset managers representing USD $130 trillion – 40% of the world’s financial assets - pledged to align with net zero carbon emissions by mid-century, and to provide 2030 interim goals, by joining the Glasgow Financial Alliance for Net Zero (GFANZ).
That is, as the Washington Post put it, “eye-popping”.
But as Larry Fink, CEO of BlackRock Inc, the largest asset manager in the world, commented: “deploying that capital is going to be far harder”. Put simply, the real work starts now.
Where is all that money going to go?
Perhaps the best place to start is a simple question: where is all that money going to go?
According to the new Race to Zero Financing Net Zero Roadmap, USD $125 trillion is needed in total to transform our economy and avoid the worst impacts of climate change. This includes $32 trillion across six key sectors over the next decade.
A comparison of the costs of transforming these sectors to net zero vs their contributions to global greenhouse gas emissions shows one clear winner for low hanging fruit: Agriculture, Forestry and Other Land Use (AFOLU). For less than 5% of the total investment needed to get to net zero, we can mitigate around a quarter of global greenhouse gas emissions.
Most significantly, investing in low carbon resilient agri-food systems offers the opportunity to do this in a way which addresses climate change, biodiversity loss and inequality, the most pressing global imperatives of our time, together. For example regenerative agriculture, using agricultural practices that seek to rehabilitate and enhance the ecosystem of the farm, offers investment opportunities with positive outcomes for climate, nature and people, and is fast growing traction: last week saw the launch of REGEN10, which aims to scale regenerative practices so they produce 50% of the world’s food by 2030.
Bringing sustainable food systems to the heart of the finance agenda
The recent UN Food System Summit, the first of its kind, has shone light on the importance of food systems for people, planet and prosperity. But these systems continue to get much less attention than is warranted: to date, despite the potential impact, less than 10% of climate finance has been spent on the Agriculture, Forestry and Other Land Use sector.
This has to change. The Good Food Finance Network, recently launched by a number of partners including the World Business Council for Sustainable Development, aims to do just this: bring sustainable food systems to the heart of the finance agenda.
A Just Rural Transition
The food and land use transition is an essential, and often overlooked, part of the climate solution. But it can only be successful if it is carried out in partnership with producers and rural communities.
There is a strong moral case for taking this approach: food producers and their dependents make up two thirds of the people facing extreme poverty in the world and we cannot meet the Sustainable Development Goals while leaving them behind.
There is also a practical case: farmers and fishers must be incentivized and rewarded for their efforts in driving the changes needed.
And there is an economic case. Resilient communities, equitable livelihoods and strong SMEs ecosystems allow for reliable supply chains. Investing in people – whether internal staff or those across a company’s supply chains – enables businesses to respond to shocks and manage risks – as an analysis of early business responses to the COVID pandemic shows. Vibrant rural economies offer decent work and living incomes that keep young people, the workforce of tomorrow, in food and agriculture.
Financing a just rural transition is a way to future proof businesses, economies and societies.
Showing the way
The biggest question though is the “how”.
To explore this, the Just Rural Transition initiative has produced a series of thirteen case studies which show best practice for investing in people-centered food systems. They include the Moringa Fund, deploying private equity to build community and supply chain resilience through agroforestry, Aceli Africa, which uses a data-driven, marketplace approach to mobilize private sector lending to agri-SMEs, the engines of prosperous rural economies, and Neumann Kaffee Gruppe (NKG)’s Smallholders Livelihoods Facility, a revolving credit facility backed by ABN AMRO, Rabobank and BNP Paribas, which provides farmers with credit, enabling them to buy inputs which improve production and strengthen the supply chain.
These examples show how investment in agri-food systems can enhance both equitable livelihoods and the bottom line. But a just rural transition relies on getting these approaches to scale.
Mark Carney, the mastermind behind GFANZ, posed a challenge, as he reflected on the commitments made by finance leaders: “What you’re hearing today is that the money is here, but that money needs net-zero aligned projects.”
It is imperative that these projects include scaling up finance for people-centered food systems.
We can’t win the race to zero without financing a just rural transition.