Beijing — The global food system is not sustainable. While it is worth around $ 8 trillion a year, its negative impact is estimated at around $ 12 trillion. And this is not the only contradiction of the system. Food systems around the world are both affected by climate change (due to weather disturbances and rising temperatures) and significantly contribute to it (through greenhouse gas emissions and destruction of the biodiversity). The millions of jobs they provide are often of poor quality and poorly paid. And, more importantly, they are failing in their ultimate goal of providing healthy, affordable food for all.
Because the global food system is fundamentally unsustainable, change is inevitable. But the sweeping reforms needed to create an inclusive and sustainable sector that produces nutritious food for the world’s people can have devastating short-term consequences. If we take the wrong approach, incorporating the real costs of production into food systems could trigger widespread bankruptcy, devastate rural unemployment, drive up prices and increase poverty.
However, the best way to achieve a rapid, just and safe transition to a sustainable global food system capable of providing safe and affordable food for all is the subject of heated debate.
From a production standpoint, proponents of regenerative agriculture vehemently oppose a new generation of soilless food production, such as laboratory-grown “alternative proteins” and vertical farming. But it is difficult to make regenerative agriculture evolve quickly. Soil-less systems must be an important part of the solution, given their dramatically reduced carbon footprint and water consumption, minimal impact on biodiversity, and potential for rapid delivery of healthy, inexpensive food on a large scale.
The role of finance in this transition is no less controversial.
There is some merit in complaining about the undue influence of a limited number of private actors over decisions that impact the entire global food system. Financialization – the drive to maximize risk-adjusted financial returns – is increasing across the global food system and market concentration is increasing. For example, only 10 companies control half of the global seed market, and four agribusinesses account for 90 percent of the global grain trade. Only 1 percent of farm businesses own 65 percent of available farmland.
Financialization reinforces the unequal distribution of economic income, reducing the incomes of small farmers and communities, while supporting business models that under-offer healthy and affordable foods and overfeed foods containing high levels of salt, sugar, fats and carbohydrates. Additionally, financialization amplifies corporate lobbying that externalizes public health costs, maintains perverse agricultural subsidies, and ensures that costs to the climate and nature do not negatively affect bottom lines.
But private capital is absolutely necessary to finance the transition of the global food system. We must harness the massive financial resources managed on our collective behalf by pension funds, banks and private equity while mitigating the dangers of financialization.
In a recent report, “Making Finance Work for Food: Funding the Transition to a Sustainable Food System,” the Finance for Biodiversity initiative describes the role that global finance can play in the necessary transition. The report, prepared in association with the Food System Economics Commission, describes four ways in which financial tools can be used to shape future food systems.
To begin with, financial policies and regulations, reinforced by shareholder and public activism, must lead investors to internalize the costs to nature and climate in their financing decisions. This change would block dirty assets, accelerate environmentally friendly investments and trigger a shift towards more nutritious food production.
Second, financial innovations, including mixed public and private solutions, are needed to accelerate investments in healthy foods produced by climate-friendly and nature-friendly forms of agriculture, thereby reducing costs. Such innovations could involve scalable instruments equivalent to feed-in tariffs which have been used to great effect to catalyze investments in renewables.
Third, public policies and finances are needed to protect and recycle those whose livelihoods are eroded during the transition. The aim should be to provide the technology, skills development and capital to enable them to own and operate commercially viable, regenerative and soil-less forms of food production.
Finally, we must create opportunities to empower citizens, including by harnessing the power of digitization. As consumers, they can make an impact by adopting improved and sustainable diets. As investors, pension policyholders and taxpayers, they can advocate for better use of their money.
Delaying the transition to a more inclusive and sustainable global food system would jeopardize food security, destroy livelihoods and prevent us from achieving environmental goals. Resetting global finance and harnessing its benefits is necessary to finance a rapid, sustainable and equitable transition. Project union
Simon Zadek is president of the Finance for Biodiversity Initiative.
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