Recovery and resilience depend on financing food system transformation
With the release of a new WWF report, ‘Bringing It Down To Earth: Nature Risk and Agriculture’, offering guidance for financial institutions, Margaret Kuhlow, WWF Finance Practice Leader, and João Campari, WWF Food Practice Leader, take stock of the opportunity and need for investment in nature-positive food production.
System error
A green, just, and resilient recovery from the global COVID-19 pandemic depends fundamentally on scaling investment in ecosystem restoration and nature-based solutions that tackle climate change and nature loss.
And for financial institutions looking to address climate- and nature-related financial risks, food system transformation is a pressing priority.
How we produce and consume food today is the biggest single cause of deforestation, land conversion, and nature loss, which in turn drive the emergence of infectious diseases like COVID-19.
Since 1970, food systems have driven 70% of biodiversity loss on land and 50 in freshwater. And we use over 40% of all habitable land to produce food but more than half of all farmland is degraded and underperforming.
Agriculture also accounts for 29% of global greenhouse gas emissions, and 70% of freshwater use. And nearly 900 million people go hungry every day while nearly two billion are overweight or obese, and one third of all food produced is never eaten.
Our current industrialised, subsidised, and globalized food system is undermining the stability of the natural systems on which it depends, replacing diverse ecosystems with monocultures and exacerbating climate breakdown.
But with more purposeful investment, food systems can be part of the solution to nature and climate crises. Creating a sustainable global food system is critical if we are to feed a growing global population and deliver on the fundamental human right to healthy and nutritious food produced within planetary boundaries.
Financial risks
Climate- and nature-related risks driven by conventional food production not only impact producers, suppliers, and consumers but also present systemic financial risks. Decline in ecosystem services such as clean water, pollination, pest control, and a stable climate are causing significant losses and increasing costs. Soil degradation alone could reduce global crop yields by an average of 10% with estimated costs of $6.3–10.6 trillion per year globally.
Supply chain pressure on producing countries is also causing upset. While corporate commitments to end deforestation remain largely unmet, the call for change from big brands and investors continues. In June last year, seven European funds threatened to withdraw $2 trillion-worth of investments from Brazil if steps weren’t taken to protect the Amazon rainforest. More recently, nearly 40 food businesses threatened to stop sourcing products from Brazil over proposed land reforms that could accelerate deforestation in the Amazon.
And with new EU legislation designed to curb the global environmental impact of European consumption on natural ecosystems worldwide receiving backing from some powerful industry players, along with similar proposals from the UK, food-related financial risks are sure to increase.
Nature-positive production
Unsustainable food production may be to nature loss what fossil fuels are to climate change — but we can’t phase out food, so we need to transition to and scale nature-positive production to reduce risk and build resilience.
We must improve food traceability and remove deforestation and land conversion from food supply chains. We must rehabilitate the 52% of farmland that is currently degraded or disused, and adopt agroecological practices, such as agroforestry and regenerative agriculture, to restore and maintain ecosystem services and improve yields. We must transition to Planet-Based Diets — a flexible way of eating that is different around the world, but is higher in human health benefits and lower in environmental impacts. And we must reduce food loss and waste, saving the one third of all food currently produced that is wasted.
All of this requires a shift in research, incentives, and investment that financially reward and enable producers to adopt nature-positive practices that protect ecosystem services, and allow nature to flourish alongside food production.
Currently, only 1% of the $700 billion in subsidies that producers receive each year is used to benefit the environment. The other 99% fuels intensive, industrial production, which drives conversion, monocultures, and excessive pesticide and fertiliser use.
Transforming food and land-use systems by 2030 would require about $300-$350 billion (less than 0.5% of global GDP) each year but deliver $5.7 trillion in economic savings over the same timeframe based on avoided hidden costs. In other words, societal return would be more than 15 times the investment cost, and create $4.5 trillion in annual opportunities for businesses. In addition, investing in sustainable, resilient food systems could support the livelihoods of more than a billion people around the world engaged in agriculture.
Bringing it down to Earth
In response to these risks and the opportunity of a more financially and environmentally resilient approach, WWF has launched a new report, ‘Bringing It Down To Earth: Nature Risk and Agriculture’. The report offers financial institutions a one-stop shop to understand and assess climate- and nature-related risks in the food sector, as well as guidance on how to address such risks in ways that support agroecology and shape nature-positive, net zero portfolios.
Across the board, financial institutions must understand that nature-related risks are born both of dependencies on nature as well as investment impacts on the environment, and start scaling investment in solutions that transform production, shift diets, and reduce waste.
With 55 signatories holding €9 trillion in assets under management having made the Finance for Biodiversity Pledge, and the launch of the UN Decade on Ecosystem Restoration, the invitation is open to all to join #GenerationRestoration.
Through the UN Food Systems Summit, coalitions are already getting behind pilot projects and commercially viable solutions for nature-positive production, including a $200 million Climate-Smart Food Systems Impact Investment Fund. And together with the development of a framework to disclose nature-related risks by the Taskforce on Nature-related Financial Disclosures, there has never been a better opportunity to kickstart a transformation of our food system for a green, just recovery, and a resilient future.
