Forum Views - January 2024

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FORUM VIEWS - JANUARY 2024

The consequence? Businesses find planning increasingly

difficult, leading to elevated expenditures in defending

against climate-related consequences. Simultaneously,

finance providers struggle to gauge risks accurately,

hindering their ability to determine appropriate capital prices.

The increased financing costs associated with this rising

uncertainty are having a perverse impact on the provision of

essential funding to many Lower and Middle Income

Countries (LMICs) across the global south that face the

greatest threats from climate change and yet now find

themselves having to pay ever high costs for the funding they

require to support adaptation and mitigation measures on top

of the impact on global interest rates caused by rising

inflation.

These costs apply to businesses as well and the vulnerability

to threats arising from the interlinked climate and nature

crises extends across sectors and along supply chains,

making it imperative for businesses to adapt proactively.

As the source of a third of humanity’s GHG emissions and the

primary driver of biodiversity loss (as well as the cause of a

fifth of global deaths due to non-communicable diseases) the

food system cannot remain as it is today. Transformation is

essential and inevitable, but investors can accelerate the

pace of change by deploying their capital where it is most

needed.

Planet Tracker published a report in March 2023 entitled ‘A

Financial Markets Roadmap for Transforming the Global Food

System’ where we identified six priority actions that financial

institutions (and individuals) should take to support the

transformation.

Allocate capital to stopping or reducing harms including

deforestation, methane emissions and food loss and waste;

and invest in solutions including traceability systems for

supply chains, regenerative agriculture and aquaculture, and

the development of alternative proteins.

There are four underlying themes that will drive this

transformation and thus create these investment

opportunities:

• Responsible supply chains - increasingly, regulation and

pressure from end customers will require businesses to

have full visibility over their supply chains (‘traceability’)

to be able to ensure they can provide the information that

regulators and the markets require (‘transparency’).

Planet Tracker’s research shows that this can be

profitable for the businesses that embrace it (and those

that don’t will find their costs increase - as already

illustrated by the EU’s impending deforestation due

diligence rules that will require traceability of key soft

commodity imports).

• Increased (true cost) efficiency - the food system is

incredibly inefficient, wasting a third of the protein

produced, using land inefficiently to focus on industrial

meat production rather than alternatives which require far

less land, excess use of water, wasteful deployment of

costly fertilisers, and ultimately using agricultural and

fishing practices that deplete the natural capital base on

which the whole system depends. There are probably no

other systems in the global economy that provide such

low hanging fruit in terms of enhancing efficiencies while

respecting planetary boundaries.

• Reduced pollution - the food system is responsible for

significant, life threatening, pollution including methane,

particulate matter, nitrogen run-off and plastics.

Significant opportunities will arise as existing businesses

seek to address these issues and new ones arise to

provide novel solutions (such as bio-alternatives to

plastics).

• Sustainable production - consumers are powerless in the

face of the marketing spend of the large food

manufacturing, retail and food service companies, and

too many of the products we are persuaded to consume

Allocate capital to stopping or

reducing harms including

deforestation, methane

emissions and food loss and

waste; and invest in solutions

including traceability systems

for supply chains, regenerative

agriculture and aquaculture,

and the development of

alternative proteins.

Investing in solutions

Investing in sustainability and green technology emerges as

a pivotal strategy. Not only do these initiatives mitigate

economic losses, but they also offer substantial long-term

benefits. Delayed action, on the other hand, comes at a steep

cost, both economically and in terms of human lives.

Moving towards a low-carbon economy not only aligns with

environmental goals but also yields economic advantages.

Investing in innovative strategies, such as regenerative

agriculture and traceable supply chains, can enhance

resilience and contribute to sustainable business practices.

The food system provides a significant opportunity for

investors to support and benefit from the required

transformation.

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