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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