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Agroecology Investment Guide
Our Agroecology Investment Guide provides you with comprehensive evidence and information on investing in enterprises which operate in line with the 13 principles of agroecology. The guide presents key evidence on the social and environmental impact of agroecological enterprises (AEEs), and showcases innovative funding models to support the holistic approaches of AEEs, with the ultimate goal of shifting towards healthy, just and resilient food systems.
This guide is for all impact investors, donors and international financial institutions looking to invest in food systems transformation. It marks a starting point for answering your questions around why and how to invest in AEEs to achieve both your intended impact and your financial goals.
Despite technological advances in agriculture and food production, a large proportion of the worldâs population still suffers from food insecurity and malnutrition. In 2022, approximately 29.6% of the worldâs population â equivalent to 2.4 billion individuals â experienced moderate to severe food insecurity. This represented an increase of 391 million people from 2019. Food insecurity and malnutrition significantly lower peopleâs physical development, cognitive development and learning, resulting in lower productivity as well as political and economic instability.
Many factors contribute to these challenges, including poverty, conflict, climate change and unequal distribution of resources, but they are also a consequence of the global food systemâs reliance on monoculture, intensive farming practices, and industrial-scale production. Food systems have for too long been geared towards producing large quantities of cheap food, in turn generating high externalised environmental, social and health costs. Pressure on smallholder farmers to produce low-priced food and compete with cheap imports from the Global North creates unsustainable and unjust lock-ins.
Monoculture and industrial production systems have led to a loss of biodiversity as large-scale farming, focused on single crops, has undercut diverse ecosystems, reducing food systemsâ resilience against environmental shocks and stresses. The current food system also contributes to climate change, with agriculture and livestock production accounting for a third of global greenhouse gas emissions. If we do not implement agroecological production practices, reduce food waste and start to eat healthier diets, the methane emissions from agricultural production alone will push increases in world temperatures above 1.5C. The industrialisation of food systems also erodes local food cultures and knowledge systems.
At the same time, the current business and policy environment poses a real challenge for small and medium-sized agricultural businesses in Africa and beyond in the following ways:
- Subsidies and cheap food imports erode their incomes and ability to compete, threatening their existence.
- High volumes of food are lost due to challenges around infrastructure, food preservation and processing, and transport.
- Access to organic inputs, such as seeds, fertilisers and pesticides, is severely limited.
Power imbalances reinforce these challenges, as a small number of large corporations influence and control the availability and quality of seeds and other inputs, such as fertilisers and pesticides. The concentration of power in too few hands (e.g. the four largest commodity firms control over 70% of the global grain market) has led to small-scale farmers being excluded from value chains. For example, small farmers struggle to satisfy large agribusinessesâ minimum-volume stipulations while volatile prices expose them to unsustainable risks and can hurt their incomes. Small and medium-sized AEEs also struggle to access markets, infrastructure and finance. This unequal system has left small-scale farmers struggling to survive, led to the marginalisation of healthy local food systems and resulted in many people being unable to access healthy, nutritious food. Low-income countries also bear the highest burden of the hidden costs of food systems relative to their national income.
Women too bear an unequal share of the burden associated with food systems. For example, women in Africa produce around 70% of the continentâs food, but they face significant challenges in the agricultural sector, such as lack of land and profit ownership, limited access to finance, constrained decision-making power and restricted access to markets. At the same time, women are more affected by food insecurity than men in every region of the world, and climate change impacts them disproportionately.
Food prices do not currently reflect the environmental, social and climate impacts of food systems. The estimated market value of all the food consumed globally totals USD 9 trillion. However, food systemsâ external costs to the environment and society total at least USD 10 trillion, according to the FAOâs State of Food and Agriculture 2023 report. This represents about 10% of global GDP. And including health care, these costs are as high as USD 19.9 trillion â comprising USD 7 trillion of costs to the environment, USD 11 trillion in terms of human life and USD 1 trillion in economic costs â according to a WWF study. These costs include the large and growing burden of hunger, malnutrition, lost productivity, ill health and environmental damage, which is largely borne by the public sector. Consequently, the price we pay for food covers only one third of its actual cost. And not included in these numbers are subsidies of about USD 385 billion, which result in harmful environmental outcomes. We urgently need to re-value common goods in our economic system.
In light of these challenges, it is clear that the current global food system is failing to meet the needs of people and the planet. Major global financial institutions also consider climate change, biodiversity loss, and income inequality material risks to investor portfolios. There is an urgent need for transformative and systemic change in our food systems, to promote more sustainable, equitable and resilient approaches to agriculture and food production and more prosperous local and national economies. It will not be enough to address some of these challenges in isolation, as they are all interconnected. We need a systemic approach that also addresses their root causes.
The modern science, practice and movements of agroecology and regenerative approaches, which draw from and build upon indigenous wisdom and expertise, offer significant opportunities to address these challenges. By strengthening food systems that increase food security and sovereignty, reduce biodiversity loss, and enhance our ability to manage the impacts of climate change, we can improve the health and well-being of people and the planet and offer future-proofed investment opportunities for funders.
Agroecology /ËĂŠÉĄ.roÊ.iËkÉË.lÉ.dÊi/
- The study of the whole food system, encompassing its environmental, economic and social dimensions.
- A scientific discipline that relies on evidence-based, scientific approaches (farmers = researchers) to bring about transformation.
- A set of practices that are built on (bio)diversity and on ecological cycles and processes, and which create and leverage synergies between animals, plants, microorganisms and soil.
- A social movement that focuses on participation, co-creation and social justice to increase food security and resilience.
Agroecology is a comprehensive and integrated framework and practice that factors in ecological and social principles and concepts when designing and managing sustainable food and agricultural systems. In addition to addressing the need for socially equitable food systems that give people choice over what they eat and how and where it is produced, agroecology aims to maximise interactions between plants, animals, humans and the environment. Agroecology as a concept has developed over the past few decades, moving away from a focus on fields and farms to include the entirety of agriculture and food systems. It is simultaneously a science, a body of practices and a social movement. It is now a transdisciplinary field that covers all aspects of food systems, from production to consumption, including their ecological, sociocultural, technological, economic and political dimensions.
Agroecology has various definitions, which also differ by geographic location. However, in 2019 the High Level Panel of Experts on Food Security and Nutrition (HLPE-FSN) published the 13 principles of agroecology. These complement and align with the 10 elements of agroecology, which were approved by 197 countries during a multi-stakeholder process organised by the Food and Agriculture Organization of the United Nations (FAO) to guide its strategy on agroecology. The main difference between the two frameworks is that the 13 principles include explicit references to soil and animal health, and that they distinguish between biodiversity and economic diversification.
Agroecological enterprises stand to benefit from very promising market opportunities and growth as they are much better positioned to address and withstand the new realities of climate change, limited natural resources and unpredictable global politics, which all have implications for global trade and prices. But more importantly, they also offer better solutions for consumers, who are increasingly aware of health and food safety.
A comparison between investing in agroecology and in industrial agriculture highlights the mid- to long-term resilience of investments in AEEs:
Navigating the high risks of industrial agricultural and food systems.
Risks to the profitability and sustainability of industrial agriculture are substantial and intensifying. Investors are exposed to an array of short- and long-term risks that they must manage actively:
- High and volatile input costs, such as synthetic fertilisers and fuel
- Productivity declines due to degraded soils and waning water reserves
- Vulnerability to climate change, especially extreme weather events
- Social (e.g. discrimination and exploitation) and environmental harm that will be increasingly regulated or taxed
- Shifting consumer trends as people demand cleaner, greener, healthier and tastier food.
Investing in the positive outcomes of agroecological systems.
Investments in agroecological systems can deliver superior risk-adjusted financial returns due to their more positive outcomes for society and the planet:
- Comparable or better and more stable harvest yields, leading to more reliable supply chains
- Healthier and more productive communities
- Lower operating costs due to reduced need for external inputs (organic inputs are significantly cheaper than synthetic, and shorter supply chains reduce transaction costs)
- Enhanced natural capital, including through regenerating degraded land
- Superior climate resilience because healthy soils and agroecological farming systems cope better with droughts and floods
- Positive impacts on ecosystems and biodiversity, plus the chance to be paid for them (e.g. through carbon or biodiversity credits)
- Greater community wealth, resulting in market growth and customer retention
- The ability to sell to higher-value markets such as organic.
In light of the interconnected crises facing todayâs global and regional food systems, âbusiness as usualâ will no longer work. Agroecological enterprises â such as entrepreneurial farms and cooperatives, food processing companies, input providers and marketing initiatives â offer a vital alternative to the status quo. They have a key role to play in supporting the agroecological transformation towards resilient, equitable and healthy food systems, in which food is produced, processed and consumed in harmony with people and nature.
However, our financial system, as it is currently set up, represents further obstacle to this transformation. Agroecological enterprises are often overlooked by financiers that focus on conventional agricultural models. And lack of access to suitable finance prevents them from growing and scaling.
We created this agroecology investment guide to synthesise key evidence about agroecological enterprisesâ social and environmental impact in emerging economies, to showcase interesting funding models and to present new ways of thinking about financing AEEsâ holistic approaches.
As the world continues to change, interdependent environmental and social considerations must be factored into investment decision-making. We must act fast to fundamentally change how we approach agriculture and food systems â before it is either too late or mandatory regulations force us to. Investing in agroecological enterprises represents an opportunity for financiers to support the shift towards sustainable, resilient and just food systems, while still making profits.
Business as usual investing is threatening the foundations of our economies. Investors are grappling with the complex interdependencies between biodiversity, climate, health and nutrition security, thriving communities and economic vitality. They are drawn to efforts aimed at the transformation of our food systems. Companies and financing mechanisms that are designed for the holistic approaches of agroecology and regeneration show a path for investors to generate positive returns for financial, natural, human and social capital.â
Rex Raimond, Director, Transformational Investing in Food Systems (TIFS)
Purpose of this investment guide
- Define what agroecological enterprises are
- Demonstrate the social and environmental impacts of AEEs
- Explain the overall benefits of investing in AEEs
- Showcase successful AEEs and lessons learned
- Share insights on innovative financing models for AEEs
- Present a pipeline of investment-ready AEEs.
Who is this guide for?
This guide was developed for donors and international financial institutions, impact investors, fund managers and asset managers, and serves them in the following ways.
- offers insights into investment opportunities and AEEsâ capacity-building needs
- presents solutions and financial mechanisms to help donors attract private capital to AEEs
- provides insights into why a better policy environment for AEEs is needed, and which approaches can help.
- explains why AEEs matter and represent a pathway for systemic investment
- demonstrates how to invest directly in AEEs
- offers pathways to invest in agroecological funds and vehicles
- outlines incentives for creating innovative finance models and vehicles that serve AEEsâ needs
- shares insights on AEEsâ capacity-building needs.
- provides insights on how to align a fundâs strategy with agroecological food systems transformation
- shares learnings and insights from funds that are already working towards food systems transformation
- offers insights into innovative funding models that serve the needs of AEEs.
- demonstrates how agroecology facilitates a systemic investment approach
- provides insights on how a fundâs strategy can align with agroecological food systems transformation.
The guide focuses on evidence mainly from emerging economies. Due to Biovisionâs and our partnersâ focus on Africa, examples we showcase often stem from this region.
Furthermore, this resource references evidence and literature that specifically focuses on agroecological enterprises, as well as on challenges and barriers that AEEs share with many small and medium-sized agribusinesses more generally. Where relevant, lessons and conclusions from other frameworks, such as regenerative agriculture or the circular economy, are considered.