Planet Tracker has released a roadmap with practical, tangible actions for financial institutions (FIs) to cut the food system’s global emissions and deliver over $1.5 trillion in economic benefits.
- The global food system, which accounts for over a third of humanity’s emissions, is in urgent need to change to improve human health and protect the environment.
- Financial companies will not only fail to meet their climate ambitions if they do not support the transformation needed, but also stand to lose financially.
- Conversely, those taking action before it is too late will benefit from significant economic opportunities.
Financial think tank Planet Tracker has published Financial Markets Roadmap for Transforming the Global Food System. It analysed over 400,000 companies in land use and aquaculture – including Nestlé (SIX:NESN), Mcdonald’s (NYSE:MCD) and Walmart (NYSE:WMT) – pinpointing exactly how and where investor action can drive urgent food system transformation before 2030.
What’s the problem with the food system?
The global food system is a significant source of harm to the climate, nature and society. If current trends continue, the sectors that form part of it could preclude the achievement of Paris Agreement goals on their own, as they are projected to cause a 60-90% rise in emissions between 2010 and 2050. Indeed, they are currently estimated to generate 34% of global anthropogenic greenhouse gas emissions.
Moreover, addressing the negative impacts of the food system will also improve human health through food security and healthy diets. Food is currently distributed unevenly across the world, with people suffering from obesity, nutritional deficiencies or hunger depending on where they live.
It is shocking to think that 20% of global deaths in 2017 were due to dietary risk factors arising from suboptimal diets, while one-third of the food produced is wasted or lost. According to experts, however, not all healthy diets are sustainable and not all sustainable diets are healthy, which is why it is imperative to tackle these issues in a holistic way.
What does the food system need in order to change?
The think tank analysed the financial data of 400,000 food system companies from 160 countries, overlaying with environmental and funding data to provide a comprehensive, bottom-up view of the relationship between finance and the food system’s harmful planetary footprint.
It found that 53% of the total revenues come from less than 0.1% of the companies, with 20 of them accounting for 40% of the industry’s market capitalisation. It corroborated other studies that suggest that the majority of the profits in the system are captured by companies at the downstream end, as only 13% of the aggregate profits in the database were captured by producers, compared to 47% of the profits captured by food retailers and food service companies.
Planet Tracker identified four themes that FIs should focus on to ensure they are aligning their capital and investment processes with the changes required. They are: responsible supply chains, increasing food system (true cost) efficiency, reducing pollution and sustainable product offerings.
These are expected to make the food system more resilient, efficient and effective – one that will provide sufficient nutritious, culturally appropriate, food to all of a growing population and support livelihoods and wellbeing, while withstanding challenges such as war and climate change as well as maximising outputs and minimising inputs and losses.
In the report, FIs were encouraged to use these themes as the basis to construct an investment strategy to guide their capital allocation and engagement with companies and governments.
How can FIs take immediate action?
Planet Tracker provided six tangible priority actions for FIs, which could cut global emissions by 20% and the food system’s footprint by 60% – saving 10 gigatonnes of CO2e, equivalent to double the US’ current emissions.
To ensure maximum impact, they need to be implemented by 2030.
- Require fully traceable supply chains with particular responsibility for investors and banks funding companies towards the downstream end of the supply chain (manufacturers, retailers and service companies);
- Halve food loss and waste by engaging with companies to reduce losses through the production process and waste at the retail and consumer end while maximising efforts to reuse food that is not fit for consumption for other purposes;
- Stop funding deforestation by implementing policies including publicly committing to ensuring zero deforestation risk in portfolios and targeting deforestation-linked emissions in net zero plans;
- Cut agri-methane emissions by 45% through allocating capital away from industrial animal protein production towards alternative protein producers, increasing disclosure around methane emissions and engaging with investees to ensure producers are aligned with the Global Methane Pledge;
- Encourage regenerative agricultural systems through activities such as engaging investee companies to adopt regenerative techniques and establishing strong due diligence processes to ensure regenerative practices are genuine;
- Invest in alternative proteins by engaging with governments to ensure regulatory frameworks encourage the development of alternative proteins and with investee companies to set time-framed targets for shifting away from industrial meat and dairy.
Why should FIs follow the advice?
FIs will not be able to meet their climate ambitions if they do not support the food system’s transformation – but they have immense power to change it. According to Planet Tracker, around $8.6 trillion of private finance is currently supporting the global food system, corresponding to a whopping 63% of its estimated asset value of $14 trillion. The estimated annual global investment to achieve world-altering results, however, is just $300-350 billion – equivalent to 4% of what is being spent now.
Without taking action, FIs face significant risks to their investment portfolios, as individual food companies stand to lose 26% of their value, according to data based on the Race to Zero 2022 report. While there are risks for those failing to address these issues, proactive firms can tap significant investment opportunities: specifically, $1.5 trillion worth of economic benefits arising from a traceable supply chain, reducing food loss and waste, protecting and restoring nature, diversifying the protein supply, and regenerative agriculture.
“The global food system generates nearly 20% of the world’s GDP, however it is inherently fragile and no longer fit for purpose. From conception in the farm to consumption on the fork, the global food system accounts for a third of greenhouse gas emissions and endangers 86% of species on the IUCN Red List. Even as food reaches the end of the chain, one third is lost or wasted,” said Peter Elwin, director of fixed income & head of food and land use programme at Planet Tracker.
“Unless the global food system is transformed, none of the global targets, pledges and ambitions that have been agreed in recent years with respect to people, planet and climate will be achieved. Financial institutions providing debt and equity finance have an outsize opportunity to influence systemic change.”
