Blogs, Economics

Notes from the Field: Transitioning Agricultural Finance Towards Systems Investing

Guest contribution by Rex Raimond, Director at the Transformational Investing in Food Systems Initiative 

When the Global Alliance launched 10 years ago, the negative impacts of industrial agriculture on people and the planet were too obvious to ignore — although many investors and institutions did their best to turn a blind eye to the ongoing crisis.

We are now seeing change among the investment community. In recent years, sustainable and impact investing has become mainstream, accounting for a third of the total U.S. assets under management

This has been driven, in part, by the twin crises of climate change and social inequality. Companies and investors have committed to Paris Agreement net-zero targets and the UN Sustainable Development Goals. Pensions and other large asset owners have begun to embrace systems-level investing to drive investment policy decisions and achieve positive financial, environmental, and social results.

While this progress is encouraging, more needs to be done to activate creative finance strategies that support entrepreneurs, farmers, activists, and social movements to transform food economies towards healthy, equitable, and renewable food systems. 

Responding to this need, in December 2018 the Thread Fund and the Swift Foundation gathered 20 foundations to discuss how integrated capital (the blending of grants, investment, and other resources) enables food systems transformation. The idea for the Transformational Investing in Food Systems initiative (TIFS) was born later that year and in May 2019, the Global Alliance voted to accept TIFS as a new form of collaboration; an Allied Initiative. TIFS launched in January 2020. 

The need for collaboration and networked action 

Stimulating transformative action in food systems by realigning financial capital to achieve diverse value creation is core to TIFS. As a partner of the Global Alliance, the Agroecology Fund, (AEF) and other aligned initiatives, we strive to ensure that food systems investments properly align human capital for nutrition gains, social capital for thriving local economies, and natural capital for soil and ecosystem health and all its related benefits.

Recently, TIFS and the Global Alliance released Mobilizing Money & Movements: Creative Finance for Food Systems Transformation. The report showcases six food-focused initiatives that use unique investment strategies blending a spectrum of financial capital to stimulate social enterprise and achieve sustainable, equitable, and secure food systems. 

The initiatives demonstrate that a combination of financial and non-financial investments will generate net financial returns as well as positive outcomes for the communities they operate in and the environment that supports them. 

For example, Educe Cooperativa, a beekeeping cooperative in Mexico, has benefited from financial, in-kind, and social investments from local nonprofits, the UN Development Programme, W.K. Kellogg Foundation, ethical lenders including Root Capital and Shared Interest, and a national development bank in Mexico, among others. These investments have enabled its membership of 750 local beekeepers to produce 1 million kilograms (2.2 million pounds) of Fair Trade honey. 

The cooperative’s financial success, in turn, strengthens local communities where co-op members live, and protects the local environment from harmful pesticides, deforestation, and GMO seeds. These protections are critical to honey production and personal well-being, as well as expanded honey processing capacity.

Educe’s story and those of the other five initiatives demonstrate the network effect of blending private, public, and commercial finance. These stories also demonstrate the importance of coordinating finance with other factors as part of a systems investing approach. Our report found that investors should consider business models that embrace shared governance and participation of farmers and community members, cost-conscious approaches that work in harmony with ecosystems, and the provision of training and dignified work.

The foundation of systems transformation established by the Global Alliance, coupled with the growth of system-level investing strategies in the financial sector, offers a unique opportunity to bring about the urgent, transformative change we need. 

TIFS is helping build a system investing movement by sharing insights, developing tools, and connecting people. Working with impact investors, fund managers, public donors, and philanthropic grantmakers, we can generate positive non-financial and financial returns, and help restore and regenerate farms, the practice of farming, and traditional and Indigenous foodways. 

Building a movement of investors that consider the systemic value created by good food producers is a critical component in solving the world’s mega-crises. 

– Ends 

To join the movement of investors, and for additional information, contact:
Rex Raimond, Director, TIFS