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6 Ways In Which Financial Institutions Can Transform Global Food Systems

By Steve Wynne-Jones
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6 Ways In Which Financial Institutions Can Transform Global Food Systems

The urgent transformation of global food systems is crucial in terms of reducing global emissions, but it could also deliver over $1.5 trillion (€1.4 trillion) in economic benefits, according to a new report by financial think tank Planet Tracker.

The report, Financial Markets Roadmap for Transforming the Global Food System, explores how financial institutions around the world can play a key role in driving positive change. It captured data from 400,000 companies across 160 countries in land use and aquaculture, including food giants such as Nestlé, McDonalds and Walmart.

According to the report, the estimated annual global investment to achieve world-altering results is between $300 billion and $350 billion – equivalent to 4% of the $8.6 trillion of current investment.

Planet Tracker’s Roadmap provides a ‘Four Transformation Themes’ strategic framework for financial institutions to guide their capital allocation and engagement with food companies, and outlines six priority actions that if implemented would wipe out approximately ten gigatonnes of CO2e.

This would reduce the current global food system footprint, 17.9 GtCO2e, by 60% and humanity’s overall greenhouse gas emissions by a fifth.

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Let's explore these six priority actions in more detail:

1. Traceable Supply Chains

Firstly, financial institutions should require fully traceable supply chains, with a particular responsibility for investors and banks funding companies towards the downstream end of the supply chain (manufacturers, retailers, and service companies).

2. Engagement On Reducing Losses

Financial institutions should aim to 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.

3. Stop Funding Deforestation

Financial institutions should 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.

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4. Cut Methane Emissions

Financial institutions have the opportunity to cut agri-methane emissions by 45% by 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.

5. Encourage Regenerative Agriculture

Financial institutions should 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.

6. Invest In Alternative Proteins

Financial institutions should 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.

If financial markets fail to follow these steps and address the harms caused by the global food system, they are likely to face significant risks to their investment portfolios, with individual food firms standing to lose 26% of their value, according to Planet Tracker.

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On the other hand, the report illustrates a clear economic benefit from the priority actions, which in total is calculated at $1.5 trillion.

Transformed Food Systems

“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," commented Peter Elwin, director of Fixed Income and head of the Food and Land Use programme at Planet Tracker. "Financial institutions providing debt and equity finance have an outsize opportunity to influence systemic change.

“From halving food waste to stopping deforestation, six steps by investors could take 60% of food’s emissions off the table”.

© 2023 European Supermarket Magazine – your source for the latest supply chain news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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