At first glance, global agricultural systems are impressive successes. The world’s food systems produce more than 2,750 kilocalories per person, more than enough to feed everyone on the planet. But despite that abundance, one in nine people around the world suffers from hunger, and rates of undernourishment have been increasing. While the world produces large quantities of food, food systems are failing to ensure food security, equitable access, and sustainability.

Vulnerabilities Plague Food Systems

Food systems are complex, and they can break down at many points through a variety of causes. For example, climate change can alter growing conditions and render once-arable land unusable, reducing crop yields and creating uncertainty for farmers. The loss of biodiversity leads to risks that plants and animals needed for food production may not survive. Food waste uses valuable resources and lowers the food supply available for consumption. Violent conflicts and forced displacement can devastate agricultural economies, disrupt supply chains, and cause famines. Economic downturns, changes in commodity prices, and income inequality can create conditions where food is less affordable and fewer people can access it.

Recognizing the threats unsustainable food systems pose for global development, the United Nations addresses several aspects of food security in its Sustainable Development Goals (SDGs). The second SDG is to “end hunger, achieve food security and improved nutrition and promote sustainable agriculture.” Several other goals are intertwined with food systems; for example, robust food systems are essential for achieving good health and well-being (SDG 3), reduced inequalities (SDG 10), and responsible consumption and production (SDG 12). Clean water and sanitation (SDG 6) and climate action (SDG 13) may depend on sustainable agricultural industries and also affect food systems.

Investors use diverse vehicles to support sustainable agricultural initiatives all over the world.

Impact Investors Respond to the Challenge

Impact investors strive to improve food systems through several methods. In the US, funds such as the Harvest Returns Sustainable Agriculture Opportunity Zone Fund leverage Opportunity Zone tax benefits as they provide equity financing to farmers and ranchers. More broadly, investors may use diverse vehicles including corporate bonds, private debt, and public equity to support sustainable agricultural initiatives all over the world, ranging from conservation projects to organic farms to irrigation improvement initiatives.

Combating waste is also possible through investing. Some investors have used shareholder engagement to persuade retailers to address food waste. Others have funded startups that aim to reduce waste, such as FoodMaven, which has created a marketplace to connect food that would otherwise be wasted with institutional kitchens and food banks, and Apeel Sciences, which has developed a coating that can be used on produce to prevent spoilage.

Investors have targeted food deserts by backing loan funds like the California FreshWorks Fund and the Michigan Good Food Fund to supply capital to grocery stores in underserved areas. They have also funded technology companies that grow food closer to food deserts, such as vertical farming startup AeroFarms.

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