Unlocking Investment in Africa’s Sustainable Landscapes

Sharing successful techniques for landscape restoration pays off. (Photo courtesy Global Landscapes Forum) Posted for media use.

Sharing successful techniques for landscape restoration pays off. (Photo courtesy Global Landscapes Forum) Posted for media use.

By Sunny Lewis

KIGALI, Rwanda, May 18, 2017 (Maximpact.com News) – Businesses can realize many benefits by investing in restoration of forests, rivers and freshwater, new research finds. Corporations increasingly recognize that working in landscape partnerships can help them address critical issues beyond their immediate supply chains.

Yet, today, only a quarter of the 428 large, multi-stakeholder landscape partnerships surveyed for the research report include businesses.

The report was presented in Kigali on May 16 at the inaugural Forest and Landscape Investment Forum organized by the UN Food and Agriculture Organization (FAO).

The Forum attracted project developers and business leaders from African countries such as Ethiopia, Kenya, Madagascar, Rwanda, Tanzania, Uganda and Zambia, and investors from all over the world to explore a marketplace for effective forest and landscape investment opportunities. Delegates came from

“The importance of promoting a broad spectrum of investments in forests and landscapes in East Africa can’t be underestimated,” said Douglas McGuire, coordinator of the Forest and Landscape Restoration Mechanism for FAO.

“We can no longer afford to miss out on funding opportunities,” said McGuire. “There is so much talent and enthusiasm out there, and it is our hope that this event will make those important connections between project developers and investors that until now have been missing.”

The research report, “Business for Sustainable Landscapes: An action agenda for sustainable development,” is based on an 18-month consultation with input from more than 40 organizations.

It shows how public-private-civic partnerships for integrated landscape management are emerging to address the difficult problems of natural resource degradation, competition, and conflict.

Innovative financial instruments designed to support landscape investments – new blended finance schemes, impact investment funds, investment screens and standards, and investment strategies in sustainable supply chain programs – are attracting investment, the report shows, but the authors point out that greater participation is needed.

The report was produced by EcoAgriculture Partners, the International Union for Conservation of Nature (IUCN) <iucn.org>, the Sustainable Agriculture Initiative (SAI) Platform, and the Sustainable Food Lab , under the auspices of the Landscapes for People, Food and Nature Initiative .

It outlines an action agenda with concrete steps that businesses, finance institutions, governments and landscape program leaders can take to strengthen these partnerships and advance a socio-economic transformation based on sustainable production and economic growth.

“Innovative financial instruments designed to support landscape investments are emerging, and they have the potential to help drive nature-based solutions, such as forest landscape restoration and climate-smart supply chains,” says Stewart Maginnis, global director of IUCN, which co-authored the report.

“IUCN’s Regional Forest Landscape Restoration Hub for Eastern and Southern Africa, which was established last year, is an excellent example of how increased coordination at a landscape level can catalyze resources and technical capacity to deliver tangible benefits for communities,” said Maginnis.

The Forest & Landscape Investment Forum was intended to advance efforts to achieve the Bonn Challenge and the AFR100 target of restoring 100 million hectares of degraded land in Africa by 2030.

Ambitious restoration goals will require large investments. A recent analysis by the FAO and the UN Convention to Combat Desertification, up to US$49 billion worth of investments are needed every year to achieve this and other restoration goals.

Today, investments in forests and landscapes are being made, but they unevenly distributed. While most are made in Latin America, only one percent are in Africa.

“Although landscapes are still not a natural business environment for most companies, the frontrunners are now starting to grasp the potential, take responsibility beyond their direct interests and seek collaborative solutions to address issues like water scarcity, deforestation or ecosystem services by landscape projects,” says Peter Erik Ywema, director for strategy and engagement, SAI Platform.

The nonprofit SAI Platform is the primary global food and drink value chain initiative for sustainable agriculture, founded in 2002 by the multinational corporations Nestlé, Unilever and Danone. Working at the precompetitive level, the SAI Platform’s more than 90 members share knowledge and best practices to support sustainable mInstream agriculture involving stakeholders throughout the food value chain.

The report’s action agenda suggests that to be most effective, landscape partnerships should:

  • Develop a landscape financing strategy
  • Get creative in blending finance
  • Heat up the incubators
  • Ensure finance reaches the farmers and resource managers
  • Leverage grant funds for enabling investments, for asset investments that do not generate financial returns, and to leverage private finance.
  • Socialize innovations among peer institutions

“Investors can do much more to identify promising integrated landscape investments. Innovative investment models from groups like Commonland, IUCN, The Nature Conservancy’s NatureVest, the Livelihoods Fund, African Wildlife Foundation’s African

Wildlife Capital, and the Coalition for Private Investment in Conservation, are demonstrating ways to link agriculture

and conservation to contribute to landscape goals, incubating and providing finance for them,” the report advises.

Potential investments by local businesses and farmer cooperatives often need to be supported during the development phase to reach the point where they are attractive to debt or equity financiers.

The report points out “an urgent need for major development finance institutions to establish business incubators with public-civic-private funding to provide pre-financing and advisory services to improve business performance/design and consistency with landscape goals.”

These services and funding could be paid back once the business becomes profitable.

“Collaborative landscape approaches align stakeholders in a particular place to resolve complex issues that cannot be successfully resolved by actors working alone,” said Sara Scherr, president of EcoAgriculture Partners and one of the key authors of the report.

“These partnerships reflect growing recognition that long-term business success is tied to healthy communities and ecosystems.”


Featured Image: This Kenyan farmer is happy with his thriving papaya grove, showing what investment can accomplish. (Photo by the International Centre for Tropical Agriculture (CIAT)) Creative Commons license via Flickr

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EU Patent Office Under Siege Over Seeds

GardenBelgium

An organic garden in Walhain, Walloon Brabant, Belgium (Photo by Simon Blackley) Creative Commons license via Flickr

By Sunny Lewis,

MUNICH, Germany, July 12, 2016 (Maximpact.com News) – More than 800,000 signatures against patents on plants and animals were handed to officials of the European Patent Office on June 29, as the EPO’s Administrative Council held a meeting in Munich.

By the signatures they have collected, civil society organizations are demanding that the EPO change its rules.

European patent laws do prohibit patents on plant and animal varieties, and on the conventional breeding of plants and animals.

But the civil society organizations behind the petition warn that the European Patent Office is undermining these prohibitions by granting more patents on food plants, including vegetables, their seeds and the harvested food crops.

In total, some 1,400 patent applications on conventional breeding have been filed at the EPO, and around 180 patents have been granted.

The petition comes in the context of a resolution passed by the European Parliament in December calling for a ban on patents for conventionally bred products; a groundswell against a patent requested by Syngenta for a conventionally bred tomato; and the recent revocation of a patent that had been issued by the European Patent Office to Monsanto in 2011 for a conventionally bred melon that resists viruses – “The Melon Case“.

The signatures were handed over to the president of the Administrative Council of the European Patent Office Jesper Kongstad, who also serves as director general of the Danish Patent and Trademark Office (dkpto), and to the chair of the Committee on Patent Law of the EPO, Sean Dennehey.

The signatures were collected in Germany, Switzerland, Austria, the Netherlands, Denmark, Sweden, Spain, Portugal and France.

The petition was organized by civil society organizations, including Campact from Germany, Arche Noah from Austria, Berne Declaration in Switzerland, Bionext in The Netherlands, the EU-wide group WeMove and dozens of organizations that are members of the international coalition No Patents on Seeds!.

The organizations are jointly calling for a change in the European Patent Office rules.

It is time for a change,” said Lara Dovifat for Campact, an organization that collected many signatures for the petition.

The patent system has become unbalanced. The interests of society at large, which does not want to become dependent on huge companies such as Bayer, Monsanto and Syngenta, have to be given priority. Now is the time to stop patents on our food, seeds, plants and animals,” said Dovifat.

OrganicTomatoesFrance

Conventionally bred organic tomatoes for sale in Moustiers-Sainte-Marie, Provence-Alpes-Cote d’Azur, France (Photo by Philip Haslett) Creative Commons license via Flickr

In 2015, the European Patent Office granted a patent to the Swiss company Syngenta for tomatoes with a high content of flavonols, compounds the company claims are beneficial to health. The patent covers the plants, the seeds and the fruits.

Opponents say this tomato is a product of crossing tomatoes originally from Peru and Chile with varieties currently grown in the industrialized countries, but is not an original invention.

European patent law is meant to prohibit patents on plant varieties and on conventional breeding. For this reason, the opponents want the patent to be revoked completely.

The members of the EPO’s Administrative Council are delegates from the 38 contracting states of the European Patent Convention. They have control of the Implementation Regulation, which defines the rules on how to apply current European patent law.

The civil society organizations are demanding that these rules are changed in order to stop further patents on plants and animals derived from conventional breeding.

They claim to be seeing support from many member states of the EPO, as well as from the European Commission and the EU Parliament.

An increasing number of member states such as Austria, Czech Republic, France, Germany, Luxembourg, Poland, Portugal, Spain and The Netherlands are becoming increasingly aware of the problems that go along with seed monopolies and are unhappy with current EPO practice,” said Maaike Raaijmakers, speaking on behalf of Bionext, which represents the Dutch organic food sector. “Some of these countries have already changed their national patent laws or are invalidating these patents.

There is strong support from the EU Parliament and also some movement within the EU Commission. However, legal certainty will only be achieved if the rules and regulations at the EPO are corrected in a way that strengthens the current prohibitions to stop patents on plants and animals derived from conventional breeding,” said Raaijmakers.

In mid-May, members of the European Patent Organisation refused to accept a meeting requested by the opponents.

In May a symposium on patents and plant breeders’ rights was hosted by the Dutch Minister for Agriculture Martijn van Dam.

The International Foundation for Organic Agriculture (IFOAM) EU welcomed the Dutch Presidency initiative and urged the Commission to take concrete, legal action to put an end to patents on seeds.

Thomas Fertl, IFOAM EU Board Member and Farmers’ Representative, said, “The European Commission should urgently clarify that seeds and genetic traits that can be found in nature and obtained through conventional breeding cannot be patented.

The patent legislation has increasingly been used to grant patents on natural traits, which is a complete misuse of the patent system. This kind of patents fosters further market concentration in the seed sector and hamper competition and innovation,” Fertl said.

Today, only five companies control 75 percent of the seeds sold throughout the world and own most of the patents. This is corporate control over farming and the food chain at its most dangerous,” warned Fertl.

Raaijmakers said, “We are cooperating with conventional farming associations, NGOs and many concerned citizens to put an end to patent claims on our food. Farmers constantly need new varieties, as growing conditions on the fields and market demands change rapidly. Climate change makes it even more urgent for farmers to have access to a wide range of adapted varieties. Patents on seeds hinder the development of new varieties, reduce choice and increase prices for farmers and consumers. This threatens our food security in the long term.

Eric Gall, IFOAM EU Policy Manager, concluded, “Patents on seeds hinder innovation in breeding and block the circulation of genetic resources. Access to genetic biodiversity is essential for creating new varieties and should not be blocked by patents. Organic and smallholder farmers are particularly at risk of losing the varieties they need to farm.”

The Commission must issue a legal interpretation that clearly prevents these types of patents,” said Gall, “and should revise the biotech inventions Directive 98/44 in order to protect farmers from intellectual property rights claims regarding the plants and animals they save and breed.

The EPO has made no comment on the petition


Featured image:  123 RF stock footage

Food Supplies At Risk as Pollinators Vanish

ButterfliesThistlesBy Sunny Lewis

KUALA LUMPUR, Malaysia, March 1, 2016 (Maximpact.com News) – Apples, mangoes and almonds are delicious, pollinator-dependent foods, but these dietary staples are at risk because bees and other pollinators worldwide are disappearing, driven toward extinction by the pressures of living with humans.

The holes they are leaving in the fabric of life threaten millions of human livelihoods and hundreds of billions of dollars worth of human food supplies, finds the first global assessment of pollinators, published Friday.

Conducted by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), the two-year study highlights ways to effectively safeguard pollinator populations.

Based in Germany, IPBES was founded four years ago with 124 member nations to develop the intersection between international scientific understanding and public policymaking.

The organization’s first biodiversity assessment, “Thematic Assessment of Pollinators, Pollination and Food Production” was compiled by a team of 77 experts from all over the world. It underwent two rounds of peer review involving experts and governments.

The final assessment was presented at IPBES’ 4th Plenary meeting, which took place February 22-28 in Kuala Lumpur, hosted by the government of Malaysia.

With citations from some 3,000 scientific papers, it is the first such assessment based not only on scientific knowledge but also on indigenous and local knowledge. Information about indigenous and local practices comes from more than 60 locations around the world.

“Pollinators are important contributors to world food production and nutritional security. Their health is directly linked to our own well-being,” said Vera Lucia Imperatriz Fonseca, PhD, co-chair of the IPBES assessment and a senior professor at University of São Paulo in Brazil.

The study finds that more than three-quarters of the world’s food crops are pollinated by insects and other animals. Nearly 90 percent of all wild flowering plants depend on animal pollination, the study notes.

Each year, at least US$235 billion and up to US$577 billion worth of global food production relies on the actions of these pollinators.

BeeAppleTree

Honey bee in the apple tree, Ontario, Canada, 2007 (Photo by Mike Bowler) creative commons license via Flickr

There are more than 20,000 species of wild bees, plus other species: butterflies, flies, moths, wasps, beetles, birds, bats and other animals, that pollinate the foods we love best.

Crop yields depend on both wild and managed species, the researchers found.

Pollinated crops are fruits, vegetables, seeds, nuts and oils – important sources of vitamins and minerals for human health and well being.

Chocolate, for example, comes from the seeds of the cacao tree. Two distinct kinds of midges are essential for the pollination of cacao trees, the study notes. No midges, no money. The annual value of the world’s cocoa bean crop is roughly US$5.7 billion.

“Without pollinators, many of us would no longer be able to enjoy coffee, chocolate and apples, among many other foods that are part of our daily lives,” said Simon Potts, PhD, the other assessment co-chair and professor of biodiversity and ecosystem services in the School of Agriculture, Policy and Development, University of Reading, UK.

Historically, bees have inspired art, music, religion and technology. Sacred passages about bees occur in all major world religions.

Food crops are not the only kind that need pollinators – there are the biofuels, such as canola and palm oils; fibers like cotton; medicines, livestock forage and construction materials. Some bee species make prime quality beeswax for candles and musical instruments, and arts and crafts.

But pollinators are disappearing. The study team estimated that 16 percent of vertebrate pollinators are threatened with global extinction, a number that increases to 30 percent for island species, with a trend toward more extinctions.

Global assessments are still lacking, but regional and national assessments show high levels of threat, especially for bees and butterflies. Often more than 40 percent of invertebrate species are threatened locally.

“Wild pollinators in certain regions, especially bees and butterflies, are being threatened by a variety of factors,” said IPBES Vice Chair Sir Robert Watson.

“Their decline is primarily due to changes in land use, intensive agricultural practices and pesticide use, alien invasive species, diseases and pests, and climate change,” said Watson, a British atmospheric chemist who has served as a chairman of the Intergovernmental Panel on Climate Change (IPCC).

The IPBES study confirms declines in regional wild pollinators for North Western Europe and North America.

Local cases of decline have been documented in other parts of the world, but data are too sparse to draw broad conclusions.

José Graziano da Silva, director-general of the UN Food and Agriculture Organization, said, “Enhancing pollinator services is important for achieving the Sustainable Development Goals, as well as for helping family farmers’ adaptation to climate change.”

The assessment found that pesticides, including the notorious neonicotinoid insecticides outlawed in some countries, threaten pollinators worldwide, although the long-term effects are still unknown.

Pests and diseases pose a special threat to managed bees, but the risk can be reduced through better disease detection and management, and regulations on the trade and movement of bees.

The effects of genetically modified crops on pollinators are poorly understood and not usually accounted for in risk assessments.

The decline of practices based on indigenous and local knowledge is a factor too. The traditional farming systems; maintenance of diverse landscapes and gardens; kinship relationships that protect specific pollinators; and cultures and languages that are connected to pollinators are all important in safeguarding the tiny creatures.

“The good news is that a number of steps can be taken to reduce the risks to pollinators, including practices based on indigenous and local knowledge,” said Zakri Abdul Hamid, elected founding chair of IPBES at its first plenary meeting in 2012.

So, one solution is supporting traditional practices that manage habitat patchiness, crop rotation, and coproduction between science and indigenous local knowledge, the study finds.

Safeguards include the promotion of sustainable agriculture, which helps diversify the agricultural landscape and makes use of ecological processes as part of food production.

Achim Steiner, executive director, UN Environmental Programme, thinks humans have to take this situation seriously, saying, “The growing threat to pollinators, which play an important role in food security, provides another compelling example of how connected people are to our environment, and how deeply entwined our fate is with that of the natural world.”


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Main Image: In Lorton, Virginia, the Meadowood Special Recreation Management Area’s pollinator garden attracts butterfly species like these Eastern Tiger Swallowtails, Papilio Glaucus. (Photo by Jennifer Stratton, U.S. Bureau of Land Management, BLM Eastern States) public domain
Featured Image: Red-belted Bumble Bee, Bombus rufocinctus, in Milwaukee, Wisconsin, August 2014 (Photo by Dan Mullen) creative commons license via Flickr

Much more than just a conference – Lilongwe Malawi, 14-17 April 2015

World Vision AUS

We need your help to raise $122,000

in order to restore land and change lives

Maximpact is reaching out to its network to assist World Vision  in raising  the remaining $122,000 for the 2015 Beating Famine Conference in Africa.

This is your opportunity to be part of a global movement

In 2012 the first Beating Famine conference was held in Kenya, with incredible results. The conference introduced cost effective land regeneration techniques and instigated the roll out of ground-breaking projects across the East Africa region. These projects are now actively restoring land, regenerating trees, increasing crop yields and ultimately improving livelihoods and food security for people across East Africa.

  • Contributed to NEPAD/Africa Climate Smart Agriculture Alliance’s decision to cast FMNR as a foundation of Climate Smart Agriculture.
  • Helped convince the Australian Government overseas Aid program to invest $1.5 million matching funds to the FMNR for East Africa project.
  • Contributed to the Dutch Government decision to fund the Euro 40m DGIS project in five Sahelien countries.
  • Resulted in strengthening World Agroforestry Centre – World Vision collaboration, helping to scale up activities East Africa and opened up new opportunities around the world.

In 2015 we want to offer you the chance to be involved in the second Beating Famine conference, to be held in Malawi. Our 2012 event was the catalyst for huge changes in the region. In 2015 we want to provide Southern Africa with the same opportunity. We cannot do this without your help.

World Vision Malawi, World Vision Australia, and the World Agroforestry Centre (ICRAF) will deliver the ‘Beating Famine’ conference from 14-17 April 2015. It will showcase leading global land restoration techniques and will feature world class speakers from the private sector, NGOs, research institutes, governments and more,. This conference is more than just a way to reach out to local farmers and communities, it is also a vibrant platform for knowledge sharing and developing new partnerships in the sector.

About the 2015 Beating Famine Conference

The conference will showcase leading global land restoration techniques and will feature world class speakers from the private sector, NGOs, research institutes, governments and more.

This conference is more than just a way to reach out to local farmers and communities, it is also a vibrant platform for knowledge sharing and developing new partnerships in the sector.

How you can help

There are many ways that you can actively support this conference and Southern African communities. Your attendance will not only involve you in a global movement, it will provide you with networking and knowledge sharing opportunities.

Alternatively your donation can go towards co-sponsoring this conference, which will secure your promotional material and presence throughout.

To be involved 

If you would like to support, attend or donate the Beating Famine Conference please contact us on +61-3-9287-2604 or email us at info@beatingfamine.com

For more information please visit www.beatingfamine.com

world Vision

The IPCC Summary Report on Climate Change: What it Means for Impact Investing

By Marta Maretich

On 27 September 2013, the United Nations Intergovernmental Panel on Climate Change (IPCC) published the first of three volumes of its fifth Assessment Report (AR5). The long-awaited report summary emerged amid a flurry of media coverage and a volley of commentary, both pro and contra. Its main conclusions were clear, however: climate change is real, its effects are already measurable, and it is being caused by human activity.

AR5 Summary Highlights

– Human influence on the climate system is clear. This is evident in most regions of the globe.

– Warming in the climate system is unequivocal.

– Global surface temperature change for the end of the 21st century is projected to be likely to exceed 1.5°C relative to 1850 to 1900 in all but the lowest scenario considered, and likely to exceed 2ºC for the two high scenarios

– Projections of climate change are based on a new set of four scenarios of future greenhouse gas concentrations and aerosols, spanning a wide range of possible futures. The Working Group I report assessed global and regional-scale climate change for the early, mid-, and later 21st century.

Source: the UK government

The summary report has sparked controversy worldwide.

Some rushed to embrace the findings while others immediately set out to disprove the science and question the motives behind it. The world’s reaction is a measure of how emotive; and divisive; the issue of anthropogenic (human-caused) climate change has become for governments, businesses and individuals in the years since the first IPCC report in 1990. With passionate feelings on both sides, the controversy is set to continue.

Challenging times for believers

The report’s publication follows a rough period for those who believe that climate change poses a threat to life on earth. In 2001, the US, under the administration of George W. Bush, rejected the Kyoto agreement on global warming. Flaws in the AR4, IPCC’s 2007 report; among them the apparent claim that Himalayan glaciers would disappear by 2035; drew intense fire from critics and distracted attention away from AR4’s core findings. They provided more fuel for the so-called climate change deniers; those who hold that global warming is a hoax or a conspiracy to slow progress.

From 2008, the economic crisis prompted world leaders to put economic growth ahead of environmental protection, with many governments backing away from previous emission-lowering commitments. The worldwide carbon market, including the EU’s cap-and-trade scheme, essentially collapsed in 2012, leaving questions about its efficacy as a means to control emissions.

Against this background the summary report comes as a wakeup call from the most respected source of climate science the world has. The new report has been widely accepted as the most convincing body of evidence of climate change and the human role in it so far. For impact investors, it could have profound importance on many levels.

What does it mean for the impact investing sector?

It’s fairly safe to say that most of those involved in the impact investing sector are already convinced of the reality of climate change. Many already focus their investing activity on areas relating to climate change such as agriculture and agribusiness, food security, forestry, land and water use, waste management and reduction, clean and renewable energy, energy efficiency and cleantech. For this reason, it’s likely that impact intermediaries, impact investing funds and social entrepreneurs will take the IPCC report as a renewed call to action.


However, the new IPCC report will change the impact investing landscape for everyone. Impact investors will see the effects of changes in government policy, the attitude of big business and international public opinion.
What will be some of the main currents affecting our impact investing strategies?

Governments respond with policy

The release of the summary report was a huge event, but it’s only the tip of the iceberg when it comes to the IPCC findings. The 19th annual meeting of the UN Climate Change Convention will be held in Warsaw from 11-22 November. At this meeting, the IPCC will deliver further scientific evidence to diplomats in order to facilitate policy decisions. A new legal commitment with respect to carbon emission will then be drawn up, replacing the 1994 accord. This is scheduled to take effect by 2015.

In preparation for these events, governments across the world are already formulating their policy stances. There are questions about how individual governments will react in the face of the new evidence. Climate change remains highly controversial in some developed countries, notably the US and Australia where it has become an issue that divides the political left and right. India, China and other rapidly industrializing countries are also wary: they have so far been unprepared to agree emissions cuts unless more developed countries do the same. Meanwhile island nations like Tuvalu, and South Asian countries like Bangladesh, both highly vulnerable to the effects of climate change, argue for a robust international response.

For impact investors, one thing is certain: there will be a new legal framework guiding climate change policy worldwide in 2015. Whatever the shape of this framework, it will change the investing landscape in many countries and have far-reaching effects for impact investors in many parts of the world. Much will depend on the structure and extent of the new laws, which will be hotly debated by governments. Regardless of the outcome, things will change for impact investors. The direct effects will be felt through the policies, programs and incentives governments create in response.

Where governments take a lead

In places where government policy supports pro-climate investing there are likely to be more opportunities for collaborative investments working across government agencies, impact intermediaries, impact funds and private investors.

Collaborative cross-sectoral arrangements are already a characteristic of the impact investing world. In the UK, Sustainable Development Capital was awarded £50 million by the UK government’s Department of Business, Innovation and Skills to invest in energy efficiency infrastructure projects. Big Society Capital, an independent fund created by the government, invests in many climate-friendly initiatives, especially in cleantech, energy efficiency, and sustainable energy for disadvantaged communities in Britain.

The UK provides what is probably the best current example of a dynamic government-lead approach to market-based social investing. As other governments take action to meet new policy commitments, they will be looking for solutions and partners.

Seasoned impact intermediaries and funds; of which there are a growing number; can bring specialist skills and knowledge to collaborative cross-sectoral arrangements for financing impactful businesses. They are also in position to benefit from government subsidies and tax incentives focused on meeting carbon reduction targets. For these reasons, the ability to work for and with government could prove essential for impact investors and the businesses they finance.

..and where they don’t

Where government leadership is lacking; and incentives such as tax breaks, subsidies and government co-investment are not forthcoming; global development agencies, philanthropic organizations, activists and impact investors will have to take the initiative in catalyzing the response to climate change. This may not be a bad thing: some commentators believe that private action, not government intervention, will be the key front in the fight against human-caused climate change. There’s already evidence that governments have been scaling back their commitments to climate change action and pushing responsibility onto NGOs and private companies, while private investors have been picking up the slack.

Many organizations and activists have been operating this way for decades and will continue to do so regardless of what governments do in response to the IPCC findings. The US provides many examples. The same country that rejected the Kyoto Protocol; and produced some of the most virulent and well-funded examples of climate change denial; has also given the world some of the most progressive models of local and state support for climate-friendly businesses and approaches.

This independence has made parts of the US leaders in areas like clean energy, energy efficiency, renewables, organic and sustainable agriculture and sustainable forestry. The States boasts some of the most mature markets in these new kinds of businesses, proving that federal government policy needn’t be an obstacle to progress.

The new markets remain volatile and, despite everything, still subject to the effects of government policy and subsidy (the rollercoaster of cleantech provides one example). Yet it looks as though these market areas will grow as communities and values-driven businesses, if not governments, look for new ways to react to climate change. This could be a growth area for impact investors and businesses.

Mainstream businesses go greener

Large multinational corporations and mainstream business will also feel the effect of the new climate change policies at ground level; and this will have a knock-on effect for impact investors and the businesses they capitalize.

All businesses will need to respond to the international regulations that grow out of the new IPCC report findings. More directly, they will need to meet national and regional standards set locally, and these too will be affected by the report. There also seems to be a feeling in the corporate sector that an upturn in the economy will leave them freer to take steps toward carbon emissions reduction. Many see a “green” profile as key to their corporate image. A growing number of organizations in the developed world are making sustainability a core value in their operations and employing sustainability professionals to help them achieve it.

All this will drive the market for services that support sustainability and carbon emission reduction in companies; for example, consultancies that help organizations shrink their carbon footprint and conserve resources. This will create a possible growth area for impact business-to-business providers, offering services that embed sustainability and carbon-thrift into corporate operations practice.

CSR, now a norm for business, will continue to play a key role in the business/government/climate change triangle. Already an important factor, CSR will become more central as the need for businesses to meet emissions targets increases under new regulations; and new, very real resource pressures anticipated by the IPCC report. A closer relationship between CSR and impact investing could open new avenues for corporations to use their considerable resources for good. Supports like the impact business CSR Hub, which helps track the effectiveness of CSR efforts, will help businesses hone their choices and give the public information about the real effect of corporate claims.

Beyond this, there’s a trend toward mainstreaming businesses that once were considered alternative. Words like sustainability, clean or green technology, renewable and clean energy; all important areas for lowering carbon emissions; already feature prominently in the reports of large multinational companies. General Electric invests in renewable energy projects, while ExxonMobile has programs for reducing its greenhouse emissions and innovating carbon capture technologies and biofuels made from algae. This is largely an effect of earlier government regulation on emissions. But it’s partly due to public pressure and, for some of the companies, canny strategic positioning for a future where business will have to be energy efficient to be successful.

The fact that these companies continue non-climate friendly business practices alongside these progressive ones leaves them open to the accusation of greenwashing from some quarters. Nonetheless, these examples are evidence of a mainstreaming of climate-friendly technologies and approaches in business. This trend suggests that the demand for them will continue and increase, especially as resources, such as fossil fuels, arable land and water become more scarce, as the IPCC findings seem to indicate they will.

This “greening” trend among multinationals could create opportunities for impact intermediaries, dynamic impact enterprises and engaged impact investors. Those who successfully bridge what’s been called the “pioneer gap” and manage to scale up socially and environmentally beneficial businesses to the point where they can join the mainstream, will be able to attract investment by multinationals and a wider pool of “neutral” investors; those for whom positive impact goals are not a motive for investment. This could increase the flow of capital into beneficial enterprises exponentially; and finally establish impact investing as a normal way to do finance.

Reducing Carbon Emissions: Key sectors for impact investment

(Maximpact Deal Listing)Agriculture

Agribusiness

Cleantech

Biotech

Renewable Energy

Energy Efficiency

Forestry

Waste Reduction

Land Remediation

Water

Sanitation

The public demands change

Another important consequence of the IPCC report will be its influence on public attitudes toward climate change; this too will have consequences for impact businesses and for the practice of impact investing.

Some recent surveys of public attitudes in developed countries have recorded a shift toward a more skeptical view of human-generated climate change. Pro-climate-change commentators put this down to the success of a well-organized media campaigns by special interest groups opposed to more government regulation.

But there is also a common-sense issue: people doubt the science when they don’t perceive significant climate change around them. Extreme weather events, such as the last year’s heavy snowfall in the US and the high temperatures in Australia, have been shown to produce large swings in public opinion in favor of belief in climate change. As events such as these become more common, as the IPCC report suggests they will, it’s likely that the climate will make its own case for action.

Still, there’s plenty of evidence that suggests that the public already accepts the idea of anthropogenic climate change and wants to see governments, businesses and individuals do something about it. The IPCC report will strengthen the convictions of many who already feel that we need to change tack. As impact investing becomes more accepted as a means of effecting positive change, this group will be supportive, buying products and services from impact businesses and providing funding, through micro-lending and crowdfunding platforms. The popular movement for divestment from fossil fuels could create a whole generation of small investors looking for more climate-friendly ways to deploy their capital.

People in developing countries; some of whom will be the worst hit by the effects of climate change; may need more convincing. As mentioned before, the governments of countries like China and India look on moves to limit carbon emissions as curbs to their growth by developed nations. Similarly, people in the developing world focus on the need for economic growth and view the talk of controlling emissions and resource consumption with suspicion.

There is some evidence that this is beginning to change. As in the developed world, people in economically emerging countries are beginning to see the effects of climate change for themselves; often in disastrous forms. Extreme weather events such as droughts and floods have the power to change opinions there, too. And there is anecdotal evidence that those who work on the land, farmers, are seeing the changes firsthand. These local observations, plus the hard lessons of extreme natural forces, may shift world opinion in time to make a difference.

For people in the developing world, the impact investing model could offer a middle way between economic development and climate stewardship. Its market-based approach encourages economic growth, while its commitment to positive impact has the power to channel that growth in climate-friendly directions. In this sense, the multiple bottom line of impact investing holds out hope for developed countries, too, who also need to find new ways to thrive economically without further damaging the planet.

Impact: a powerful tool to counter climate change

It looks likely that the IPCC report will generate a new groundswell of activity around the issue of climate change and this could be a boon for the growing, diversifying impact investing sector.

Impact investing’s pragmatic approach to finance, and its commitment to capitalizing impactful businesses, make it a powerful weapon in the fight to save the planet from the effects of global warming. Its market methods translate across borders and geographies, providing solutions for developed and developing countries alike. Its flexible techniques can be used in many contexts to support the kind of businesses, processes and technologies that can help minimize climate damage while supporting economic development.

All this means that it’s time to for the impact sector to get to work. There are still market infrastructure issues that need to be solved: impact metrics and the lack of exits are two important examples. More research is needed; investment models need to be tested, honed and replicated. Education for impact professionals, now in its early days, still needs to be developed as the sector expands, professionalizes and becomes, in time, part of mainstream finance.

However, if some of these limitations can be overcome, impact investing could play a key role in helping mankind develop an effective response to the threat of climate change. Let’s all hope the warning has come in time; and we are up to the job.

Building Bridges Between Impact Investors and Sustainable Forestry

photograph of trees in a woodGuest post by Alexander Watson, CEO OpenForests

My name is Alexander Watson, I am a forestry scientist with a background in Social Banking and Social Finance and founder of OpenForests, a consulting company with the mission to finance and develop social and biodiverse forestry projects.

The challenge

The annual worldwide deforestation is about 13 million hectares, predominantly in the tropics. We believe that reforestation is one opportunity to counter deforestation. At the same time it can help to satisfy the increasing demand for timber, which is estimated to grow by 50 percent by 2050.
This is why considerable investments in the forestry sector are needed to effectively combat forest exploitation. Responsible investments in the forestry sectors of the emerging countries are still limited due to uncertain market environments and a low level of investment experience.

Lessons Learned

The goal of OpenForests is to understand these barriers and deliver services to overcome them and unleash the existing investment potentials. But how do we do this in practice? In this article I am going to share our experience working with project developers and investors and present tools of which we think are useful to build strong bridges between investors and projects.

In recent years we have been working in Latin America, Europe and Asia and conducted various feasibility studies and developed sustainable forestry and agroforestry investment projects. We found that the major limitation for project developers to scale up their operations was a lack of sufficient funding. As reforestation projects are very capital intensive in the beginning, project developers often need of seed funding. This is especially true in the case of sustainable reforestation with long rotation cycles.

But why do some projects obtain funding and others not? On the project level we found common patterns that kept investors from funding these projects.

The Power of Data Management and Reporting

First, we learned that the data management and reporting was often insufficient. Although in many cases project developers have shown a high level of experience in managing their forest assets, forestry projects often needed to improve the consistency and timeliness of their forestry data.

A plausible, consistent and complete project documentation is required in order to make projects attractive to investors. Such documentation has to include financial data as well as social and environmental performance metrics. Only by understanding project processes it is possible to improve performance while facilitating a transparent project insight for investors. At OpenForests we improve project management and documentation by providing a customized Forest Information System, a centralized geo-database to organize and share project information amongst all participants.

Investors Need Better, More Transparent Information

Now turning to the investors’ side. When working with investment groups from the U.S. and Europe they revealed their great interest in extending their investment activities to emerging forest investment countries in Latin America, Africa and Southeast Asia. This interest is mainly due to the higher returns that can result from the relatively higher forest growth rates and lower land and labor costs, than it would be feasible in developed countries.

However, investors hesitate because of the lack of high quality information about the forestry sectors of these countries. Furthermore forest investment markets are often poorly organized and non-transparent which makes it difficult to source investment opportunities.

To help investors get the information they need, we developed services and tools like a set of risk assessment guidelines, a marketplace for sustainable forest investments and drone-based remote sensing system, to help investors to assess risks more accurately. Using modern information technology, the complexity and heterogeneity of forest ecosystems, management and market environment can be captured and understood more easily. Equipped with these tools, investors are able to explore high potential emerging forest forest investment markets more securely.

With our work, we wish to reinforce and unleash the potentials of the emerging forest investment markets and make Impact Investing for Sustainable Forestry a strong force countering deforestation.

For more about OpenForests and to source forestry deals.

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Where Are the Opportunities for Impact in Agriculture?

The big corporations, governments and NGOs will continue to be active in agriculture, but there are still opportunities for impact investors.

Scaling up existing models

Impact investing already has a track record of success in agriculture. Over years of experience organizations like Root Capital have developed models that have proved their effectiveness in providing impact finance to key rural smallholder communities. Now these methods are ready to be brought to scale, applied to new parts of the world and extended to new crops and new markets. GEXSI, Toniic and Total Impact Advisors are some of the intermediaries currently listing smallholder finance deals on the Maximpact platform now.

This could be an important avenue of growth for impact investing and for world agriculture with a ready-made demand for capital, a group of experienced financiers and proven models for making the finance work. And, because these seasoned financiers are good at sharing their knowledge, possibilities for replication and franchising make more impact possible.

Pioneering longer-term finance

These providers are also taking their investing into new territory and this could be another area to watch for investors. So far, most of the tried-and-true models have provided short-term finance for specific agricultural activities. Yet there’s a need for longer-term finance for a greater range of activities.

Some experienced lenders, including Triodos, are beginning to establish longer-term funds for just these cases. The buzz is that we may see other organizations joining forces and coordinating their efforts to create a bigger impact in the sector. This is a riskier approach,yet it has the potential to catalyze food production in many parts of the world and have an impact beyond any seen so far. Watch this space.

Moving from “alternative” to mainstream

The taste for sustainably produced,responsibly sourced and organic and Fair Trade certified food is growing in all parts of the world, as is the interest in locally produced food. Banks in many places are still reluctant to lend to small and mid-sized producers on terms they can afford.

This creates another area of potential profit for impact investors. Some already have a track record of providing finance to small and medium-sized, local producers of high-quality food. In the US, Iroquois Valley Farms is one example of a company tapping into this part of the market. Iroquois ValleyFarms buys land then leases it on a long-term basis to mid-sized local and organic farming businesses. In New Zealand, Agro-Ecological offers a range of supportive finance for organic and sustainable producers, while in Canada Investco Sustainable Food Fund does the same.All these companies currently have live deals on the Maximpact deal site.

Embracing agribusiness

Impact investors should look beyond farmers to find opportunities in agribusiness in its widest sense. The term agribusiness embraces every aspect of commercial food production, from growing, to processing,to market delivery. It includes new and high-tech methods and equipment as well as services to producers, including financial ones. It links agriculture with rapid growth areas like cleantech, renewable energy, water technology, bio-technology and sustainable forestry.

This broad sphere provides multiple opportunities to invest for impact a snapshot of Maximpact’s platform demonstrates this with its range of agribusiness deals: a business that caters to the information management needs of coffee farmers; an off-grid cold storage system that allows farmers to get their perishable produce to market in good shape; a eco-lodge that combines sustainable cocoa production with tourism. Several deals combine forest stewardship and agriculture; and important theme for impact. Agribusiness even extends into the ocean, with a deal for Hawaiian company innovating new ways to produce seafood.

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Mike McCreless Reveals the Secrets of Root Capital’s Success

Root CapitalBy Marta Maretich

Root Capital is one of impact investing’s success stories.This nonprofit social investment fund grows rural prosperity in poor, environmentally vulnerable places in Africa and Latin America by lending capital, delivering financial training, and strengthening value chains for small and growing rural businesses. Since 1999, Root Capital has disbursed more than $500 million in loans to more than 425 borrowers representing nearly 750,000 farmers and artisans in 40 countries in Latin America and Sub-Saharan Africa while maintaining a repayment rate of 98% for borrowers and a 100% repayment rate to investors.

But what lies behind this impressive record? Mike McCreless, Root Capital’s director of strategy and impact, talks to Maximpact about the importance of agriculture, the secrets to Root Capital’s success and what’s coming for agricultural impact investing in the future.

Maximpact: Why is agriculture such a key sector for impact investing?

Mike McCreless: The first reason is that the need is so great. There are 2.6 billion people living on less than $2 a day, which is the international poverty line. 75% of these people live in rural areas and most of them are involved in agriculture. If you want to reach these people, agriculture is a good place to start

The second reason is that agriculture has been a neglected area for decades in international development circles. Beginning in the 80s and through the 90s there was a trend of disinvestment in agriculture. Foreign aid for agriculture dropped from 18% in 1979 to 3% in 2004. Root Capital began work in1999, when investment in agriculture was near its lowest ebb.

Today, investment in agriculture is making a resurgence. Foreign aid agencies and commercial capital are getting back into the picture; the New Alliance for Food Security, Feed the Future and World Bank Global Food Crisis Response Program are some examples. Policymakers are beginning to realize the power of agriculture to both to achieve food security at a national level and to transform livelihoods for the rural poor. At the same time, it’s becoming clear that any approach to mitigating climate change must involve agriculture given its large carbon footprint, especially as practiced in many developed countries. Finally,better agricultural practice is needed to feed a global population that will reach 9 billion by 2050.

Maximpact: You say the funding picture is improving for agriculture. Is there still a role for impact investors?

Mike McCreless: The funding, both public and private, is beginning to come back. However, the private capital is drawn primarily to the bigger deals, for large-scale commercial agriculture. Most of that money is not reaching down to the 2.6 billion living on $2 per day, mainly smaller farmers with one to four acres of land. This means there’s still an important role for impact investors to play.They can place their money with the agricultural businesses that engage directly with those smallholders who may not be benefiting from the large-scale influx of agricultural monies.

Maximpact: There are many ways of doing impact investing. How does Root Capital do it?

Mike McCreless: We invest in emerging agribusinesses that have the potential to connect smallholder farmers to markets but cannot access loans locally because they are considered too small, too risky, and too remote by commercial banks. Many of our clients are cooperatives, owned and managed by the farmers themselves. Others are private businesses that source product from smallholders or sell them agricultural inputs such as seeds.

In most cases, the businesses we invest in aggregate the harvests of 100, 1000 or even a few thousand farmers. With access to credit,they can purchase more volume from farmers and more reliably supply their buyers, which often leads to larger purchases the next year and, over time,price premiums tied to improved quality. When farmers can connect to markets in this way they’re able to get a higher share of the end price than if they sold to a local trader.

We don’t establish new agricultural businesses ourselves. Rather,we build on the strength of pre-existing, locally-driven initiatives. Where there is already momentum for change and a market-based approach but a financing constraint, we can unlock latent potential with our loans and financial management training. We have found that capital by itself is often not enough. Fledgling agricultural businesses also need support in managing cash flows, assembling financial statements, and building a credit history, and our financial advisory services team helps businesses to these things.

Maximpact: What are the special challenges for impact investing in agriculture?

Mike McCreless: There are a lot of not very glamorous specifics that are key to making it work. There’s a lot of technical knowledge related to agricultural risk and small-scale farming; harvest cycles, perish ability, quality standards in the market. An investor needs to understand these.

You also have to be able to scope the whole agricultural value chain from the farm to the end buyer. You need a good feel for who the buyers are and for the relationship between buyers and a given agricultural business. Likewise, you need a sense for the strength of the relationship between the agricultural business and the smallholder farmers whose harvest it purchases. This informs how much of that product it makes sense to finance and how to structure the finance to support the business and mitigate risk.

Maximpact: Root Capital has been very successful as an impact financier. What are the keys to your success?

Mike McCreless: Honestly, the financial tools are not complicated. The key for us is choosing the right businesses to invest in. The way our model works from an impact and finance perspective is that we are able to identify clients in an early-stage sweet spot, where they’re ready for external capital but not yet able to access it, and we provide the capital they need to grow. We look for agricultural businesses that really can’t get a loan anywhere else because they’re too small or because local banks often don’t lend to agricultural businesses. Then we give them that first loan that helps them achieve their potential.

Having the right personnel is also key. A lot of our loan officers, our founders and early employees came from backgrounds as farmers. Others came out of a farmer cooperatives or agribusiness, often in the finance function. Their expertise makes it possible for them to assess the risks and the credit worthiness of agricultural businesses. Today we still hire loan officers who have that combination of agriculture and finance backgrounds. We favor people who grew up in the country where we’re operating, who have local knowledge, know local languages, and are familiar with the agricultural businesses in that region.

There’s been an interesting evolution over the course of the last several years where intuitively “knowing how to pick-em” has been translated into formal systems and processes that can guide people how to do that on a larger scale.

Right now we’re trying to formalize and crystallize the process of how to pick businesses to invest in. We’ve developed a social and environmental due diligence process that is embedded into our credit evaluation process. Our social and environmental due diligence is based on what our most mission-driven and perceptive loan officers knew intuitively to look for, buttressed by additional research and consultation with outside experts. We are preparing our first issue brief on the topic.

Maximpact: What’s in the future of impact investing for agriculture?

Mike McCreless: We think there will be a formalization of what’s been happening in this sector over the last ten years, a re-emergence of a formal sector around agribusiness investing and smallholder agricultural finance. For instance, just last year the Dalberg Group published an important report that suggests several paths forward for this sector. This report has gotten great traction and we anticipate that increased collaboration will follow as a result.

We also see an extension of impact investing to new frontiers such as longer-term investments linked to increasing productivity. An example: coffee rust in Central America is wiping out coffee crops. This is a bigger problem than Root Capital can tackle alone so we’re working with a range of partners that can bring different types of expertise to address the problem.

Fundamentally, the idea is to provide finance for farmers to”renovate” their coffee farms or replace aging and often sick plants with young, healthy ones. Although many of Root Capital’s loans are for one year or less, we are increasingly offering long-term loans, for instance for major capital expenditures. Coffee renovation loans would be even longer-term investments because it takes three years for a coffee tree to start to produce coffee, and longer to reach full productivity.

A lot can happen in that time. It’s a riskier but a higher impact investment, because without renovation the farmer would eventually be left without any income from coffee as the trees age and die. To stay on the leading edge we need to find new ways to bring financial tools to meet new challenges. Even as we keep on offering familiar products in familiar sectors, finding the next frontier of unmet needs is key for the sector.

Maximpact: Who do you admire in this sector?

Mike McCreless: Good question! Financiers such as Root Capital can always improve practice by learning from organizations on the sourcing and production side. We learn a lot from organizations like Catholic Relief Services who have been very active in tackling the coffee blight. They understand the cutting edge of best practice in terms of production methods, processing and farmer engagement. They are finding new ways to help farmers re-invest in themselves and contribute the time and the money to capitalize their cooperative for long-term success. These are all things we need to understand to be successful.

We also admire; and learn from; many of our buyers. For this reason identifying the buyers that deliver benefits to smallholder farmers is the way forward. Good buyers are, for us, the best value chain partners.

As for buyers we admire? One company that springs to mind is Theo, an ethical chocolate company. We admire their progressive sourcing programs and ways of engaging with farmers. Green Mountain Coffee Roasters has led the way in raising awareness of the problem of chronic hunger among coffee farmers, and in investing in programs to address the problem. Sustainable Harvest has done a lot to strengthen the livelihoods of farmers it buys coffee from. Falcon is doing great work sourcing from difficult, often post-conflict environments. And of course, folks like Equal Exchange and Coop Coffees were at the front of the ethical sourcing movement. Engaging with buyers and other partners in the value chain is always an educational opportunity for us.

Find out more about Root Capital and how their approach works.

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Cultivating Change: Why Agriculture Needs Impact Investing

By Marta Maretich

There’s a global food crisis looming, according to many commentators. The food price crisis of 2008 spooked world markets and gave us a taste of what may be to come in the future: commodity prices went through the roof and people in many parts of the world panicked. This lead to a reappraisal of food and agricultural policy in many quarters,spurring international aid organizations to action and attracting private investment to agriculture. This changed the agricultural investment landscape; but not enough. There remains an urgent need for impact capital in agriculture today.

The lay of the land

One thing is certain: agriculture is a sector set for growth it has to be. Global populations are rising and adopting new dietary patterns as income levels increase in developing countries. Researchers predict that by 2050 the demand for crop foods will increase by 100% by 2050 and for animal foods by110%. Yet food stocks in many countries are dropping to some of the lowest levels yet seen and food production is not increasing fast enough to meet future demand.

Other related factors are driving change. Rising oil prices continue to exert an upward pressure on food prices while at the same time the diversion of cropland for use in growing biofuels is limiting the amount of land used for producing food. Political and economic in stability in some regions, changing weather patterns and plant diseases, such as the coffee rust now affecting Central America, are contributing to a sense of scarcity that is driving food prices higher; and fuelling markets in agricultural futures, agribusiness and land.

Large investors buy in to agriculture

As a result, agriculture is very much on the map for large multinational corporations and traditional investors. One indicator is that agricultural ETFs (electronically traded funds) such as MOO, PAGG and CROP have been hot property in recent months. These funds are typically populated by agricultural giants such as Monsanto, Syngenta, Cargill and Deere. Multinational corporations such as these have been actively expanding their agribusiness holdings and penetrating new markets, especially in developing countries, in preparation for a future where food is in more demand than ever before.

The actions of governments, arguably the biggest buyers of food, are still extremely important in this sector. Food supplies are a political issue across the world and many governments maintain stores of staples as a matter of policy; a factor not set to change in the foreseeable future. Beyond this, many developing countries are also investing more in agriculture in a move to increase production: China for example upped its agricultural budget 27% in 2007, 38% in 2008, and about 20% in 2009. At least some of this money is going into increasing production outside of China in countries such as Africa, further turning up the heat under agriculture as an investment.

The Global Food Crisis

This heated market activity is not necessarily good news for a hungry world. In 2007-2008 high market volatility driven by the export policies of some governments and commodity speculation resulted in a global food price crisis. Prices for staples such as corn and rice shot up by as much as 217%, sparking food riots in several countries. The complex reasons for the crisis are explored in this podcast from NPR’s Planet Money. One of its effects was to galvanize the international aid community to action.

After “decades of disinvestment in agriculture” (to use the words of Root Capital’s Mike McCreless) agencies such as the Food and Agriculture Organization of the United Nations (FAO) and the World Bank and others hurried to establish a slew of new aid programs to support agricultural development including the Global Agriculture and Food Security Fund, the US government’s Global Hunger and Food Security Initiative, Feed the Future, and US AID’s Investing in Sustainable Agriculture program. According to Official Development Statistics, aid for agriculture rose 19% between 2005-2010, and this trend toward more investment is continuing.

Yet the need for impact investment remains

Given this increased global interest in agriculture by governments, international agencies and multinational corporations, is there still a role and, importantly, are there still opportunities for impact investors?

A majority of impact investing thought leaders think the answer to both questions is yes. The establishment of GIIN’s Terragua working group, whose membership includes the IFC, OPIC, WK Kellogg Foundation, Omidyar Network, the Tony Emelelu Foundation, Calvert, Accion, IGNIA and many more serious impact players, is one indication of the continued importance of sustainable private investment in agriculture. Terragua’s focus is agriculture in Africa, but the principles behind the need for impact investing are similar in other parts of the world.

Toward a healthier marketplace

When it comes to creating global food security there are indications that the markets, at least as they stand, may not be our best tools. Government food policy and commodity speculation were widely blamed for the food price crisis of 2008; and these have not gone away. With all the drivers still in place, further volatility is predicted with some commentators predicting another full-blown food crisis for 2013. The stage is set for more instability in the food markets and more serious global consequences as a result.

The fickle nature of the markets is not helping. The recent vogue for agriculture and agribusiness investing seems to be fading while the problem of food security persists. According to an article in the Financial Times, many private investors didn’t see the big profits they were lead to expect from agriculture and are now getting cold feet. Forbes recently declared those agriculture ETFs mentioned earlier to be “oversold”.

And it’s important to point out, that while the levels of investment in agriculture went up, there’s little evidence that global food production increased significantly. That seems to indicate that the private investment money pouring into the market has done little to change the reality of food availability in the world. Clearly, this capital did not reach the places where it could make a real difference, a fact that highlights the need for a more sustainable market-based approach.

Tapping the potential of the poor smallholder

Another serious failing seems to be that the recent boom in agricultural investment has hardly touched the world population of rural poor. This group makes up 75% of the 2.6 billion people living on less than $2 per day, the international measure for poverty,according to UN figures. Some 80% of them live by farming or farming-related activities. A2012 research report by the Dalberg Group estimates that there are 450 million poor smallholders worldwide.

Large multinationals tend to invest in only the largest and most profitable farm businesses in the developing world.They also tend to acquire only the best land, leaving the less productive farmland to the locals. This means that these poorer farmers, tilling the poorest patches, are excluded from the commercial equation. Also left out are those who can’t afford the products sold by the big multinationals. For many corporations, the goal in the developing world is simply to increase the market for their western-style products; for example equipment (such as harvesters) and inputs (such as seed and herbicides); to those farm businesses that can afford them.

Yet ignoring these rural small holders may prevent us from solving the bigger problem of food security on both local and global levels. Rural smallholders represent an untapped, underdeveloped resource that has the potential to change the global food picture. There is evidence now that multinationals are looking to smaller producers to source commodities, especially sustainably produced and certified ones. Yet small holders won’t be able to connect with this global marketplace if they can’t increase yields, improve the quality of their produce and get their products to buyers. To do this they need capital; the Dalberg report estimates the demand at $450 billion, now largely unmet. And, to be effective, that capital has to be the right kind of capital, and it has to reach the right places.

Keeping sight of the big picture

Development agencies and NGOs have long known that agriculture holds the key to more than just food supply. A healthy agricultural economy has the power to transform rural prosperity, strengthen social stability, empower women, protect health, and nourish economically productive urban centers. The right kind of agricultural development can also provide a means of improving environmental stewardship (for example fighting deforestation) making it a powerful tool in the struggle to adapt to climate change. This is as true in the developed world as it is in the developing one.

Many of the multinational corporations now active in agriculture are making the right noises in these areas. The growing global demand for sustainable, responsibly sourced and organic and Fair Trade certified food products, has lead a number to make commitments to sustainable sourcing. (The top five chocolate manufacturers have all publicly committed to sourcing sustainable cocoa, for example.) Recent statistics from the Rabobank, a Dutch agricultural lender, say 70% of US farmers now report using sustainable methods.

There’s hope that this heralds a new approach to investor responsibility among big agribusiness corporations.Yet it’s unlikely that multinationals will ever put social and environmental benefit on par with profit in their investment strategies. At the same time, international aid agencies and charitable NGOs are putting social and environmental benefit first, but their grant-based, philanthropic approach may not be enough to turn the tide of a global food crisis. More capital and smarter, more sustainable capital; will be needed to change the future of food.

All of these factors mean the time is right for impact and sustainable investing in agriculture and its broader category, agribusiness. The need for a new approach is evident. The tools, at least some of them, are in our hands. Meanwhile, a global community of impact investors and social benefit investors of all stripes are finding new ways to put those tools to work. But we’d better hurry. Our peace and our survival depends on getting it right.

Find out more about to find the investing opportunities in agriculture and agribusiness.

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