THE FOOD FINANCE NEXUS
How can global finance be shaped to support the transition to an inclusive, healthy, sustainable food system? This is the core question of our Food-Finance Nexus work.
Today’s global food system – valued at US$8trillion a year and accounting for almost 10 percent of the global economy – is fundamentally unviable, as a result of its contribution to climate change, destruction of biodiversity, unstable food prices and security, and provision of low quality, low paid jobs. Indeed, these unpaid-for negative impacts have been estimated to be worth US$12 trillion by the World Bank – significantly more than the food systems’ annual economic value.
This food system, already in transition, is being increasingly shaped by financial flows. F4B's work, in collaboration with the Food System Economic Commission (FSEC), is working to understand the current nexus between the global food and financial systems, and explores how the two can be better aligned to
deliver an inclusive, healthy, and environmentally sustainable food system.
The first phase of this work has culminated in the recent release of the report "Making Finance Work for Food - Financing the Transition to a Sustainable Food System". It is accompanied by a supporting report on the current literature on the food and finance nexus.
Key Perspectives from the report:
Today’s global food system is unstable and destructive, driving an inevitable transition.
It is battered by our changing climate, and is a major contributor to climate change, both through its own carbon emissions and by being the single biggest cause of biodiversity loss. It provides low quality, low paid jobs, and fails in its ultimate purpose of delivering affordable healthy food to all.
The transition must be rapid, fair, and safe.
Ensuring a rapid, fair, and safe transition will depend on our actions. We need to move towards a system that produces affordable healthy food in ways aligned to climate and nature goals, whilst avoiding transition risks such as widespread bankruptcy, devastating rural unemployment, and increased food prices, poverty and inequality.
The transition is delayed and diluted by unproductive debate.
Resistance to change from those who profit from today’s food system, and those rightly seeking to protect the vulnerable, needs to be overcome by recognising the complementarity of apparently competing visions, such as regenerative agriculture and soilless food production, and the relative merits of private and public financing.
Global finance shapes the food system.
Public and private financing decisions, including citizens’ consumption choices, shape how the food system impacts people and the planet, in determining production systems and technology choices, climate and nature impacts, the economic value created and its distribution, and the quality and cost of food.
Getting financialisation right is a pre-condition for an effective food system transition.
Crowding in deeper levels of private capital, at all stages of the food system, is needed to support the transition. But ‘more private finance’ alone is an insufficient condition for ensuring that the transition itself is rapid, fair, and safe, or that it will lead to an inclusive, sustainable, healthy food system.
Financialisation can be shaped to support the right transition
It is completely possible to get financialisation right, requiring action across four key fronts in aligning global finance to support the transition to the food system we need, internalising costs, policy action (summarised in the diagram below).
Much can be done to align global finance with the transition to an inclusive, sustainable food system. The power and impact of financialisation is a choice, with four critical clusters of levers that can shape it to support the food systems that we need.
F4B is also working on a related piece of work in collaboration with Material Economics covering alternative protein disruption, which sets out a number of initial scenarios looking at their potential impact on the food system and beyond. Soilless farming is likely to play a significant role in the food system transition, including alternative protein and vertical farming. Our sketch scenarios highlight the potential for very different pathways in the scale-up of alternative protein.