Financing the Future of Food - Learning Event

On 27 September 2024 around 35 experts from Dutch financial institutions, Ministry of Foreign Affairs, knowledge institutes and other experts focusing on agri-food and/or access to finance gathered in Amsterdam for a learning event regarding the role of finance in food system transformation. The event was co-organized by NFP, Foresight4Food and Rabo Partnerships. 

Below a first article on the event. A more elaborate report and the presentations will follow shortly. The event was very lively and many connections were made. As organizers we feel the energy among participants for further joint learning, innovation and collaboration in the field of Food System Finance. We will soon share an action agenda. So stay tuned !  

Food Systems Thinking

During the learning event the participants were introduced to food system thinking by Foresight4Food expert, Jim Woodhill. He challenged the audience to think about which outcomes - such as food security & nutrition, economic & social well-being and environmental sustainability outcomes - our current food systems are leading to. The desired impact?

If we continue in food systems as they are today, by 2035, 50% of the world's population will have a high BMI leading to a US$ 4 trillion cost to the global economy, while 42% of the worlds population can not afford a healthy diet and 733 million are living with hunger in 2023. The agri-food sector currently produces 31% of GHG emissions. Two degrees of warming could lead globally to 2,5 times more droughts and a 13% drop in crop yields. Concluding: food systems are central to all the big challenges facing the world.

What would be the desired outcome of our future food systems? A food system approach facilitates:

• agreement on which outcomes we want from our food systems
• Understanding of food system activities and how they need to change
• recognizing what drives the food system: like demographics & development, consumption, technology, markets, climate & environment and policy & geopolitics
• understanding what incentives and signals would change behavior: like laws, regulations, standards, but also norms and informal rules
• recognizing trade offs and synergies
• examining how systems can be nudged in the right direction
• Identification of the key-stakeholders which should be involved to nudge the system

There is a clear urgency for food system transformation and innovative financing is a critical foundation to realize this transformation. Therefore financial actors, both public and private, should be taken along in food system transformation strategies at an early stage for mutual understanding, agreement on the desired future food system scenarios, to enable public and private financiers to co-create and make available needed innovative financing for these strategies.

Emerging issues and challenges as identified by financial actors

The financial stakeholders, Nourelhouda Kassi of Rabo Partnerships and Anton Timpers of FMO gave their outlook on emerging issues and challenges regarding the role of public and private finance in food system transformation. Nourelhouda Kassi of Rabo Partnerships stressed the importance of finding common ground between all stakeholders involved in food system transformation, elaborating on the connection between food, nature and people. While Anton Timpers of FMO highlighted their important role in enabling market creation, developing innovations into bankable projects through public funds which can be scaled through blended and subsequently private funds.

Financial Flows to Food Systems (3FS)

We were particularly honored that Nadine Gbossa, Director of Food Systems Coordination at IFAD, presented the IFAD and World Bank tool ‘Financial Flows to Food Systems’ (3FS). Ms. Nadine Gbossa stressed the urgency that financial institutions in their investment decisions should not only look at economic viability, but also at the impact of their investments on food security, sustainability, resilience and decent livelihoods. By looking at the impact of investments on the entire food system from these different perspectives, financial institutions can take a role in bending food systems in a more sustainable direction.

The 3FS tool a/o gathered data on the domestic public financial flows and international development financial flows to food systems in Peru, Niger and Kenya. In 2024 and 2025 this will be completed by data on private financial flows to food systems.

The 3FS tool tracks the financial flows to 5 food system components:

The 3FS country reports give valuable information to public and private financial stakeholders and to experts focusing on food system transformation. Information which facilitates key-stakeholders to understand to which food system components financial means flow currently, which offers opportunities to adapt in accordance to food system transformation strategies. This should be a combined effort of public, private and blended financial institutions.

Financing to end hunger, food insecurity and malnutrition (SOFI 2024)

Mr. Giovanni Carrasco Azzini, economist at FAO Rome zoomed in on the financial flows to one of the 5 food systems components; ‘food security and nutrition’ based on the 2024 SOFI ‘Financing to end hunger, food insecurity and malnutrition in all its forms’. He stated that the SOFI 2024 research concludes that those countries which have a high prevalence of undernourishment often have the most limited ability to access financing. SOFI 2024 research further states that in countries with a limited ability to access finance, particular innovative financing instruments could make a big difference. Innovative financial instruments such as concessional finance for de-risking private financing or insurance and guarantees for risk-resilient food security and nutrition investments can have a positive effect on food security, for example as parametric insurance for better management of agricultural risks, risk pools for increased insurance affordability and first loss guarantees to absorb losses for high-risk investments. SOFI 2024 furthermore concludes that the current financial architecture for food security and nutrition is highly fragmented, creating further challenges to scale financing. Therefore the SOFI 2024 calls to enhance the role of multilateral development banks in de-risking financial flows, to create a closer nexus between humanitarian, climate and development finance, to break the sectoral silos in food security and nutrition policy and planning at national level, and incorporate environmental, social and governance considerations in private sector decision making.

Challenges and opportunities identified by the expert panel of public, private and blended finance

An expert panel consisting of Ms. Nadine Gbossa of IFAD, Ms. Agnes Janzsen of the Dutch Ministry of Foreign Affairs, Mr. Raymond Beimers of Invest International, Mr. Marcel Neutel of IDH and Mr. Bart van Kranenburg of Rabo Partnerships and moderated by Ms. Agnes Johan of Rabo Partnerships gave their views on challenges and opportunities in financing the future of food in a lively panel discussion. Agnes Janzsen of the Dutch Ministry of Foreign Affairs stated that the most important role for the Dutch government is to de-risk the private sector when moving into game-changing innovative food systems financing. The power of de-risking was supported by an example of Bart Kranenburg of Rabo Partnerships where a guarantee fund multiplied the investable capital available by two-fold.

Nadine Gbossa, IFAD, stressed that in terms of public finance, governments should be very aware of the impact of subsidies distorting international fair competition. And equally, she raised the devastating impact on local food systems of dumping food products abroad below cost price.

Group discussion - How can financial institutions help shift investment patterns?

Bram Peters, Foresight4Food, gave food systems thinking hands and feet by introducing the five Nakuru County Food System scenarios, which have been developed by a diverse group of more than 40 different stakeholders from Nakuru county, Kenya. On this basis, 4 groups entered into discussion on how financial institutions can shift their investment patterns towards food system transformation and what they would need for this.

The discussion groups stressed the importance of collaboration between financial stakeholders and beyond regarding joint learning and innovation. Additionally they highlighted the importance of enabling financial policy that looks beyond economic sustainability alone. The need for long term perspectives and finance was stressed, as well as the need to share emerging good practices.

Way forward

Based on the outcome of these discussions, as well captured by Nourelhouda Kassi of Rabo Partnerships, the way forward for financial institutions is two-fold or can be divided into two buckets, as Nourelhouda called it:

Way forward bucket 1 - Information

Financial institutions and their partners need food system knowledge, food system specific data transparency (such as 3FS) and exchange of experiences. Be informed about locally desired future scenarios and connected and local food system strategies.

Way forward bucket 2 - Partnerships

Include financial actors, public, private and blended in an early stage to food system strategy development at local level. Connecting the silo’s a/o to be ready for financial innovation needed for transformation.

Nourelhouda Kassi finalized her concluding remarks through an impressive personal story illustrating how partnerships, thoughtful use of resources, diversification, partnerships, trust and mutual focus can lead to systems change.