If now isn’t the time to invest in agriculture, when?
At this year’s United Nations Climate Change Conference, or COP27, the global conversation was focused on food security more than ever before. Now, a few weeks after the gathering has ended, is the perfect time for world leaders and investors to take climate-smart agriculture, an approach that helps to guide actions needed to effectively support development and ensure food security in a changing climate, seriously as an investment opportunity — one with the potential to be part of the climate solution.
There is a strong investment case for including climate-smart agriculture and food security among a broader portfolio of net zero investments. Investments in climate-smart agriculture can reduce greenhouse gases and enhance the resiliency and adaptive capacity of food production. Climate-smart agriculture practices include rotating crops, planting cover crops, reducing tillage, and integrating crop and livestock systems in order to improve soil health, sequester carbon, and produce co-benefits such as reduced erosion, increased water infiltration and economic and environmental resiliency.
More farmers are transitioning to climate-smart practices and the U.S. is recognizing the critical role agriculture plays in driving climate solutions and strengthening the U.S. and global food systems. As a result, there will be significant opportunities to invest and help drive a climate-smart transition. In fact, at USFRA, we believe climate-smart agriculture merits consideration as part of climate portfolios on par with renewable energy and sustainable forestry.
In order for our farmers and ranchers to be part of the solution, it is critical that they have partnership and investment from the private sector.
But few institutional investors, if any, are investing in agriculture as a critical piece of their sustainable investment portfolio. Today, there are emerging technologies, such as soil testing and manure management tech, to make agriculture more climate smart, and rural communities could play a pivotal role in helping us reaching a net zero economy. Institutional investors can invest right now in transformative technologies in the agriculture sector that not only provide for climate solutions but most importantly provide for people’s livelihoods? In order for our farmers and ranchers to be part of the solution, it is critical that they have partnership and investment from the private sector.
Recently, the Biden administration announced initial commitments to pilot new revenue streams for climate-smart farmers, ranchers and forest landowners. All in, the United States Department of Agriculture anticipates investing more than $3 billion over five years in pilots that will create market opportunities for American farmers using climate-smart production practices. According to a news release announcing the program, "These initial projects will expand markets for climate-smart commodities, leverage the greenhouse gas benefits of climate-smart commodity production and provide direct, meaningful benefits to production agriculture, including for small and underserved producers."
Our report on transformative investment in agriculture outlined both the need and the opportunity for investing from the private sector. The good news is that this is a sector that has a technology pipeline, and it has willing and capable farmers and ranchers ready to deploy climate-smart technology. They just need greater partnership from the finance sector.
Long term investors need to support this sector, especially sustainable investors seeking to align their portfolio with the U.N. Sustainable Development Goals (SDGs). The second SDG, and the order matters, is ending hunger. Feeding the population creates economic development and other co-benefits. Sustainable agriculture cuts across the other SDGs related to climate action, sustainable communities, responsible consumption and production and life on land. It is also about the protection of green spaces and the revitalization of rural communities.
Sustainable investors have primarily relied on investments in alternative energy, but rarely consider agriculture as another source of energy and technological innovation. An emerging bioeconomy can be a new Silicon Valley with agriculture innovation driving important sustainable outcomes. Technologies such as biofuels derived from plants, biobased products that can displace synthetic and fossil fuel-derived products and biodigesters that turn food waste and manure into energy could create a new startup boom. These technologies seek to replace black carbon, carbon derived from fossil fuels, with other forms of carbon from plants and soil considered green and brown carbon. Agriculture provides nature-based solutions, solutions derived from plants, trees, working lands, that should be considered primary solutions.
But this is about more than missed opportunities. Overlooking agriculture could add risk to portfolios. Agricultural technologies that address climate change can catalyze the transformation of an industry that is perhaps most at risk due to climate change. Recent fires, heat waves and droughts had a devastating impact on farmers. A productive and sustainable agriculture sector is at the heart of our economy, not to mention national and global security.
The farmers who produce our food care about sustainability; it is their livelihood. In fact, farmers are the eco workforce who can have an impact on getting us closer to solutions for a net zero economy every day. They just need greater investment to employ the technologies that can catapult the transition. Institutional investors should see the promise of investing in agriculture as both an opportunity and potential alignment with their long-term sustainable investment goals.
For those who really care about investing sustainably, no other sector can do as much to advance people and planet.
