Tuesday, March 11, 2014

Food: More with less

The food sector’s impact on the environment is undeniable. It contributes about 1/3 of total greenhouse gas emissions through energy/land use and methane/nitrous oxide emissions. Ironically the changing climate it helps bring about will have an immense impact on the food sector itself. With a projected population of 9.6 billion in 2050 a major global concern will be to keep up with demand. The agricultural sector must produce 70 % more output (calories) without increasing water and land use, relying on renewable energy (WRI, UNDP, UNEP, World Bank, 2013). In short more output without increasing inputs, under the guise of sustainable agriculture. A difficult equation aggravated by water scarcity, shortage of fertilizer, crop disease, waste, urbanization, overfishing, droughts, floods and competing land use. Annual productivity gains have been declining as these factors begin to take a toll, a trend that needs to be reversed in order to eradicate hunger and poverty.

A shocking fact about waste - 1 trillion dollars worth of food is wasted annually, that is ¼ of all calories produced for human consumption. The waste occurs on all levels, consumer, retail, farming and transport. According to the World Resources Institute, halving the level of waste would reduce the demand-supply gap in 2050 by 20 %. To put the waste issue in its environmental context, wasted food uses 24 % of all water used for agriculture and occupies a landmass about the size of Mexico. It is also responsible for 3300-5600 megatons of greenhouse gases (UNEP, 2013). If wasted food was a country it would only rank behind the US and China in terms of emissions.

The waste issue is not new, part of the problem is understanding its true scale. Many estimates are based on studies several decades old and fieldwork is difficult to conduct. More exact monitoring and estimation is needed in order to respond the right way. Fortunately new initiatives are popping up, the WRI recently announced the Food Loss and Waste Protocol on how to measure food loss and waste on a local level. UNEP, FAO and other partners already work with campaigns such as Think Eat Save. Reduce Your Food Print and Save Food Initiative.

Smart agriculture and food production
Another important dimension to the food and emissions conundrum is the food it self. What do we eat and how do we grow it? Along with reducing waste, yields need to be increased to ensure global food security.

GMO’s are a controversial topic. Strict labeling, following the precautionary principle as well as further science is needed to arrive at a conclusive position. Investigating both possible long-term drawbacks (declining biodiversity, gene flow) and positive aspects (less insecticides and more yields) is a must. Given that between 26 and 40 % of the potential global crop production is lost due to weeds, pests and disease, the stakes are high (FAO, 2012).

Meat – we are eating more and more but the climate effects are well known and pose a severe threat to the environment. Live stock production accounts for 18 % of human caused emissions (World Watch Institute). It uses a third of available land and a tenth of all water as well being a leading source of water pollution and deforestation (FAO, 2012). A more varied diet with less meat and/or more investments into synthetic foods are avenues we must pursue.

We need to move quickly towards climate-smart agriculture. Research indicates that using organic and ecological farming methods, renewable energy, crop rotations, protecting forests and improving the productivity of the smallholder farms will go a long way to meet our food needs. Increased resilience and reduced emissions are welcome bonuses.
Water-energy-food linkages and Impact Investing
In the pursuit of food security and climate smart agriculture the linkages to water and energy need to be fully realized and considered when making the necessary investments. For example, the food production and supply chain is responsible for around 30% of total global energy demand and agriculture alone uses 70 % of available freshwater.

Furthermore, competition between sectors for land use, water rights and energy is becoming increasingly common, the biofuel boom being case in point. Rainforests, grasslands and agricultural land have been converted to produce first generation biofuels, leading to a food price spike in certain regions and for specific products. This very conversion process leads to GHG emissions on a scale that dwarfs the benefits of using the biofuel instead of fossil fuels.

Aforementioned food price increases, due to rising demand and competing land use, have steered considerable investment to the agricultural sector. A word of caution is warranted as many of these large scale farming initiatives run the risk of becoming stranded assets as climate change makes previously fertile land unusable. As evidenced, any investment analysis needs to go both deeper and broader.

The opportunities for investment are nonetheless plentiful, The World Business Council for Sustainable Development estimates 1.2 trillion USD annually through 2050. Realizing the necessary shift to sustainable agriculture where more output is produced while reversing the negative impact on the environment will need both efficiency measures, for example drastically cutting waste, and investments in new technology and smarter solutions, for example synthetic foods and yield increasing innovations. In short, a combination of short and long term or defensive and offensive investment strategies.

Envisioning the investments as impact investments will go a long way in ensuring that they consider more than economic profit from the very onset of the process, balancing profit and environmental perspectives as equals and guaranteeing a long term perspective. It will also facilitate collaboration and coordination between sectors, including business and government. Alignment of interest between investors, investees and public sectors partners is not a “nice to have”, it’s a “must have”. Using specific, interdependent metrics to measure performance is another key tenant of impact investing that will hinder the usual “silo” thinking that oversimplifies investments and ultimately leads to underperformance. The world is hungry, investments need to happen now, let the shift begin.