Box 3: Innovations in the agricultural supply chain increase shareholder and societal value
For investors, water risk exposure is increasingly becoming material for mitigating investment risk in companies. For example, Robeco Asset Management invests in mainstream companies and encourages them, through active dialogue, to implement policies and innovative practices that mitigate risks resulting from water scarcity to their operations and reputations. In doing so, it also encourages companies to find solutions that can enhance their performance, increase shareholder value and therefore contribute in the long-term to building and sustaining a green economy.
Cotton, one of the most water-intensive crops, is the focus of a dialogue with companies in the textile industry to develop water-efficiency targets and adopt sustainable supply-chain practices. Through Better Cotton Initiative (BCI), a platform has been created for exchange of experiences on the use of efficient irrigation technologies, farmer education programmes and reduction in the use of pesticides and acceptance of transparent sourcing efforts.
Source: Based on the information from Robeco Asset Management received through Lara Yacob, Senior Engagement Specialist (2010)
60 54.9 50 40 33.2 30 25.5 20.9 20 15.2 10 0 46.1
1999
2001
2003
2005
2007
2009 Figur e 12: Global trade in organic food and drinks
(1999-2009) Source: Prepared by Asad Naqvi, Pratyancha Pardeshi based on the data from Sahota, A. (2009)
that can leverage larger multiples of private capital loans to smallholders who need working capital to undertake sustainable agriculture practices.
yield improvements with minimal environmental damage and contributes to sustainable development goals”.14
Recently, the Food and Agriculture
Organisation (FAO), World Bank, the United Nations Conference of Trade and Development (UNCTAD) and the International Fund for Agricultural Development (IFAD) have jointly proposed Principals for Responsible Agricultural Investments.15
Private funding interest Preferential access to credit and investment capital is one of the most important incentives to catalyse a transition to greener agriculture. The number, volume and rate of return of sovereign wealth funds (SWFs), pension funds, private equities and hedge funds with investment in agriculture, are increasing (McNellis 2009). Major financial institutions are expanding their green portfolios to offer investment credit to companies that manufacture and market products that enable more efficient use of agricultural inputs and introduce innovative private enterprises (see Box 3). The public sector, especially in developing countries, should support finance mechanisms (e.g. loan-guarantee funds)
Increasing consumer demand for sustainable food Over the last few years, consumer demand for sustainably produced food has increased rapidly. Purchasing patterns of fairtrade products have remained strong despite the global economic downturn. In 2008, global sales of fairtrade products exceeded US$ 3.5 billion. Data collected by the International Trade Centre (ITC) and the Forschungsinstitut für biologischen Landbau (FiBL) shows that the major markets for organic food and beverages expanded on average by 10 to 20 per cent per year between 2000 and 2007 and reached US$ 54.9 billion in 2009. This figure does not include markets for organic fibre, cosmetics and other luxury products. This demand has driven a similar increase in organically managed farmland. Approximately 32.2 million hectares worldwide are now farmed organically. In addition, as of 2007, organic wild products were harvested on approximately 30 million hectares.