Box 7: Innovative sustainable and social capital investment initiatives
Institutional investments for greening agriculture are emerging. For example, Rabobank Group is supporting sustainable agriculture through the launch of the Rabo Sustainable Agriculture Guarantee Fund and supporting initiatives such as the Dutch Sustainable Trade Initiative (IDH), the Schokland Fund and Round Table of Sustainable Palm Oil (RSPO), the Round Table on Responsible Soy (RTRS), and the Better Sugar Initiative (BSI). In addition, it has launched programmes to improve the financial strength and resilience of small farmers in developing countries via the Rabobank Foundation and Rabo Development. It has also introduced new financial services such as the Sustainable Agricultural Fund to try out innovative financing models such as the Xingu River Basin Project in Brazil, under which 83 hectares have been replanted in the last two years. Rabobank has invested nearly US$ 50 million to purchase carbon emission reduction credits that are created by the Amazon reforestation by farmers.
Another example of social capital investment institutions is the Acumen Fund, which has channelled investment worth millions of US dollars to private entrepreneurs in developing countries, enabling businesses and other initiatives to flourish, from those that provide drip-irrigation products to those operating village-scale biogas power-generation services. Acumen provides both patient capital investments and business management capacity-building support to the private businesses in their portfolio
than investment in any other sector (ADB 2010). The greatest success stories in terms of reducing hunger and poverty are from China, Ghana, India, Vietnam and several Latin American nations, all of which have relatively higher net investment rates in agriculture per agricultural worker than most developing countries (FAO n.d.). The World Bank has estimated that the cost of achieving the first Millennium Development Goal (MDG 1) amounts to between US$ 554 and US$ 880 per head (based on growth in income in general), while a study published by the Asian Development Bank Institute has concluded that the cost of moving a household out of poverty through engaging farmers in organic agriculture could be only US$ 32 to US$ 38 per head (Markandya et al. 2010).
Box 8: Organic versus conventional cotton production
An Indo-Swiss research team compared agronomic data of 60 organic and 60 conventional farms over two years and concluded that cotton-based organic farming is more profitable. Organic farming’s variable production costs were 13-20 per cent lower and inputs were 40 per cent lower. But yields and profits margins were 4-6 per cent and 30- 43 per cent higher respectively during the two years. Although crops grown in rotation with cotton were sold without a price premium, organic farms achieved 10-20 per cent higher incomes compared with conventional agriculture (Eyhorn et al. 2005). Similarly, an impact assessment study for organic cotton farmers in Kutch and Surendranagar in eastern India, concluded that farmers who participated in the project enjoyed a net profit gain of 14 to 20 per cent resulting from higher revenues and lower costs. The updated version of the study surveying 125 organic cotton farmers concluded that 95 per cent of respondents found their agricultural income had risen since adopting organic agriculture, on average by 17 per cent. Most farmers attributed this largely to the reduced cost of production and an increase in output price (MacDonald 2004). Raj et al. (2005) also found in Andhra Pradesh that organic cotton was much more profitable. Source: Nemes (2009)
In addition, green agriculture directs a greater share of total farming input expenditures towards the purchase of locally-sourced inputs (e.g. labour and organic fertilisers) and a local multiplier effect is expected to kick in. Overall, green farming practices tend to require more labour inputs than conventional farming (e.g. from comparable levels to as much as 30 per cent more) (FAO 2007 and European Commission 2010), creating jobs in rural areas and a higher return on labour inputs. This is especially important for developing countries, where large numbers of poor people continuously leave rural areas in search of jobs in cities and growing proportions of young people are imposing enormous pressures for job creation (Figure 6). In addition, most developing countries run substantial trade deficits (World Bank 2010) with the lack of foreign exchange representing a key resource constraint. Greening agriculture can relax the foreign-exchange constraint by reducing the need for imported inputs and by increasing exports of sustainable agrifood products. Reducing deficits would