Agriculture

diversity and can bring significant biological, social and economic benefits. Replenishing soil nutrients with biological nitrogen fixation and crop-residue recycling, reducing thermal stress and water evaporation rates, and attracting beneficial insects for pollination and pest predation, and deterring pests are all important benefits of crop diversification. Combining the horticultural production of higher-value vegetables and fruits with the cultivation of cereals and cash commodity crops can raise farm income, along with grass-fed livestock, which also enables people to acquire protein and calories derived from otherwise inedible biomass resources. Recycling of livestock manures as organic nutrients for soil is an essential element of greening agriculture. In addition, there are numerous opportunities for combining a wide variety of trees and shrubs with the cultivation of crops, horticulture and specialty crops (e.g. coffee, tea, vanilla, etc.) to maximise the output of a farm

Diversification strategies are not useful to ensure diminished vulnerability but also to increase profitability and yields of existing farming systems. Table 5 below presents selected evidence for costs and benefits of agricultural diversification strategies in Asia and Africa. Diversifying across crops has demonstrated increased yields in India and Bangladesh and shows potential for recovering research and extension costs. In both Africa and Asia, diversifying into animal husbandry has meant increased profits. The main on-farm costs for all these strategies is usually the cost of increased labour, but also the cost of training and learning new practices. In addition, diversification into animal husbandries may involve important capital costs in farm equipment. In countries where employment opportunities are few, diversification represents a potent poverty alleviation strategy for both the farmer and the labourer. After the analysis of costs of current agriculture and some strategies for a managed transition away from BAU, the following section lays out the benefit expected from greening the agriculture sector.

3.3 The benefits of greening agriculture

The greening of the agriculture sector is expected to generate a range of benefits including increased profits and income for farmers, gains at the macroeconomic level, enabling the sector to adapt to climate change and benefits for ecosystem services.

Profitability and productivity of green agriculture No business is sustainable unless it is also profitable. Many studies have documented the profitability and productivity of sustainable farms, both in developed and developing countries. An FAO study (Nemes 2009) that analysed 50 farms, mostly in the USA, reported: “The overwhelming majority of cases show that organic farms are more economically profitable”.

There are various examples of higher productivity and profitability in developing countries. Another study by Pretty et al. (2006) showed an average yield-increase of nearly 80 per cent as a result of farmers in 57 poor countries adopting 286 recent best practice initiatives,

Box 6: Investment in sustainable agriculture: case study

Current trends of population growth, climate change and resource scarcity make sustainable agriculture a compelling investment opportunity. Sustainable Asset Management AG (SAM) taps into this potential through its sustainable theme funds, investing in companies that offer cost- effective, eco-friendly technologies that enable more efficient use of water or more sustainable food production.

SAM has pursued water investments because the need for adequate water supplies is one of today’s major challenges. Advanced micro or drip irrigation systems can halve farmers’ water requirements and limit the need for chemicals while boosting yields by up to 150 per cent. Countries affected by water shortages are adopting these technologies at rapid rates (see chart).

Million hectares 8

7 6 5

4 3

2 1 0

2001 2003 2005 2007 2009E 2011E

The SAM Sustainable Water Fund currently encompasses an investment universe of about 170 companies worldwide and assets under management of € 1.14 bn. The fund has consistently outperformed its benchmark, the MSCI World, with annual return on average outperforming the benchmark by 4.14 per cent (in Euros) since launch in 2001 at a risk comparable to that of the MSCI. Strong growth in micro irrigation fosters sustainable agriculture and creates interesting investment opportunities. Source: Based on text provided by Daniel Wild, PhD, Senior Equity Analyst, SAM (2010)

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+19% p.a.