The current global food system is not structured to cope with a rapidly growing population, climate shocks and the rise of both hunger and obesity. Under business-as-usual scenarios, an estimated 637 million people will still be undernourished, while health systems could face a bill of $1.2 trillion every year for treating medical conditions related to obesity. We will also have no hope of reaching the Sustainable Development Goal of net zero emissions by 2050, given that today’s agricultural supply chain, from farm to fork, accounts for around 27% of greenhouse gas (GHG) emissions.
As the heads of leading multilateral and commercial agricultural finance institutions, we are convinced that fragmentation within the current food systems represents the most significant hurdle to feeding a growing population nutritiously and sustainably. We urgently need collective action on an unprecedented scale, with innovative alliances that pool capital, resources and knowledge. This could unlock investment and generate impact leading to more sustainable, efficient, inclusive, nutritious and healthy food systems worldwide.
Stalling at smallholder level
For example, many agribusiness clients struggle to establish a reliable supplier base of smallholder farmers in developing economies. High upfront costs to train farmers and ensure access to inputs, finance and markets add significant investment risk for our clients, and financing risk for Rabobank. Hundreds of initiatives have aimed at establishing these prerequisite conditions for private-sector investment. Yet despite individual successes, these initiatives are too small to achieve impact at the scale needed to unlock finance for large-scale infrastructure investments – from hard infrastructure such as roads and mechanization, to soft infrastructure such as climate-risk insurance and market information systems – along with the distribution and training systems needed to make these accessible to farmers.
Meanwhile, the International Fund for Agricultural Development’s investments in increasing food security and nutrition can only deliver sustainable economic benefits for rural populations – especially the poorest and most marginalized, women and youth – if there is a strong market-based economy, backed by private-sector capital focused on providing smallholder farmers with access to high-value markets for their produce and the services they need to increase production levels.
Fragmentation in the system also results in a lack of knowledge-sharing and coordinated efforts to address sustainability. Many agricultural value chains and farming practices that are successful in increasing output deplete or pollute natural resources such as water, soils and forests, making them unsustainable in the longer term. Yet at both value chain and national level, efforts to assess, mitigate and balance the effects of agriculture on the environment and health continue to be inadequate and fragmented.
Fragmentation also continues in the financial value chain, with too little coordination and collaboration between lenders to jointly leverage their resources and skills. For example, relatively small amounts of capital from donors and multilateral finance institutions that do not require an immediate or guaranteed return – known as “blended finance” – can be used to de-risk commercial lending, thereby mobilizing private-sector investment. However, both the number of these instruments available, and their limited scope due to the size of the projects available for them to support, means that their impact is insufficient to meet the challenge of food systems transformation.
We need far better and more structured collaboration between initiatives and food system players, to share best practices and to develop new projects, solutions and financial instruments in the rural space where financial markets are in their infancy. Most critically, we need to aggregate opportunities, resources and complementary expertise into large-scale projects that can unlock investment and deliver impact.
This is why the Food Action Alliance was recently launched by a coalition with IFAD, Rabobank, the World Economic Forum, the International Centre for Tropical Agriculture, the African Development Bank, the Alliance for a Green Revolution in Africa and an increasing roster of private- and public-sector partners. This coalition of initiatives and organizations works to address fragmentation across the food systems in developing economies by accelerating and expanding the impact of existing food value-chain initiatives.
The Alliance provides partners with a framework for collective action, significantly strengthening the impact of agricultural value chains to produce food efficiently and sustainably, that is accessible to all, in support of a transition to healthier diets and improved environmental outcomes. It builds on partnership models such as the New Vision for Agriculture in 25 countries and many other initiatives, aimed at integrating value chains through innovative partnerships and mutual learnings. For instance, the launch of Grow Asia, a regional partnership in ASEAN, has reached over 1 million farmers. Three state-level partnerships in India catalyzed a national platform supported by the federal government to set a more holistic approach to value-chain integration and development.
The Food Action Alliance doesn’t replace or directly support individual agribusiness initiatives or platforms. It connects projects, initiatives and organizations that are needed to achieve change at scale. It facilitates implementation of transformational ideas that, stand-alone, would struggle to realise their potential impact. It provides access to tools, research, lessons learned and solutions. Together, we believe that coordinated, collective action has the potential to improve the economic livelihoods of hundreds of millions of smallholder farmers, deliver on the SDGs and create sustainable and nutritious food systems for future generations.