Responsible Private Sector Investments in Food and Agriculture

Cross-border investments are significantly contributing to the process of global food production, with goods and services being a part of elaborate international value chains. They are increasingly important for the uptake of new technologies and know-how. Investment flows among developing economies, as well as from these countries towards higher-end markets are also growing. Smaller companies are increasingly joining these value chains, or even investing beyond their own countries. Given appropriate policies and business environments, cross-border investments can provide many benefits for emerging markets, including value-addition, higher exports and trade flows, transfer of skills and positive impact on employment.

Among the emerging markets, Africa has some of the fastest growing economies of the world and is expected to provide the most consistent rates of growth over the next decade. As a continent with the youngest population companies and consumer brands are looking to establish a strong presence, and foreign direct investments are likely to increase. Tapping into Africa’s potential is a huge opportunity for private sector companies, however there are high risks along the agri-food value chains.

The panel will present views of leading global private sector companies on opportunities and challenges for investing across borders in growing markets, including countries in Africa. How to strengthen value chain linkages, boost value-addition and higher exports, and integrate African businesses in global value chains in a sustainable way? What are the prospects of emerging economies such as Morocco, to attract private sector investments and enhance business prospects for the African continent?

Private sector companies involved in agri-food value chains can create employment, raise labour standards and implement technology to increase agricultural production or reduce pollution. They are critical for the fulfilment of the Sustainable Development Goals (SDGs). Policy-makers – and the society at large – have increasing expectations for the business practices of agri-food companies: they want them to operate responsibly. What does it mean?

In 2014, the Principles for Responsible Investment in Agriculture and Food Systems of the Committee on World Food Security – also known as the CFS-RAIs or RAIs – were endorsed by governments worldwide, together with representatives of the private sector and civil society. Since then, the principles have provided a clear framework that defines responsible investing along the agri-food value chains.

The panel will briefly introduce the RAIs and leading agribusiness companies – as well as banks financing their activities – will share their views on how the private sector can embrace more responsible practices by adjusting their internal policies, due diligence processes, and performance systems.

In recent years there has been an increased focus on blended concessional finance to promote private sector participation in developing countries. Private investors (for example, private equity funds, pension funds, insurance companies) are increasingly looking to developing countries for investment opportunities. At the same time, the Sustainable Development Goals have further emphasized the need for development funding to come both from the private and public sectors. Undoubtedly this trend has also made the imperative of working closer together, especially in sectors such as agriculture and food, which will require substantial investments in the future.

At the intersection of these two trends – the need for more development financing and private investor interest in developing countries – is an enormous opportunity for public and private investors to join forces and blend their financing sources. International financial institutions (IFIs) have been called on to leverage their balance sheets and to mobilise even more funds. In order to meet this growing demand various IFIs have been using blended finance instruments to finance transactions that cannot be structured on market terms. There is significant scope to expand the reach of blended finance instruments and improve their development impact in the agri-food sector, perceived by investors as inherently risky and requiring high risk capital.

The panel will look into ways of increasing the leveraging potential and mobilising more private sector financing through blended finance. It will also look at opportunities to encourage innovation, crowding in private capital and de-risking transactions in developing countries. Finally, it will look into ways of maximising public-private collaboration for greater impact along agri-food value chains.

A transition towards more sustainable food production is needed, with the core challenge being how to produce more with less. Agri-food value chains are currently facing multi-faceted challenges, including increased pressure on natural resources such as soils and water, loss of biodiversity, and uncertainties associated with climate change. An estimated 30 per cent of land is degraded worldwide, negatively affecting food security, livelihoods, and ecosystems costing between US$ 6.3 and 10.3 trillion annually. Estimates suggest more than 15 million hectares of land continue to be degraded each year – primarily in developing countries – to the point that they can no longer produce economic goods or provide ecosystem services, with land use conversion and soil cultivation being responsible for about one quarter of greenhouse gas emissions globally. At the same time, agricultural soils are among the planet's largest reservoirs of carbon and hold potential for expanded carbon sequestration, but the role of soil as a carbon sink has been diminished by unsustainable land management practices.

The panel will discuss innovative business models adopted by the private and public sector related to sustainable soil management, how IFIs can support scaling up such initiatives, and what role the Paris Agreement instruments can play in this context. Why are land conservation and regenerative agriculture critical, what is the scale of the challenge, and what are the benefits? How does this link to the issues of climate change, food security, and inclusion of smaller companies in agri-food value chains? What are the specific actions that need to be taken to reverse the trend in land degradation through common agricultural practices and targeted investments?

Employment and entrepreneurial opportunities for young women and men remain limited, particularly for those living in developing countries (estimated at 88 per cent of the global youth population). Increasing the economic and social inclusion among youth, especially young women, and removing the barriers to employment has become a priority for most of these countries. In recent years, the role of innovation and value chain development has been recognised as a key way to reduce rural poverty, promoting inclusion among vulnerable groups, and generating income and employment.

Sophistication in both international and local food production can create new opportunities and generate social benefits for smallholders and agri-SMEs, reducing poverty in developing countries. However, making agri-food value chains inclusive for all will require significant investment in enhancing production capacities, infrastructure, and logistics, as well as improving business skills and know-how.

The panel will present views of the private sector, IFIs, and local institutions on strengthening value chains through support for cooperation, sharing of know-how and capacity building of local enterprises, especially those run by women and youth.

The surge in digital technologies (also called the “fourth industrial revolution”) that took place over the past few decades has virtually transformed every sector of the global economy. The speed of current breakthroughs has no historical precedent, disrupting almost every industry in every country, with the breadth and depth of these changes heralding the transformation of entire systems of production, management and governance. The agriculture sector is no exception. The digital revolution is changing the way agri-food value chains are managed in more developed countries and slowly but surely the way they will be handled in developing economies, with the desired outcome of more productive, profitable and sustainable food systems. For public financing institutions challenge is to understand these new technologies in order to support and facilitate their effective adoption by smaller producers who are typically more severely hindered by market and policy failures, a fact that will inevitably slow down and limit adoption.

The panel will briefly present pioneering digital technologies as applied to the agri-food sector and explain their potential and challenges for adoption. The focus will be on the role of public institutions in accompanying the ongoing R&D process of digital agriculture, which is mostly driven by the private sector, and on identifying the required interventions in terms of policy and regulatory actions, incentive framework and pilot/demonstration initiatives.

Four Seasons Resort Marrakech

Boulevard de la Ménara, 1
Marrakech, 40000, Morocco

Web: Four Seasons Resort Marrakech

For general inquiries, help, or additional information, please contact:

Marta.Bruska@fao.org

You can see the agenda here. 

You can download the agenda in French here.