August 09, 2012
How to Fund a Sustainable Food System
by Robert Kropp
RSF Social Finance publishes a report on steps investors can take to help build a just and
sustainable food system in the US.
Institutional investors with a commitment to sustainability have focused for years on the negative
impacts of agribusiness, engaging with food companies in an effort to reduce childhood obesity in
developed nations and protect the environment from unsustainable business operations.
Recognizing the challenges to food availability from overpopulation and resource
scarcity, the United Nations' Principles for
Responsible Investment (PRI) published the Principles for
Responsible Investment in Farmland last year. The signatories to the Principles agree to
promote environmental sustainability, respect labor and human rights, respect existing land and
resource rights, and promote high business and ethical standards.
But engaging with
McDonald's to improve the quality of Happy Meals, or clashing with Monsanto over genetically
modified organisms (GMOs), are not the only avenues for sustainable investors to address the
numerous problems embedded in the US food production system, as a new report from RSF Social Finance points out.
report, entitled Bridging
the Gaps: Funding and Social Equity Across the Food System Supply Chain, highlights many of the
concerns shared by sustainable investors, including obesity, environmental degradation, and
agricultural pollution. In addition, the report observes, "Corporate control of the agriculture
industry in the US… has contributed to the deterioration of rural agricultural communities and
agricultural infrastructure in many regions as smaller farms have been swallowed up by larger ones
and infrastructure has adapted to the industrial system or disappeared."
To create a
sustainable food system in which everyone has equitable access to healthy, fresh, and safe food,
the report continues, "Requires sufficient production of healthy food in every region of the US;
widespread distribution systems to ensure adequate physical access to food; nutrition assistance
for low-income families; education about basic nutrition; and changes in food preparation and
The report proceeds to identify the current sources of financing a
sustainable food supply. The investors surveyed report that 65% of their financing is through
grants; 52% through intermediaries; and 44% via debt. Only 9% of financing comes from equities.
Seventy-three percent of respondents identified "access for underserved communities (as)
the impact area with the greatest amount of interest." A method for providing such access familiar
to sustainable investors is through community loan funds and other community development financial
institutions (CDFIs). Last year, the Community Development Financial Institutions Fund (CDFI
Fund) awarded $25 million in grants to 12 CDFIs that are "focused on developing solutions for
increasing access to affordable healthy foods."
Yet the challenges to developing a truly
sustainable food supply in the US are considerable. Addressing the many challenges will require a
foundation of education, technical assistance, and collaboration between funders and entrepreneurs,
before a system of financing can be fully realized.
"There remains a need for more capital
across the entire supply chain," the report concludes. Syndication on investments, regional
community investment, and alternative "financing vehicles that address social equity and the unique
aspects of food and agriculture businesses" will be required to achieve the scale needed for what
amounts to a revolution in food production in the US.
"Our goals with this paper are
two-fold," Taryn Goodman, RSF’s Director of Impact Investing and co-author of the report, said.
"First, we want to help funders build a foundation of greater knowledge to encourage collaboration
among peers and with entrepreneurs. Second, we want to propose solutions for designing targeted,
high-impact, and effective funding strategies to increase the flow of capital."