Socially responsible and green investments in transforming the food system

How socially responsible and green investments are helping transform the food system to drive long-term impacts for people and the planet.

 

Every investor walks a tightrope between short-term profits and long-term sustainability – balance poorly, and the fall can be costly. Financers face this challenge when investing to build a healthier, greener and more resilient European food system. To accelerate this transition, we need a range of financial mechanisms with risks spread fairly across sectors. Europe requires new approaches, blended finance, and novel ways of unlocking traditional finance.

To create a food system that works for people and planet we must rethink how, where and by whom money is invested. This cuts across the food value chain: from the way soil health is valued, through to the way ingredients are processed, packaged and distributed. If done smartly, socially responsible investment (SRI) in the food system can deliver reliable returns alongside measurable real-world impacts that benefit everyone.

What is socially responsible investment?

SRI differs from traditional investing in terms of its outlook, though is still aims to deliver financial returns for investors.

“Socially Responsible Investing (SRI) involves investing in companies that promote ethical and socially conscious themes including environmental sustainability, social justice, and corporate ethics, in addition to fighting against gender and sexual discrimination.”

– Investopedia (1)

To assess the SRI value, investors will often look at the Environmental, Social, and Governance (ESG) credentials of a given company or project. Part of an SRI strategy is to avoid investment in companies or products that conflict with the values of the investor. But the more proactive side – often known as Impact Investing – involves using funds to generate beneficial social and environmental impacts alongside financial returns (2).

This can also include trading in assets that meet certain criteria for sustainability and ethical responsibility. An investor might prioritise companies that focus on reducing their environmental footprint by using sustainable environmental materials, thereby supporting long-term efforts to mitigate climate change. By prioritising these factors, investors contribute to welfare by supporting businesses that aim to improve both social and environmental outcomes.

What does SRI in the food system look like?

Within the food system, an SRI strategy could mean divesting in the production of ultra-processed foods that have been linked with non-communicable diseases and other negative health consequences (3). Instead, funds can be channelled into innovators and startups developing healthier alternatives and promoting stewardship of resources. Food systems account for a third of our greenhouse gas emissions (4) and current practices contribute to biodiversity loss (5). And so an SRI approach could also mean investing in alternative packaging, and sustainable agriculture technologies that reduce chemical inputs and regenerate soils.

SRI in the food sector could mean supporting blended finance models that de-risk early investments and enable the uptake of solutions by actors across the food system. Investments in these projects can create opportunities for greater diversity and inclusion within the food industry by supporting businesses that prioritise ethical labour practices and equitable access to resources. These initiatives also contribute to building long-term assets that generate both financial and social returns for investors.

 

With a focus on transparency and accountability, investors and financial institutions can ensure that funds are being distributed ethically. This enhances access to capital for companies in the food system working toward sustainable solutions. Brokers and credit cards can also play a role in facilitating investments in these areas by offering innovative financial products that meet investors’ needs. By assessing the amounts of capital being invested, rates of return, and exchange options, investors can align their investment strategy with their financial and social goals.

Investing in a prosperous future for all

 

Investing in food system transformation is not a selfless act. It is an investment in the future prosperity of individual companies and business sectors. Half of global GDP is dependent on nature to some extent (6). Biodiversity loss and ecosystem collapse are cited by the WEF Global Risks Report 2024 as a major risk over the next decade, threatening a $2.7 trillion annual decline in GDP by 2030 (7). Preserving these ecosystem services is critical to ensuring the resilience of markets and industries.

In this context, community investing becomes crucial, as it focuses on fostering sustainable growth in local communities while also supporting global efforts. The investment process involves evaluating securities in sectors that prioritise sustainability, and the investment managers responsible for making these decisions must adopt a clear investing strategy that balances financial returns with positive social and environmental outcomes.

This article was initially published by Eit food.