A growing awareness of the systemic risks of agrifood sector is leading to a healthier relationship with nature.
With the global human population expected to reach 10 billion by 2050 – the same year the world is gearing up to reach net zero, at least for now – ensuring people are being fed sustainably is becoming crucial.
Global agrifood system emissions reached 16.5 billion tonnes of carbon dioxide equivalent in 2023, representing 32% of the total. Though an estimated 638-720 million people face hunger, a third (1.05 billion tonnes) of all food produced is lost or wasted each year.
Much of the harms caused to biodiversity are also linked to food production systems, which consume 70% of freshwater withdrawals while driving 90% of deforestation globally.
“The food sector is the largest driver of ecosystem conversion,” says Meryl Richards, Programme Director for Food and Forests at investor network Ceres. “The largest drivers are climate change and land and sea-use change – especially deforestation and the conversion of ecosystems like grasslands, which are also biodiversity-rich.”
A recent from Ceres – which co-leads global investor engagement initiative Nature Action 100 (NA100) – identified food production as one of eight key sectors driving nature loss, estimating the cost at US$253 billion annually as ecosystem services such as biomass provisioning, rainfall regulation, and pollination decline.
“The agrifood sector is both highly exposed to biodiversity-related risks and one of the largest contributors to biodiversity loss,” adds Richards. “This explains why investor interest in the sector is growing so quickly.”
It’s clear that drastic changes to the way we eat and produce food are needed. This was further evidenced by this year’s COP agenda, in which the need to protect and restore nature, and to transform food systems, emerged as key themes.
“We won’t meet our climate goals – not on mitigation, not on adaptation – if forests and ecosystems aren’t part of the plan,” argues Mariana Oliveira, Director of Forests and Land Use at the World Resources Institute (WRI) Brasil. “The science is clear that protecting and restoring nature and transforming food systems are powerful tools to cut emissions, build resilience and reduce climate impacts.”
While governments must change how they produce food, cut waste and shift to plant-rich diets – their leaders also need to close the nature finance gap through clear policies, market incentives and investment structures that reduce risk and attract private finance, Oliveira argues.
“Food production and nature protection shouldn’t be treated as mutually exclusive,” says François Mosnier, Head of Ocean Programme at think tank Planet Tracker. “Agroforestry and similar systems show that you can produce food while maintaining biodiversity. There are successful , including near [COP30 host city] Belém.”
Meanwhile, awareness of the issue is growing among investors – who according to Richards increasingly cite regenerative agriculture as a key strategy for reducing the physical risks of climate change and biodiversity loss. Key processes include improving soil health and water outcomes, as well as reducing agrochemical use.
“Agriculture is one of the oldest asset classes, but for a long time, big investors ignored it,” Alessia Lenders, Head of Impact at SLM Partners, tells Sustainable Investor. “The rise of natural capital is changing that. Investors are increasingly realising that agriculture sits at the intersection of climate, biodiversity, and social issues.”
A new era?
Although climate has historically led investors’ sustainability priorities, with renewables drawing the bulk of ‘green’ allocations, that balance is gradually starting to shift.
“Investors today are now moving to biodiversity as their second major theme,” says Lenders. “When biodiversity becomes your theme, you very quickly end up at agriculture, because there simply aren’t many other investable levers with real scale.”
While a few years ago, regenerative agriculture and ecological farming were very much fringe topics at investment conferences, many more people now want to be part of the conversation, she says.
In a global survey conducted by asset manager Robeco in 2023, 66% of investors said biodiversity would form a key part of their policy over the two following years, with 48% saying it was already a central factor. Meanwhile, AXA Investment Managers earlier this year reported that biodiversity is now “at the centre or a significant part” of policy for 36% of investors globally, with that share projected to reach 58% by 2026.
“This absolutely feels like a new era in sustainable agriculture investing,” Lenders continues. “Two years ago, everyone was curious. Today, everyone talks about it and includes it in their pitch decks. Many new entrants come specifically because of the biodiversity angle.”
Regenerative agriculture has also gained considerable traction within the agrifood sector as a way of reducing the environmental and social harm associated with conventional food production practices.
According to the Farm Animal Investment Risk and Return (FAIRR) Initiative, as of 2023, 50 out of 79 global food production and retail giants worth US$3 trillion mentioned regenerative agriculture initiatives in their disclosures, while 18 quantified company-wide targets.
Meanwhile, just eight of them discussed metrics and data – with half of those having established baselines to measure progress – and only four had targets to financially support farmers in deploying regenerative practices.
“Agriculture is a major part of the problem, but it can also be a major part of the solution,” Lenders argues. “Unlike other sectors where you could argue we should simply do less of it – such as travel – agriculture is non-negotiable. We will always need to grow food.”
Some investors have decidedly ramped up measures to tackle biodiversity loss. BNP Paribas Asset Management’s (BNPP AM) most recent biodiversity roadmap highlighted plans to conduct deep dives on planetary health diets and food waste. It also developed an agriculture and palm oil sector policy including biodiversity-related criteria, and set water and forest targets.
“We believe investors and asset owners such as ourselves should engage with producers, retailers and other players in the food value chain and address the close relation between food and emissions,” says Robert-Alexandre Poujade, Biodiversity Lead at BNPP AM. “Investors can also shift the allocation of capital towards companies offering solutions to accelerate it – such as manure recycling, regenerative agriculture and precision farming techniques.”
BNPP AM’s engagements with food sector companies encourage them to urgently and actively address the highly polluting methane emissions associated with dairy production, for example. The group also participates in collaborative engagement networks such as NA100, the Access to Nutrition Initiative (ATNI) and FAIRR – all of which contribute to driving the necessary system transformation, Poujade argues.
“Sustainable and regenerative agricultural practices, cutting food loss and waste by 50%, and adopting the healthiest diets can bring us back within the safe operating space for climate and cropland use,” he adds. “This can also considerably alleviate the risks associated with the crossing of other planetary boundaries – for water use, fertiliser application, and biodiversity.”
Maintaining the momentum
While such examples of investor action and engagement are positive, the cumulative impact remains limited, suggesting the need to deploy a wider range if tactics.
“Although some investors are mobilising capital to address nature-related risks, many remain passive and engagement falls short,” says Sajeev Mohankumar, Climate & Nature Senior Technical Specialist at FAIRR. “The bottom line is that a few investors are waking up to biodiversity risk, but overall, action is still negligible and far from matching the scale of the crisis.”
To curb the environmental impacts of intensive agrifood systems, a wholesale shift toward sustainable practices is needed, Mohankumar argues.
“Something is definitely happening, but not fast enough,” echoes Planet Tracker’s Mosnier. “There is still a lot of activity, but political shifts in the past 12-24 months have slowed some promising stewardship and engagement.”
Under the Trump Administration, the US Securities and Exchange Commission has tipped the balance of control away from investors and toward company management. Most recently, the regulator said it would no longer respond to no-action requests for shareholder proposal exclusions, giving listed firms more scope to strike them off proxy statements and avoid scrutiny on sustainability issues.
The move, described as putting corporates and investors in “legal limbo”, follows rule changes imposing disclosure burdens on large investors when engaging with portfolio companies.
Nevertheless, consistent engagement with companies is more impactful than create dedicated funds or products, says Mosnier.
“When enough investors express the same concerns, management teams do respond,” he says. “Biodiversity-related risks are not abstract: they have very real financial consequences. That’s the kind of financial materiality we encourage investors to focus on.”
A recent report from Planet Tracker measuring the footprint of 52 of the world’s largest meat, dairy and rice companies found that only seven provided any reporting on their methane emissions – most of them covering only Scope 1 emissions.
The absence of Scope 3 disclosures meant most companies could not effectively measure, manage or reduce their footprint Planet Tracker stressed, while investors could not accurately assess the risks associated with them. Only one company – Danone – had clear, quantified commitment to reduce methane emissions from its fresh milk supply by 30% by 2030.
“Investors would reduce their risks, address their climate and nature ambitions, and find significant investment opportunities in transforming the global food system,” argues Peter Elwin, Director of Corporate Engagement and Research at the Finance for Biodiversity Foundation. “They are active, but given the scale of the problem and the extent of the transformation required, financial institutions need to do a great deal more.”
Changes, however, are beginning to happen – so investors who continue to invest in the ‘old’ food system face increasing risks as climate change and nature loss continue to threaten the foundations of the current ecosystem, Elwin warns.
The investors that recognise those risks are also seeking to influence policy, alongside corporate engagement, ensuring their voice is heard as more public sector programmes seek to support transition and enable nature-positive investment flows.
“Collaborative investor initiatives are pushing both corporate and policy levers to address deforestation and biodiversity risks linked to the food system,” says Miriam Benarey, Head of Sustainability Client Advisory at Impax Asset Management.
“Shared escalation frameworks, joint data platforms, and synchronised advocacy can amplify impact and reduce investor fatigue.”
COP30 in Brazil saw a number of announcements aimed at reducing harms to nature and accelerating finance flows in support of biodiversity, even though the final deal did not include a proposed new deforestation roadmap. Key initiatives included the official launch of the government-backed Tropical Forests Forever Facility – aimed at driving private capital to nature stewardship – a common nature finance taxonomy backed by multilateral development banks and an agreement to establish a mature measurement protocol.
Material risks and opportunities
With the Stockholm Resilience Centre having recently highlighted that seven of the nine planetary boundaries have now been breached, adding that the consequences would ripple out to biodiversity and food security, the need for decisive action is urgent.
“Biodiversity loss driven by the agrifood system is not just an environmental issue – it’s a material financial risk exposing investors to lower returns due to operational disruptions, regulatory and legal costs, reputational damage and portfolio devaluation,” argues Benarey.
“Growth opportunities are plenty vis-à-vis investing in solutions that stem biodiversity loss. Examples include precision agriculture solutions, reforestation initiatives, displacing synthetic with more naturals, or innovation in seed technology.”
