Poor nutrition is an untrenched global challenge that impacts many of the 17 UN Sustainable Development Goals. Solving it will require a significant capital infusion in a more local, more sustainable, global food system able to deliver more affordable healthy food. That’s a big opportunity for impact investors.
Malnutrition is now the biggest health risk factor in every single country – rich and poor. Poor child growth and adult overweight and obesity rates are driving health budgets up, via associated conditions such as anaemia, diabetes, cancer, heart disease and hypertension. These are skyrocketing globally – today over 2 billion people are affected, more than double the number of 850 million people who go to bed hungry.
The Global Alliance for Improved Nutrition’s core mission is to address this by making healthy foods more available, affordable and sustainable. But this can never be achieved without harnessing investment to adapt our food systems and make them healthier and more environmentally friendly. Later this year, GAIN is introducing a Nutritious Food Financing Fund that will offer a unique platform to direct investments into sustainable nutritious food businesses.
The Global Alliance for Improved Nutrition’s core mission is to address this by making healthy foods more available, affordable and sustainable. © GAIN
Food finance
Risk mitigation. Most people in low-income countries source their food from small and medium sized businesses all along the agri-food value chain, which play essential roles in getting food to people, especially the poor. It is estimated they deliver 70% of the food consumed in low income countries. Big ticket agricultural and food investments miss this dominant market segment and focus mainly on larger companies and export crops. The only viable way to bridge this gap is to innovate to unlock and deploy more private investment and direct it to the places where it can have the greatest impact. Blended finance (public-private) combined with funding provided by impact investors has a key role to play in helping to de-risk these investments and creating opportunities for investors across the risk-return spectrum – from donors and philanthropists to institutional investors to generate a social / environmental return alongside financial returns.
Pipeline development. These small businesses also lack the finance and expertise to bring nutritious food to market in a way that is financially viable and in formats that are attractive to consumers. They can struggle to access the information and technology to reduce their environmental footprint and make changes such as improving their water management, improving their processes to avoid food loss and switching to clean energy sources. They need investment, technical assistance and nudges to produce the most sustainable nutritious foods. In Africa, GAIN has helped develop a promising pipeline of investable opportunities in businesses delivering nutritious foods. For example, a recent review of GAIN partner companies in 2018 identified 107 companies in the agri-food space, representing about USD 168 million in credible unmet funding demand. This is just the tip of the iceberg.
- Filling gaps across the value chain. Despite this unmet need and growing investment opportunity, only 10% of impact investment globally is currently allocated to food and agriculture and it is estimated that half this investment goes into export crops like coffee and cocoa, which offer no nutritional value to local populations. In addition, most of the emphasis is placed on supporting primary agriculture, while investment in the essential small and medium sized businesses that play vital roles in the storage, processing, distribution and retail of nutritious foods is virtually non-existent. Supporting the businesses that are supplying sustainable and nutritious foods across the value chain is crucial to shift the market in the right direction.
Impact multiplier
Impact investors are asking themselves the question, "how can we deploy our resources in a way that maximises our impact on the UN Global Goals?" We want to make the case that investing more sustainable and nutritious food systems to improve diets and tackle malnutrition provides a compelling answer.
Investing in nutrition has an impact multiplier effect on many SDGs, including health (SDG No. 3) and hunger (SDG No. 2), gender equality and women’s empowerment (SDG No. 5), inclusive economic growth (SDG No. 8), resilient infrastructure (SDG No. 9), and more sustainable consumption and production patterns (SDG no.12).
We believe nutrition also offers untapped opportunities for investors along the risk-return continuum.
The Business and Sustainable Development Commission estimates that business opportunities in the implementation of food-related SDGs could be worth more than USD 2.3 trillion a year by 2030. There is an estimated USD 165-USD 255 billion to be made in meeting the increasing food requirements of those emerging out of extreme poverty, USD 155 – USD 405 billion in reducing food waste in the value chain and USD 110-USD 205 billion in re-formulating products for increased nutritional value.
Impact investors can unlock these opportunities and direct their investments in ways that ensure that nutritious, safe food becomes more available and affordable to local populations. Here’s how:
- Allocate. Asset owners, including government donors, need to direct more investments into food and agriculture initiatives that contribute to building more sustainable and nutritious food systems and benefit local populations.
- Better data. They should also demand a more robust application by impact fund managers of nutrition-sensitive criteria into investment decision making.
- Nutrition impact. Impact fund managers should do more to identify and disclose nutrition impacts (positive and negative) in existing ag and food investment funds and channel more investment into companies contributing to a more nutritious food system.
Still, investing in nutrition is currently limited. To help fill this gap, GAIN is introducing a Nutritious Food Financing Fund, which will offer a unique platform to direct investments into sustainable nutritious food businesses, demonstrate their potential to achieve both a financial return and greater nutrition impact and highlight important criteria for investors interested in investing with a nutrition lens.
Investing in small businesses that grow, distribute and sell nutritious food is good for people and planet and represents a growing investment opportunity. To meet the global goals, we need impact investors’ appetite for sustainable, nutritious food to grow. Investing in these small businesses is the smart thing to do. It is also the right thing to do.