State of Sustainability Initiatives Review: Standards and Investments in Sustainable Agriculture

This SSI Review looks at voluntary sustainability standards (VSSs) from the investor's perspective and shows that sustainability standards promote synergies between sound business practices and better environmental and social performance to catalyze much-needed investment in sustainable agriculture. The report also identifies opportunities for standard-setting bodies, financial service providers, and governments to leverage standards to increase investment in sustainable agriculture.

By Vivek Voora, Cristina Larrea, Gabriel Huppe, Francesca Nugnes on April 6, 2022

Achieving food security requires a rapid shift to more sustainable and resilient agriculture that remains viable in the face of economic volatility, supply chain disruptions, and increasing adverse impacts from the changing climate—that will exacerbate the estimated USD 260 billion investment gap to meet the targets of SDG 2 (zero hunger). We need to feed the planet using farms that can limit greenhouse gas emissions and adapt to the changing climate while protecting forests and biodiversity. And we need investors to quickly get behind this transition to make it happen.

Investors are ever focused on financial risk, but it's increasingly clear to many financial service providers (FSPs) that risk and sustainability profiles have considerable overlap in the agriculture sector. How does VSS-compliance lower financial risk for investors?

The research shows that when farmers adhere to sustainability standards their operations can become more productive, profitable, and can lower environmental and social risks to FSPs. This report finds that compliance helps producers build market linkages and secure contracts that farmers can use as collateral for financing.

The report benchmarks the production criteria of 12 widely adopted VSSs against the themes of 10 popular sustainable finance frameworks. Researchers also surveyed 51 FSPs active across the globe to understand how sustainability affects investment decisions. The report finds that in many cases VSS and investment criteria overlap. With standards compliance, farmers improve their practices in many ways that facilitate financing, such as detailed records, conserving water, soil and forests, as well as building good relationships with workers and communities.

Funded by