Take Five: No Half Measures

A selection of the major stories impacting ESG investors, in five easy pieces. 

Whole-economy transformation was high on the agenda at London Climate Action Week and beyond.

Silent crisis – Among the more significant announcements made at London Climate Action Week (LCAW) was the unveiling of its draft ‘Global Roadmap for a Nature-positive Economy’ by the World Wide Fund for Nature (WWF). Avoiding the nature crisis requires the same whole-economy transformation needed to avert the climate crisis, the conservation organisation contends – and similar tools too, such as sector-specific pathways that plot the path to a sustainable future for governments, companies and investors. Due to be finalised and presented at the biodiversity COP16 in Colombia, the framework focuses on five pillars needed to underpin national plans for the nature-positive transition. While companies and investors are beginning to factor nature-related risks, impacts and opportunities into their decisions – as reflected in updates this week from the Taskforce on Nature-related Financial Disclosures and the UN Principles for Responsible Investment’s (PRI) Spring engagement initiative – their actions are limited by prevailing policies. To transform economies and redirect capital to nature-positive projects, resource-strapped governments need help, especially in the Global South. Speaking at the launch, Mahmoud Mohieldin, UN Special Envoy on Financing the 2030 Agenda for Sustainable Development and UN Climate Change High-Level Champion at COP27, said many are already struggling with the “silent crisis” of unsustainable debt levels. Governments that are already slashing health and education budgets rather than entering restructuring negotiations are not best-placed to realign their finance flows with the Global Biodiversity Framework. For this reason, the WWF’s draft roadmap seeks to provide that technical policy support, but it also expects change among those with the most power to influence, calling for multilateral development banks to “mainstream” nature into their decisions – especially around debt.

Plan to succeed – Transition pathways was a key theme throughout LCAW, in recognition of the work still needed to guide businesses and economies toward credible decarbonisation. The International Sustainability Standards Board (ISSB) confirmed it was assuming oversight of the transition plan disclosure resources developed by the UK’s Transition Plan Taskforce, taking the initiative a step closer to its original remit of establishing a ‘gold standard’ framework to be used across jurisdictions. For good measure, the ISSB also announced closer collaboration with other sustainability standards and reporting bodies, partly to build on its recent commitment to

Investors Urged to Intervene in EU Meat Lobby 

Meat and dairy companies are mimicking fossil fuel sector tactics to stall Europe’s climate policy, putting its emissions targets at risk, InfluenceMap finds.

Climate-conscious asset owners should ramp up their engagement with Europe’s food producers, after new research revealed the meat and dairy sector had lobbied successfully against a raft of EU climate policies, according to the think tank behind the study. InfluenceMap, a non-profit that monitors climate lobbying activities, found meat and dairy industry…

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TNFD Agrifood Guidance Offers Data Boost

Quantitative metrics provide investors with further tools for engagement efforts.

The industry has welcomed increased nature data for the agrifood sector provided by the Taskforce on Nature-related Financial Disclosures (TNFD), as it prepares to align with final guidance next month. The TNFD released final recommendations for nature-related risk management and disclosures last September. Those were meant to serve as a…

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How Investors can Accelerate the Food and Agriculture Revolution

Dr Henning Stein, Finance Fellow at Cambridge Judge Business School, and Ariel Barack, CEO of Ordway Selections, explain why the drivers of change – and the roles of the public and private markets – are evolving.

Efforts to build a genuinely sustainable food and agriculture system have now been under way for a number of years. On the whole, the story so far has reflected an uncomfortable truth: revolutions are messy.

There have been few exceptions to this rule throughout history. Political, social and even scientific upheaval has almost always proved tumultuous, for the simple reason that radical change is seldom easily achieved.

Given this, we should not be surprised that the global transformation of how we produce and consume food has been neither flawless nor swift. Equally, we should not shy away from its imperfect path to date.

There is no denying that some of the setbacks have been jarring. There is also no denying that many investors’ faith in the quest to feed humanity while safeguarding the environment has been undermined.

Other stakeholders have also been left disenchanted. By way of illustration, consider all those who have ‘bet the farm’ – sometimes literally as well as figuratively – on novel technologies whose promise has not yet translated into tangible results.

Yet none of this means we are in the midst of a revolution that is doomed to fail. Rather, it means we are still on a steep learning curve.

As investors, we have to understand what has happened, recognise where errors have been made and rethink our approaches. In public and private markets alike, there are important lessons to digest.

The irrefutable case for change

It is first imperative to appreciate why, in spite of limited progress, the investment attractions of sustainable food and agriculture not only remain strong but have arguably increased. This obliges us to see the bigger picture.

The most significant point here is that this is a transition that absolutely has to take place. The policies and practices that have dominated food production and consumption for the past three quarters of a century are no longer fit for purpose.

Incorporating farming, processing and distribution, the food system in its entirety is responsible for around a quarter of all greenhouse gas emissions. In turn, the dire effects of climate change – including extreme weather events, ecological decline and dwindling biodiversity – are ravaging landscapes and

Global Blended Finance Hits US$15 Billion

Climate-focused transactions are also on the rise, but private investors’ efforts have been limited by data availability. 

Catalytic capital flows to de-risk projects centred around sustainable agriculture, renewable energy, and health and education projects across emerging markets (EMs) have increased in 2023 after a ten-year lull. 

According to blended finance network Convergence’s latest State of Blended Finance report, the market rebounded to a five-year high of US$15 billion in 2023 after ten years of consistently low volumes, with multilateral development banks (MDBs) and development finance institutions (DFIs) investing greater sums. 

Convergence recorded 1,123 blended finance transactions totalling US$213 billion, outstripping the yearly 85 deals average of the past decade. Around 40% of these deals were valued at over US$100 billion in 2023, compared to 17% in 2022 and 28% in 2021. 

“Climate has become an even stronger focus [within blended finance], with financing flows increasing by over 100% in the last year and around half of these climate-focused deals worth US$100 million or more,” confirmed Convergence Manager Nick Zelenczuk during a webinar that launched the report. 

Within that, the energy sector was the most active segment, accounting for nearly a third of total deal activity and US$101 billion of capital flows. 

“Much of this investment targets renewable energy development,” the report mentioned. “Over the last year, 91% of blended transactions in the sector channelled financing to renewable energy, with nearly US$10 billion going towards solar projects.” 

In 2022, Convergence had warned that climate-oriented blended finance transactions were on the decline, having dipped 60% from US$36.5 billion in 2016-18 to US$14 billion in 2019-21. 

In its 2023 climate-focused blended finance report, the network highlighted an uptick in climate-focused blended finance, with large transactions such as the US$1.11 billion SDG Loan Fund devised by Allianz Global Investors and the Dutch Entrepreneurial Development Bank. 

Developing countries currently face an estimated US$4 trillion annual investment gap to meet the UN Sustainable Development Goals (SDGs). Blended finance is seen as a vital tool to contribute the capital flows needed to fulfil both these and the Paris Agreement goals. 

Cards on the table 

Despite the significant