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Publication | 30 May 2022

Standards and Investments in Sustainable Agriculture

The latest report of the Intergovernmental Panel on Climate Change (2022) is clear: limiting global warming to around 1.5°C requires greenhouse gas (GHG) emissions to peak by 2025 at the latest and drop by 43% by 2030. This is just around the corner, and efficient actions are needed to make this happen. Contributing to almost 20% of global GHG emissions (Climate Watch, n.d.) and the main driver of close to 90% of global deforestation (Food and Agriculture Organization of the United Nations, 2021b), the agriculture sector has significant potential for reducing emissions and removing and storing carbon through the implementation of sustainable agricultural practices, including reduced conversion of forests, ecosystem restoration and reforestation, and soil conservation. These practices can all significantly contribute to mitigating climate change. For that to happen, a large number of investments are needed to support millions of smallholder farmers in developing countries in the implementation of sustainable agriculture practices. These farmers rely on the agriculture sector for their livelihoods and contribute considerably to global food security, making their role critical for all. Evidence suggests that there is still a huge investment gap in financing smallholder farmers and small agribusiness, and that closing it is essential to supporting them moving toward sustainability. Financial service providers (FSPs) around the world are increasingly committed to sustainable investing and are allocating their assets to initiatives that can mitigate climate change or build community livelihoods. Despite the growth of sustainable investing in the agriculture sector, we are still in the early stages in comparison to other sectors that attract more capital (i.e., renewable energy, clean technology). FSPs are wary of investing more in supporting the transition to sustainable agriculture in developing countries for several reasons, including a perception that agricultural operations carry high risks among FSPs; limited knowledge about risks derived from social and environmental issues and how these can be mitigated; and a lack of agribusiness “readiness” to receive financing.