AgFunder Digitalk #4: The implications of Covid-19 on ESG and impact investing in agrifood

Editor’s Note: This is the fourth in our new What The Fork? series of digitalks for our community. Skip to the end for the recording or head over to our Vimeo page here to find this and other episodes.

While it probably seems like many moons ago to most of us, in January of this year, ESG was fast becoming the phrase of 2020 when it came to investment. For many of us, it was a long time coming, but that’s not to mean it wasn’t welcome as huge investment firms started to respond to demands from investors — and overall necessity — to tune their portfolios towards better environmental, social and governance outcomes. As many of you know, it’s not just the right thing to do, it makes good business sense. When announcing the intention for BlackRock to put sustainability at the heart of its investment process, the CEO Larry Fink argued climate change could lead to a “fundamental reshaping of finance.”

Working in an industry that feeds the world, employs the majority of the workforce in many nations and contributes to 14.5% of greenhouse gas emissions behind transport, it’s clear agri-food investing has the potential to play a big role in improving the sustainability of our planet, and technology is a key part of making that happen. It’s still surprisingly nascent outside of emerging markets as a well-trodden impact investment route, however, and amazingly, many food and agriculture corporations are only just now creating sustainability initiatives – just last year PepsiCo created the role of head of sustainability, for example.

But what happens when a global pandemic and ensuing financial recession hits? And what does that mean for impact and sustainability initiatives in agrifood more specifically? In our first episode of What The Fork? renowned agtech entrepreneur David Friedberg said he thought sustainability initiatives could fall by the wayside in the wake of Covid-19 as companies focused on their economics, while speakers on the other two episodes said the pandemic had emphasized the importance of sustainability throughout the supply chain.

Find all our digitalks over here on Vimeo

In this fourth episode of AgFunder’s What The Fork? digitalk series, we dig into the potential for agri-foodtech to achieve ESG goals and the potential impact of Covid-19 on sustainability and impact investment in the space. Joining AgFunder’s founding partner and lead on our impact investment initiative Michael Dean was Beverly Postma, the soon-to-be CEO of The Roundtable on Sustainable Palm Oil and founder of the advocacy group Food Industry Asia, and Bradley Busetto, the Director of the United Nations Development Program’s (UNDP) Global Centre on Technology, Innovation and Sustainable Development. 

Find out about AgFunder’s partnership with UNDP here.

You can watch the full recording below but here’s a few highlights:

• Sustainability initiatives in food & agriculture aren’t new, but there’s been limited efficacy in the past
  • “We’re certainly not doing enough and the gap is widening instead of shrinking. But have we taken a long time to get there? I don’t think so. I think we’ve been trying many, many things for many, many years. I’ve always been proud to work for the companies that are leading in that space, albeit with a very difficult stakeholder mix around them. And the one thing that I’ve learned is that no one organization or sector can do it alone. If we’re going to move the dial, we have to do it collaboratively and everyone has to get a win out of it. Everyone has to be focused on the same goal and we have to close some of the silos that have emerged between our various sectors,” said RSPO’s Beverly.
  • AgFunder’s Michael talked about his experience running an agriculture project in Mali that aimed to teach smallholder farmers to grow sunflowers for their seed, using pest-resistant varieties that would enable the farmers, often including pregnant women, to use fewer if any damaging and expensive chemicals. The project also elevated many women into management positions, which was seen as trailblazing at the time, said Michael.
• Consumers are demanding transparency in supply chains, putting pressure on food and ag companies to improve their practices, and digitization is making this more possible than ever
  • “Sustainability is inherent in wanting to have good returns over the long-term; there’s no distinction between sustainability and not making a good return on investment. But what’s really driving things now is at the consumer end. Younger generations like the millennials or Generation Z are making decisions about their life based on sustainability: decisions about what foods they eat, where they shop, where they’re going to work,” said UNDP’s Bradley.
  • “If there’s one thing I’ve really witnessed over the last decade is the rise of the purpose-led consumer who is demanding, not just purpose in their own lives and careers, but purpose behind the products that they buy and the companies they buy them from,” added Beverly. “And again, this concept of a purpose-led career or a purpose-led business is a relatively new branch, but I think it’s truly exciting for brands. And you know, millennials might get a lot of bad press, but I have to say they are leading the way and demanding that their employers and brands truly live up to something more than just paying their mortgage every day.”
  • Beverly added that while many consumers are miles away from where their food is grown, digitization is enabling them to see it and understand more than ever. “I’m excited because consumers are truly starting to demand that level of transparency. We all know that the number one purchase driver after price is food safety, but more and more they’re adding onto that wishlist… that there’s some social impact involved in what they’re buying; they want to see where their food has come from, who has produced it, has it been produced fairly? Is it good for the environment? Is it doing more harm than good? So I think companies are having to be quite innovative, not just in making commitments and keeping to them, but also being innovative in the way they bring that to life.”
• There are no universally accepted metrics yet for measuring impact in agri-foodtech investments as there other for other sectors, but the UN’s SDGs can provide a good guideline to get started
  • Michael shared that AgFunder will be using the UN’s Sustainable Development Goals as its framework for impact investment measurement in its new impact fund but that the firm will need to add additional layers that are specific to agrifood. This could get as granular as the measurement of reductions in inputs such as chemicals and water. “There are a lot of very expensive consultants who will come in and do an on-the-ground deep dive but if you’re investing in early-stage agrifood tech, it’s very difficult to afford that; however we think that through the tools available to us and partnerships like our one with UNDP, we’ll be able to demonstrate verifiable impacts and materially report those to our investors.”

Learn more about the types of agri-foodtech startups that fit an impact investing thesis by watching the webinar below.

Want to learn more about AgFunder’s impact investment initiative? Email [email protected].