FSF co-leads discussion on repurposing fiscal and agriculture support polices at the Good Food Finance Week

Following the World Bank meetings in middle of April this year, Good Food Finance Network organized a high level discussion and a week-long series of workshops discussing good-practice guidance and innovation to accelerate the implementation of solutions to overcome existing financial bottlenecks and challenges related to food systems transformation.

What is the GFFN?

The GFFN is a collaborative platform launched by Food Systems for the Future, EAT, FAIRR, UNEP, and WBCSD. GFFN works to develop the innovations that will allow sustainable food systems receive access to finance and become part of mainstream investment. To achieve this, the GFFN aims to:

i) raise ambition and develop commitments from financial institutions, governments, and corporates to address challenges in the funding of the transformation of food systems, and

ii) drive action by bringing together stakeholders to identify, develop, deploy, and mainstream the financial instruments, strategies, and policies needed for the expansion of food systems that sustain people, planet, and our economies.

One of the barriers that impedes the financing of sustainable food systems is perverse incentives through the misalignment of agricultural subsidies. As part of the GFFN, FSF co-leads the catalyst group on Public Finance alongside FAIRR, and co-led the panel discussion on repurposing fiscal and agricultural support policies to address climate and food security. Through collaboration with academics, policy makers, and financial institutions, the Public Finance catalyst group aims to jump start the structural change needed to align government agricultural support with a sustainable and inclusive food system.

During the GFFN week the Public Finance Catalyst group brought together 5 experts as part of a panel aimed at exploring some of the most pressing concerns regarding public financial support of food systems in the wake of the current food price crisis brought on by the war in Ukraine, the fragility left behind by COVID, and the overarching climate emergency.

Key Messages from the Fiscal Policy Panel 

Food touches our lives in two important ways: climate risk and health cost burden – Customer paying twice; first buying unhealthy food and second paying for the medicines.

• The recent increase in food and commodity represents a serious risk reversing the recent gains in poverty reduction. a study by world bank states that each percentage increase in food and commodity prices results in an additional 10 million people falling below the poverty line

• OECD study states 8% of health cost for 52 OECD countries is spent on obesity relating diseases.

• 3% of the GDP is loss due to productivity loss due to absenteeism due ill health.

The event highlighted how historically, agricultural subsidies have been biased towards the production and consumption of staple foods. The focus of subsidies must be rewritten and widened to include indigenous food, fruits, and vegetables, and plant-based options that are not only healthier, but better suited for specific regions.

Professor Shenggen Fan (China Agricultural University/CGIAR) highlighted that:

"Going forward, we should also focus on consumption in order to increase health outcomes and reduce non-communicable diseases. We need to use some of the production subsidies to encourage consumers to eat more fruits, vegetables, and plant-based protein. We have not done enough in this area."

Furthermore, the role of public and private collaboration was also highlighted as a way of building resilience and increasing food sovereignty. With Saleh Alshanfari bringing in from his own experience running Oman’s Food Investment Holding Company and highlighting that:

"A collaboration between public and private funding has made us capable of starting an array of food projects that have been able to make us less dependable on trade for our food and more food secure."

From a financial regulator’s perspective, the panel highlighted the increasing concern that central banks and finance ministries have on adaptation and the role that subsidies have, with Pekka Moren, part of the Finnish Ministry of Finance, and the Network for Greening the Financial System (NGFS) saying that:

"Adaptation is high on the agenda in the context of economic and policy transitions. When it comes to subsidies, member countries of the NGFS are in the process, and have identified key areas where harmful subsidies are in place. In many countries agricultural support fits these criteria."

From a development perspective, the role of rural development and building a solid infrastructure base for smallholder and medium sized agricultural producers in developing countries was also highlighted, with Ishmael Sunga, Chief Executive Officer of the Southern African Confederation of Agricultural Unions (SACAU) strongly emphasizing that:

"Farmers reside in areas which are completely devoid of basic backbone infrastructure. “Justness” needs to talk about improving infrastructure: electricity, schools, tools. Without this, forget about just transition - subsidies won’t fix this."

The event was summarized perfectly by FSF’s Ertharin Cousin during her intervention on our current critical junction and the opportunity to act decisively to work for a better future.

"Russia’s invasion of Ukraine has led to a major humanitarian hunger crisis, not just in Ukraine but around the world. Given the region’s importance as a breadbasket the conflict created an immediate impact on key food commodities including wheat and sunflower oil resulting in price shocks and massive shortages, tipping a “perfect storm”, the alignment of climate, conflict and COVID. The data clearly suggests the looming global food crisis will result in a significant increase from the 275 million people acutely hungry today. As food as prices continue to escalate many more will also join the 3 billion people who today cannot access an affordable nutritious and diverse diet.”

Overall, the panel successfully painted a picture of the current state of affairs surrounding agricultural support and the need to building resilient, sustainable food systems through systemic and inclusive institutional change. To achieve the changes necessary in our food system and accelerate the sustainable transition in the food and land use sector, however, the power and magnitude of capital from the private sector will have to play an important role.

Interested in finding out more and getting involved in the Good Food Finance Network? Please contact Hamid Hamirani, Senior Advisor, FSF for more information and to start a discussion. hamid@fsfinstitute.net