Socially responsible and green investments in transforming the food system

Every investor walks a tightrope between short-term profits and long-term sustainability – balance poorly, and the fall can be costly. Financers face this challenge when investing to build a healthier, greener and more resilient European food system. To accelerate this transition, we need a range of financial mechanisms with risks spread fairly across sectors. Europe requires new approaches, blended finance, and novel ways of unlocking traditional finance.

To create a food system that works for people and planet we must rethink how, where and by whom money is invested. This cuts across the food value chain: from the way soil health is valued, through to the way ingredients are processed, packaged and distributed. If done smartly, socially responsible investment (SRI) in the food system can deliver reliable returns alongside measurable real-world impacts that benefit everyone.

SRI differs from traditional investing in terms of its outlook, though is still aims to deliver financial returns for investors.

To assess the SRI value, investors will often look at the Environmental, Social, and Governance (ESG) credentials of a given company or project. Part of an SRI strategy is to avoid investment in companies or products that conflict with the values of the investor. But the more proactive side – often known as Impact Investing – involves using funds to generate beneficial social and environmental impacts alongside financial returns (2).

This can also include trading in assets that meet certain criteria for sustainability and ethical responsibility. An investor might prioritise companies that focus on reducing their environmental footprint by using sustainable environmental materials, thereby supporting long-term efforts to mitigate climate change. By prioritising these factors, investors contribute to welfare by supporting businesses that aim to improve both social and environmental outcomes.

Within the food system, an SRI strategy could mean divesting in the production of ultra-processed foods that have been linked with non-communicable diseases and other negative health consequences (3). Instead, funds can be channelled into innovators and startups developing healthier alternatives and promoting stewardship of resources. Food systems account for a third of our greenhouse gas emissions (4) and current practices contribute to biodiversity loss (5). And so an SRI approach could also mean investing in alternative packaging, and sustainable agriculture technologies that reduce chemical inputs and regenerate soils.

SRI in the food sector could mean supporting blended finance models that de-risk early investments and enable the uptake of solutions by actors across the food system. Investments in these projects can create opportunities for greater diversity and inclusion within the food industry by supporting businesses that prioritise ethical labour practices and equitable access to resources. These initiatives also contribute to building long-term assets that generate both financial and social returns for investors.

With a focus on transparency and accountability, investors and financial institutions can ensure that funds are being distributed ethically. This enhances access to capital for companies in the food system working toward sustainable solutions. Brokers and credit cards can also play a role in facilitating investments in these areas by offering innovative financial products that meet investors' needs. By assessing the amounts of capital being invested, rates of return, and exchange options, investors can align their investment strategy with their financial and social goals.

Investing in food system transformation is not a selfless act. It is an investment in the future prosperity of individual companies and business sectors. Half of global GDP is dependent on nature to some extent (6). Biodiversity loss and ecosystem collapse are cited by the WEF Global Risks Report 2024 as a major risk over the next decade, threatening a $2.7 trillion annual decline in GDP by 2030 (7). Preserving these ecosystem services is critical to ensuring the resilience of markets and industries.

In this context, community investing becomes crucial, as it focuses on fostering sustainable growth in local communities while also supporting global efforts. The investment process involves evaluating securities in sectors that prioritise sustainability, and the investment managers responsible for making these decisions must adopt a clear investing strategy that balances financial returns with positive social and environmental outcomes.

Banks have a critical role to play because they often provide the financing to farmers and other actors throughout the food value chain. Conventionally, business loan decisions are based primarily on credit ratings and are repayable within 1–5 years. But some pioneering banks realise that transitioning to sustainable practices can take much longer to see returns.

Moreover, these banks can involve professionals who specialise in sustainable finance and assess materiality – the relevance of environmental and social factors to the long-term success of the investment. The shift towards sustainability also creates new opportunities in brokerage services, where banks act as intermediaries, connecting investors and companies in the food sector that align with ESG principles. Innovative finance models can enable the market uptake of sustainable practices and technologies, while de-risking transitions for farmers, tech innovators and businesses alike.

As an example, Rabobank is a Dutch bank positioned to provide financing for farmers. Founded 125 years ago by Dutch farmers, the bank recognises that the health of farmland directly correlates with the security of its investments. “Land for us is like a mortgage,” says Nicoline van Gerrevink, Rabobank’s Executive Director, Food System Transition. The bank allows interest rate reductions and decades-long repayment periods for farmers investing in regenerative agriculture and other sustainable practices and technology. Farms are assessed on factors such as biodiversity, landscape management, and nitrogen use efficiency.

EIT Food’s own investment in startups is an illustration of the range of benefits that can result from an impact-driven strategy. An independent economic impact assessment found that for every €1 invested by EIT Food, a wider economic benefit of €6 can be forecast over 10 years, growing to €13 over 15 years (8). Published in 2024, the report assessed a range of impact metrics across our three flagship entrepreneurship programmes.

Given the complexity of the challenges, venture capital firms within the EIT Food community are taking strategic approaches to food system investment. Peakbridge, for instance, has an investment philosophy of identifying pain points along the Agri-Food value chain from the perspective of the consumer, industrial players, and impact.

As with many areas of industry, AI will continue to underpin innovations and transform processes. We are seeing that in European startups such as farmAIr whose proprietary technology enables early detection of plant stress and Orbisk whose smart bins can precisely measure food waste in kitchens to ingredient level. Elsewhere, hyper-realistic meat and fish alternatives and cultivated meat technology continue to push the boundaries, with startups like Mosameat, Redefine Meat and BettaF!sh leading the way. Insect-based protein sources also have a market niche, especially as feed sources, as is the case for startups Nasekomo and Beta Bugs.

Sparkfood is a venture capital firm with a focus on healthy, sustainable food. They have identified ‘food as medicine’ as a trend to watch and are investing in alternative protein technologies and the production of high-value ingredients. “Our investments in cell-cultivated products and precision fermentation are just the beginning. We are also closely monitoring emerging techniques such as molecular farming and biomass fermentation, which we believe will achieve significant milestones in the years ahead," said Cristina Guzmán Hurtado, a senior associate at Sparkfood.

Hurtado says Sparkfood is excited about blended finance models that bring together public grants, philanthropy, and private investments to reduce risk and enable high-impact projects.

On thing is for certain: no single actor can solve the complex challenges in the food system, so collaborations across the food system are essential to delivering impacts. At EIT Food’s annual event Next Bite, we joined forces with the World Economic Forum to host a session on the financial innovations needed to scale up climate-smart and regenerative agriculture. The event brought together champions from public, private, civil society, farmer organisations and expert stakeholders from across the value chain. Some of the solution pathways identified in the session were:

• Take a multifaceted systems approach including scalable data and measurement, reporting, and verification (MRV) systems, and standardise metrics.

• Blended public–private financing models, and risk-sharing contracts to lower financial barriers, alongside multi-stakeholder platforms and local hubs to address regional needs and drive cross-sector collaboration.

• Regulatory alignment that integrates ESG, biodiversity, and water conservation frameworks, with incentives for ecosystem co-benefits

• Retail and consumer engagement strategies such as labelling and education – to build demand and driving ecosystem-wide commitment.

Insights from the Next Bite event will feed into a follow up workshop at Building Bridges in Geneva in December, and discussions will continue at the World Economic Forum Annual Meeting in Davos in January. EIT Food will continue to engage with high-level finance events, decision makers and financial actors as we continue to build an open innovation community to stimulate new ideas and innovative financial models to deploy funding.

References

1. Investopedia: Socially Responsible Investing
2. UNDP: Impact Investing
3. BMJ: Ultra-processed food exposure and adverse health outcomes: umbrella review of epidemiological meta-analyses, 2024;384:e077310
4. Nature: Food systems are responsible for a third of global anthropogenic GHG emissions, 2021, doi.org/10.1038/s43016-021-00225-9
5. Nature Communications: Impacts of the global food system on terrestrial biodiversity from land use and climate change, 2024, doi.org/10.1038/s41467-024-49999-z
6. WEF: How a nature-forward global economy can tackle both instability and inequality
7. WEF: Global Risks Report 2024
8. EIT Food: Entrepreneurship Impact Report