How to Unlock the Green Potential Of the Agricultural Sector

One of the ways we aim to achieve this is by empowering local entrepreneurs and investing in the agricultural sector in developing countries. This is very effective in improving the lives of millions of poor people, most of whom are farmers or spend a large part of their income on food. 

FMO invests around USD 500 million per year in the agricultural sector worldwide, guided by the IFC performance standards for environmental and social management and the SDGs. But this amount of financing is just a drop in the ocean in our efforts to produce sufficient nutritional food in a sustainable way.

On top of that, it is increasingly clear that the agricultural sector is not only negatively affected by global warming (and developing countries in particular), but also contributes to it. Thanks to remarkable technological progress, farmers have achieved record yields and managed to feed an ever-growing population. But this has often been at the expense of natural resources and by emitting more GHGs. A transformation of the sector is needed that includes the planet as a stakeholder.

I was therefore very glad to see that the UN is organising the Food Systems Summit this year, with a clear call for action, which we are keen to support.

A food systems transformation has many challenges and is particularly complex, because unlike fossil fuels, there is no substitute for food and demand is increasing. We therefore need to carefully consider which solutions to embrace and what actions to take. It requires technical and financial solutions and therefore close cooperation between banks, knowledge institutes, commercial parties, public sector and other stakeholders to advise and support everyone who is willing to contribute and act.

We want to explore soil carbon credits as a means to finance transformation

I am very keen to combine forces with the leading agri-focused bank, Rabobank, to explore what we can do together. We started with collecting available research and ideas on how the agricultural sector can contribute to the reduction of global warming and what role farmers in developing countries can play.

Since reducing GHG emissions is not enough we zoomed in soil carbon sequestration. Can we use the millions of hectares of agricultural land as a carbon sink by increasing the organic matter in soils? This is technically possible, however costly and not easy to implement everywhere. And who will pay or finance this? We therefore want to explore soil carbon credits as a means to finance this transformation. Although the use of carbon credits to address climate change is not without its dilemmas, we believe they can be part of the solution as a financial incentive to our farmers worldwide for not only producing our food but also for absorbing carbon.

With this paper we aim to kick-start a serious discussion. We reach out to everyone who wants to contribute by offering ideas, improvements, criticism and anything else that can help us achieve our mission.

Looking forward to hearing from you.

With regards,

Pieternel