Michael Lewis on how food systems are affecting climate change and other systemic risks

Why is DWS Research focusing on forests, land and agriculture as an area of investor interest? 

The world’s climate scientists have shown that even our worst estimates of climate scenarios are proving too optimistic[1]. While cutting emissions is the obvious approach, it is not enough. We also need to take care of the natural carbon tanks that exist today: namely our land, forests and oceans. When it comes the Earth’s forests these sequestered about twice as much CO2 as they emitted between 2001 and 2019 absorbing a net 7.6 billion tonnes of CO2 per annum, or one and a half times more carbon than the United States emits annually[2]. However, their role as carbon sequesters is at risk from land use change, climate change and pollution. Consequently, any credible global climate strategy must incorporate nature’s critical role in emission reduction and removal.

How are our food systems affecting climate change and other systemic risks? 

The agricultural sector accounts for 70% of the world’s total freshwater withdrawal[3], spurs up to 80% of deforestation[4], causes around 70% of the projected loss of terrestrial biodiversity[5] and is responsible for around 25% of greenhouse gas emissions[6]. It therefore plays an important role in the biogeochemical cycles of carbon, water, nitrogen and phosphorous as well as impacting biodiversity. Agriculture has therefore played a central role in many of the Earth systems’ planetary boundaries to be breached[7], such as land use change and climate change. Consequently, this is moving the Earth outside of its safe operating space and threatens large-scale abrupt or irreversible environmental damage.

Are food systems receiving the investments they require? 

Put simply, no. One route to assess investment flows to the biosphere is through the OECD’s SDG financing tracker. This tracker pools bilateral and multilateral aid, or so-called official development assistance. When it comes to financing the Earth systems their latest figures show financial flows to the four SDGs directly related to the biosphere, namely life below water. life on land, clean water and sanitation and climate action are among the least funded of the SDGs, receiving just 13.5% of all SDG funding from development finance[8]. UNCTAD data[9] reveal a similar picture with international investment in food and agriculture declining 35% in 2021 compared to pre-pandemic levels on a project level basis. These illustrate why sizeable private sector resources will be required to complement official development assistance, and why investment flows need to be targeted to the appropriate biosphere and in the geography where it is required.

What recommendations do you have to push a food systems agenda? 

The world needs to produce enough food on less land and with fewer emissions. Biodiversity ambition includes not just turning 30% of land and sea into protected areas, putting an end to deforestation and land degradation and reducing pesticide use by 50% but also avoiding food loss and waste, the wider adoption of sustainable agricultural practices, increasing company commitments to science-based nature targets, and the development of an Earth systems’ taxonomy. As a production level, solutions include recycling wastewater, rainwater harvesting, drip irrigation technology, precision planting and hybrid seeds, improved infrastructure and pipes, and the introduction of desalination facilities. Lessons can be learnt from the Netherlands, which after the United States, is the world’s largest exporter of agricultural products by value, despite being 270 times smaller than the U.S.[10]. With greenhouses covering 36 square miles, compared to Manhattan’s 23 square miles, the Netherlands is a powerhouse of precision, high yield, low impact food production[11]. Spreading the adoption of the Netherlands’ greenhouse infrastructure, crop science and agricultural technologies, would help reduce the water and environmental footprint of food production, while coping with growing food demand.

What role do governments and standard setters play? 

Over the past few years efforts to protect and restore our natural environment have been ramped up by key stakeholders. At a government level, this is illustrated by the Leaders Pledge for Nature signed in September 2020, which commits 94 heads of state and government, representing 38% of world GDP, to reverse biodiversity loss by 2030[12]. At a financial and corporate level, action includes the Finance for Biodiversity Pledge and the Business for Nature initiative respectively. All eyes are now on global leadership appearing at December’s COP15 biodiversity summit which must be aligned more than ever to COP climate summits This seems possible since COP27 and COP28’s hosts Egypt and the United Arab Emirates have high food import requirements. We also need to see standard setters moving beyond the current efforts on climate and single materiality to one which encompasses broader sustainability issues such as biodiversity loss and water risk and incorporating double materiality.

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[1] Nature (August 2021) - Increasing probability of record-shattering climate extremes

[2] Nature (January 2021). Global maps of twenty-first century forest carbon fluxes

[3] World Bank (October 2022). Water in agriculture https://www.worldbank.org/en/topic/water-in-agriculture

[4] Kissinger G., Herold M., De Sy V. (2012). Drivers of deforestation and forest degradation

[5] WWF (2021). Farming with biodiversity

[6] OurWorldInData (March 2021). How much of greenhouse gas emissions come from food?

[7] Stockholm Resilience Centre (April 2022). Freshwater boundary exceeds safe limits

[8] OECD: The SDG financing lab. Data capture top 25 providers of overseas development assistance in 2019

[9] UNCTAD (June 2022). World investment report 2022 (percentage figure relates to number of projects)

[10] National Geographic (September 2017). This tiny country feeds the world

[11] WWAP 2015; EEA 2020

[12] Leaders’ Pledge for Nature (January 2022). 2021: Summary of progress one year on