Impact of COVID-19
Without question, the COVID-19 pandemic is causing damaging effects on global food systems. Prices have increased, while access has diminished. When lock down measures first kicked-in, trade came to an abrupt standstill due to a halt in collection, transport and distribution systems, and smallholder farmers suffered immediate loss of income. With the UN estimating that as many as 132 million more people could suffer chronic hunger by the end of 2020, the growing inability to buy food is one of the world’s most pressing problems.Triodos IM is once again calling for urgent and intensified action to change our food systems.
According to Nelleke Veenstra, Senior Investment Manager for Hivos-Triodos Fund - which provides, amongst others, trade finance to agricultural exporters in developing countries - the difference in impact between countries, industries and even products is concerning: “There is a large concentration of power at a country level but also with multinational players. Large supermarket chains and the multinational traders that supply them, are benefiting far more. Producers of speciality or certified products are having a hard time. Without change, I fear that we could very well see smaller specialised players disappear altogether. It’s really worrying,” she says.
“The impact of the pandemic is a reminder of the fragile interconnectedness of our food system. The entire value chain from production to distribution and consumption, has a role to play if things are to change,” says Isabelle Laurencin, Principal Investment Manager, Triodos Organic Growth Fund - which provides long-term private equity to leading European organic food businesses.
Supporting investees and clients
Laurencin tells that Triodos Organic Growth Fund investees have all had to take swift action in response to COVID-19 with support from the fund. As European businesses, many have received government assistance, and despite some having to temporarily downsize, they are faring relatively well. She says: “We are a hands-on investor and have guided our investees by being very present and helping them make quick and strategic decisions. We are a sounding board, but we also challenge them on what’s the best way going forward. Some decisions were difficult, and some were radical. One investee, who earned a majority of its revenue from out-of-home and school canteens prior the pandemic, managed to completely shift its focus to the retail market and build resilience.”
Veenstra tells that Hivos-Triodos Fund also had to act, and much faster than usual: “All of a sudden some of our clients were facing huge demands because their international clients and consumers started stockpiling. We had to be more flexible in our terms and conditions.”
Enabling and activating change
Triodos IM advocates the need for a radical and systemic change in the way we produce, trade and consume our food. Every player in the food and supply chain should contribute to a food system that balances ecosystems, health and inclusive prosperity. These are the ingredients for a resilient future food system. With Hivos-Triodos Fund and Triodos Organic Growth, Triodos IM has long-term strategies to realise this much-needed change.
“Triodos Organic Growth Fund is an investor, but we also try to enable consumers to play their part,” says Laurencin. “We support established businesses that increase access to organic and sustainably produced foods in Europe. but we also support fast-growing companies and trends that can accelerate the transition, such as producers of plant-based alternatives to animal protein and short distribution channels. Our investment in Farmy, a Swiss online store is our most recent example. It’s a farm to consumer delivery model that promotes local consumption and addresses consumer demands for information about where their food is coming from and who the farmer is.”
“The focus in developing countries and emerging markets is similar, yet different,” says Veenstra. “Hivos-Triodos Fund finances export companies and cooperatives so that they can pay the smallholder farmers, while the products are shipped to Europe and the US. Many of these products are fair trade and organic certified. The coffee chain that we finance for example has had a minimum environmental impact and a maximum socio-economic effect. We also finance start-up or early phase companies that want to transition the sector through food waste solutions and are looking to increase the added-value of food crops that could be processed at their origin instead of being exported.”
Although devastating, the pandemic is opening up opportunity to improve things quickly, and at a much faster pace.
“Because of shifts in demand, we are looking at how we can best support new businesses models that accelerate the transition in emerging markets,” says Veenstra. “We are financing companies that can also support their local markets, such as a coffee cooperative in Nicaragua that also sells the fruit produced by coffee growers to local supermarkets. In Sierra Leone a client has set up a fruit juice company.”
“Consumers also need to be prepared to know where their food comes from and pay the full and fair price,” says Laurencin.
“New technologies, like online trading platforms and blockchain track and trace systems are advancing the ability to do this. They can help calculate true pricing, which can really define what it costs to put your food on the table. For many years, the driving force for consumers has been price, but now it has to be about the reliability and origin of our food,” says Veenstra.
Our commitment to changing the food system
Triodos IM has advocated for a holistic approach to food and agriculture for a long time. It has two funds that provide transformational finance across the entire food system’s value chain. Hivos-Triodos Fund (established in 1994) provides trade finance, debt and equity in emerging markets, and Triodos Organic Growth Fund (established in 2014) uniquely specialises in food system equity investments within Europe. Both funds are evergreen, which means they are open-ended and recycle capital from the realised returns.
In June 2019, Triodos Bank also outlined its vision on the food and agri sector in 'Towards ecologically and socially resilient food systems', and called for transition and a back-to-the-drawing board approach that incorporates working with nature, the acknowledgement of true pricing, the need for governmental stimulus and policy changes, and a financial sector that supports innovation.