Guide on Incentives for Responsible Investment in Agriculture and Food Systems

By Food and Agriculture Organization of the United Nations

Increased investment in agriculture and food systems—from both the private and public sectors—is critical to enhance food security and nutrition, reduce poverty, and adapt to climate change. To generate sustainable benefits, this investment must be responsible. What role should investment incentives play in encouraging such investment? This Guide helps to answer that question. Specifically, the Guide provides policymakers and government technical staff with guidance on how investment incentives can be used (and how they should not be used) to enhance responsible investment in agriculture and food systems. The Guide provides an overview of responsible investment in agriculture and food systems; examines common types of incentives; offers general considerations on how incentives can be used; and discusses how to plan for, design, monitor, and evaluate investment incentives for responsible investment in agriculture and food systems.

• Language: English
• Publisher: Food and Agriculture Organization of the United Nations
• Release date: Jun 8, 2021
• ISBN: 9789251345276

Food and Agriculture Organization of the United Nations

An intergovernmental organization, the Food and Agriculture Organization of the United Nations (FAO) has 194 Member Nations, two associate members and one member organization, the European Union. Its employees come from various cultural backgrounds and are experts in the multiple fields of activity FAO engages in. FAO’s staff capacity allows it to support improved governance inter alia, generate, develop and adapt existing tools and guidelines and provide targeted governance support as a resource to country and regional level FAO offices. Headquartered in Rome, Italy, FAO is present in over 130 countries.Founded in 1945, the Food and Agriculture Organization (FAO) leads international efforts to defeat hunger. Serving both developed and developing countries, FAO provides a neutral forum where all nations meet as equals to negotiate agreements and debate policy. The Organization publishes authoritative publications on agriculture, fisheries, forestry and nutrition.

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Bulman, A., Cordes, K.Y., Mehranvar, L., Merrill, E. and Fiedler, Y. 2021. Guide on incentives for responsible investment in agriculture and food systems. Rome, FAO and Columbia Center on Sustainable Investment. https://doi.org/10.4060/cb3933en

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Contents

Foreword

Acknowledgements

Executive summary

Overview of the guide

Part I – Responsible investment in agriculture and food systems

What is responsible investment in agriculture and food systems?

Who are the key stakeholders when it comes to responsible agricultural investment?

National and sub-national government actors

Agricultural and food systems investors

Community members and civil society

Part II – Understanding investment incentives

What are investment incentives?

What are the legal and programmatic sources of incentives?

Non-institutionalised programmes and initiatives

Domestic and international laws and policies

Investor-state contracts

Common types of investment incentives

Thinking about cons and costs

Financial incentives

Technical and business support incentives

Tax (Fiscal) Incentives

Regulatory incentives

Other incentives

Part III – Using incentives to enhance responsible investment in agriculture and food systems: General considerations

Responsible agricultural and food systems investment is primarily determined by the enabling environment

The role of strong laws and regulation in ensuring investment is responsible

When does it make sense to use investment incentives or when is a different approach required?

Circumstances where incentives can help

Circumstances where incentives do not make sense

Incentives should be designed to support the outcomes encouraged by the CFS-RAI Principles

Reconsidering and managing incentives oriented towards large-scale foreign investors

Risks of excessive focus on large-scale foreign investors

Ways to ensure foreign large-scale investments are responsible

Regional governance and coordination are important

Attaching conditions to incentives can be essential for promoting responsible and sustainable practices beyond what is required by law

Incentives may work best as part of a package

Part IV – Planning for, designing, implementing, monitoring, and evaluating incentives for responsible agricultural and food systems investment

Planning for an appropriate intervention

Designing investment incentives

Implementing investment incentives

Monitoring, evaluation, and learning for investment incentives

Monitoring and Evaluation

Applying Learnings

Conclusion

Glossary

Annex I - Theory of change

Annex II – Designing tax incentives

Annex III - Monitoring, evaluation, and learning

Foreword

As we write this foreword, the world is facing the worst economic crisis since the Great Depression, tied to the COVID-19 pandemic. The number of extremely poor and undernourished has increased dramatically. Millions of workers and small-scale entrepreneurs have lost their jobs and livelihoods, with women and youth hit particularly hard. Beyond triggering a recession, COVID-19 has shone a light on the deep vulnerabilities inherent in our global economic and food systems.

As countries worldwide plan for a post-pandemic recovery, we have an opportunity to design more equitable and inclusive systems. This will require concerted efforts from both public and private actors that are fully aligned with the Sustainable Development Goals in order to foster inclusive growth that is environmentally and socially sustainable.

Responsible investment in the agri-food sector holds strong potential to support realization of the SDGs. Such investment can help address some of the world’s most pressing challenges, including the achievement of sustainable food security, protection and regeneration of vital ecosystems, and the creation of decent work and livelihood opportunities for those who need them most. Mechanisms that promote responsible investment in agriculture and food systems are thus critical to addressing the systemic vulnerabilities and inefficiencies COVID-19 has exposed. Such mechanisms include targeted, well-designed incentives for sustainable investment, with a particular focus on small-scale producers and small- and medium-scale enterprises.

This guide, which is a joint product of the Food and Agriculture Organization of the United Nations and the Columbia Center on Sustainable Investment, makes an important contribution in this regard. It provides policymakers and government technical staff with guidance on whether and, if so, how investment incentives can be used to enhance investment that is aligned with the Sustainable Development Goals and the Committee on World Food Security Principles for Responsible Investment in Agriculture and Food Systems.

The guide contains analytical frameworks, recommendations and good practices that can inspire new approaches to investment incentives. It builds on the extensive experience and expertise of both organizations on the trends, impacts, multidimensional challenges, and opportunities of agricultural investment in developing and emerging economies.

We hope that this guide will be of use to policy makers and technical staff in promoting and supporting the responsible investment in agriculture and food systems that is critical for more inclusive and sustainable food systems and economies.

Acknowledgements

This guide was authored by Anna Bulman, Kaitlin Y. Cordes, and Ladan Mehranvar, with contributions by Ella Merrill and Yannick Fiedler. This guide is a joint publication of the Food and Agriculture Organization of the United Nations (FAO) and the Columbia Center on Sustainable Investment (CCSI).

The project support provided by Jesse Coleman and Lisa Sachs was indispensable. The authors would also like to express their sincere gratitude to the following colleagues who provided peer reviews of all or parts of the guide: Emilie Beauchamp, David Bledsoe, Sarah Brewin, Lorenzo Cotula, Brooke Güven, Jana Herold, Lise Johnson, Jesper Karlsson, Nyaguthii Maina, Francesca Romano, Carin Smaller, Ben Stewart, Sam Szoke-Burke, Kenneth P. Thomas, Perrine Toledano, and Margret Vidar.

The authors are grateful for the excellent research support provided by Maria Jimena Rojas Mendez, Jacob Shepherd, and Abigail Edwards.

The layout and graphic design work by Carolina Saiz is gratefully acknowledged.

Finally, FAO and CCSI would like to thank Teresa Lamas Menendez for the coordination of the final editorial, layout and formatting process.

The guide was originally written in English.

Suggested citation

Bulman, Anna, Kaitlin Y. Cordes, and Ladan Mehranvar, with Ella Merrill and Yannick Fiedler. 2020. Guide on incentives for responsible investment in agriculture and food systems. Rome. Food and Agriculture Organization of the United Nations (FAO) and the Columbia Center on Sustainable Investment (CCSI).

Executive summary

Increased investment in agriculture and food systems—from both the private and public sectors—is critical to enhance food security and nutrition, reduce poverty, and adapt to climate change. To generate sustainable benefits, this investment must be responsible.

What role should investment incentives play in encouraging such investment? This guide helps to answer that question. Specifically, the guide provides policymakers and government technical staff with guidance on how investment incentives can be used (and how they should not be used) to enhance responsible investment in agriculture and food systems.

The guide provides an overview of responsible investment in agriculture and food systems; examines common types of incentives; offers general considerations on how incentives can be used; and discusses how to plan for, design, monitor, and evaluate investment incentives for responsible investment in agriculture and food systems.

Responsible investment in agriculture and food systems

The Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI Principles) provide a framework for understanding responsible investment in agriculture and food systems. Such an investment contributes to sustainable development, enhances food security and nutrition, and respects human rights. The achievement of these objectives is supported by the incorporation of responsible investment principles into law and policy design by governments. It is also contingent on the incorporation of responsible investment principles into investor practices. Inclusive and meaningful multi-stakeholder engagement should be incorporated, by both government and investors, at all relevant stages.

Some of the principles within the CFS-RAI Principles reflect binding international human rights law, while others embody more aspirational development goals. Incentives are often not the most appropriate tool for ensuring that investments do not result in human rights abuses. By contrast, some important goals in the CFS-RAI Principles focus on achieving outcomes that are critical from a sustainability perspective, and which are aligned with but go beyond what