Food and agriculture companies and their investors are failing to adequately price in the financial impact of coming 'land use transition', UN study warns
Food and agriculture companies and their investors have been urged to gear up for a wholesale transformation of how land is used as climate and deforestation goals draw closer, with fresh analysis estimating that some leading firms could lose as much as 26 per cent of their value by 2030 if they fail to adapt.
A report published by the UN Race to Zero campaign this morning calculates that the food and agriculture sector could face permanent losses equivalent to those suffered after the 2008 financial crash if they do not transition businesses practices in readiness for a net zero and nature-positive economy.
The analysis warns that markets are failing to adequately price in the financial impact of an "inevitable" and accelerating transition in the way land is used that will have significant implications for both food and agriculture firms, and the financial institutions that bankroll them.
It argues that companies and investors that move early to align business models with the land use transition by developing and deploying solutions for a net zero, nature positive future could generate up to $4.5tr of new business opportunities annually by 2030.
But it warns that those companies that fail to transition their business models could see billions of dollars of value "permanently lost".
At Climate Week in New York, COP26 President Alok Sharma and UN Climate Change High-Level Champions Nigel Topping and Mahmoud Mohieldin are set to urge financial institutions to work together to start preparing for this transition by eliminating commodity-driven deforestation from their portfolios.
"Due to the unique role of deforestation in driving emissions, and the role of the standing forest and terrestrial ecosystems in mitigating carbon, the financial sector must front load its transition to net zero, with a swift move away from deforestation-related emissions," Sharma is set to say. "Signing the Financial Sector Commitment Letter on Eliminating Commodity-Driven Deforestation sends an important signal to your supply chains and harnesses the power of collective action."
Global climate and nature goals can only be delivered with a major transformation of the food system, given the forest, land, and agriculture sectors are the primary drivers of global biodiversity loss and currently account for more than a fifth of global emissions.
As such, the Accountability Framework Initiative has warned that commodity-driven deforestation must end by 2025 if the world is to achieve a 1.5C trajectory.
In the report out today, the Race to Zero has set out a string of recommendations for how companies and investors can proactively prepare for - and help accelerate - the coming land use transition, for instance by entering new markets for bio-fertiliser, alternative proteins, and nature-based carbon credits.
Companies can also reduce their exposure to nature and climate-related risk by driving operational efficiencies and taking action to ensure suppliers source their goods from deforestation-free markets, according to the report.
Race to Zero has called on all investors to eliminate commodity-driven deforestation from their portfolios by 2025, boost their understanding of wider portfolio risks and opportunities arising from the land transition, ramp up investments in nature-based solutions, and advocate for just land transition policies.
Topping said the research underscored the need for financial institutions to protect themselves against escalating financial, regulatory, and reputational risks.
"We're seeing some leadership from investors on nature and deforestation, but frankly, not enough," he said. "Over 30 financial institutions with more than USD$8.7tr in assets under management have already signed the Financial Sector Commitment Letter on Eliminating Commodity-Driven Deforestation, with a target date of 2025."
The campaign to enlist investors to prepare - and help accelerate - the land use transition comes as world leaders, green policy experts and campaigners convene in New York for Climate Week, a week-long summit held on the fringes of the UN General Assembly.
Yesterday, UN Climate Change Secretary Simon Stiell urged nations to update their 2030 climate targets to deliver a halving of global emisisons by 2030 in his opening address to the climate conference.
Summarising his speech on Twitter, Stiell outlined the UN's priorities for the COP27 Climate Summit taking place this November in Egypt, noting the summit was the first "in the era of implementation" following the finalisation of the Paris Agreement's rulebook at last year's COP26 Summit.
"COP27 must also make progress on providing the necessary finance, capacity building and technology support, especially for the most vulnerable nations," Steill wrote. "I call on countries to arrive in Egypt prepared to reach consensus on these & other issues. A cleaner, healthier and more secure world is within our grasp. COP27 is our opportunity to avoid further delay and get moving in that direction."