Philanthropy can scale back unprecedented strain on global food systems

 

Jan Kellet

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The global food system is being severely disrupted by climate change, biodiversity loss, conflict and disasters. Farmers are the bedrock of food security, livelihoods and growth in many countries, with 97 percent of the world’s farmers, an estimated 550 million, being ‘small-holders’ that work less than 10 hectares of land. These small-holder farmers produce around a third of the world’s food, feed five billion people each day and drive markets in rural and urban areas alike. Often overlooked, they also play a critical role in society as guardians of the land.

These same farmers are under great and growing threat. The frequency and duration of drought have risen 29 percent in the past two decades, affecting 40 percent of the world, and with agriculture in developing countries absorbing up to 80 percent of the direct impacts. Too little water in some places is sometimes coupled with too much, with cyclones and floods also on the rise. Coastal erosion, sea level rise, land degradation, pests, and infestations are more realities of the increasingly complex risk landscape faced by farmers. Adding to this, our warming climate has extended disease transmission seasons, resulting in malaria epidemics that are seeing smallholders lose up to 22 days of work due to illness and only 40 percent of their crops harvested.

Despite the critical importance of farmers to society, and the increasing financial impacts of hazards on their farms and on agricultural systems more broadly, the vast majority lack any form of financial protection. Just 3 percent of farmers in sub-Saharan Africa have agricultural insurance and 60 percent of global insurable crop production is unprotected against disasters and accidents. This reflects one important facet of missing investment in financial resilience, with Swiss recording the highest-ever global protection gap of $1.8 trillion in 2022. Simply put, risks are rising at an incredible pace, and normative investment, development and philanthropy models are not keeping up. As risks rise, the number of households, businesses and farmers living without financial protection are growing day by day, minute by minute, with massive impacts across our deeply interconnected societies and value chains – in both developed and developing countries.

Climate change has caused more than US$3.8 trillion losses for crop and livestock production in the last three decades. This is a conservative estimate when the lack of systematic data on losses in the fisheries, aquaculture and forestry subsectors is taken into account. For philanthropic foundations and organisations this has to be a massive wake-up call. The impacts of weak financial resilience of food supply chains goes to the heart of the philanthropic exercise everywhere.

  • For those investing in food security, the impact of risks to farmers is undermining food production and escalating massive increases in humanitarian assistance year on year.
  • For those investing in community cohesion, the loss of farms has a huge burden on the resilience of societies across the world, with losses of livelihoods and jobs further driving forced migration and displacement.
  • For those looking to accelerate gender empowerment and equality, the loss of agriculture strips away opportunities for women’s financial inclusion

Beyond these individual examples is the reality of a tremulous food supply chain that is built on the shoulders of heavily at-risk small-scale farmers around the world. This undermines the livelihoods and economic progress of billions as well as the philanthropic projects of thousands of organisations.

The question then is, what should philanthropic organisations do? The world of massively rising risk should prompt a significant revision of how all philanthropies focus and invest their resources. For those investing in humanitarian action and emergency aid, we recommend shifting resources into building the financial resilience of farmers. It is worth noting just now much humanitarian aid is driven by the absence of national and local food production. For those investing in social impact goals, including gender equality, financial inclusion, and community rehabilitation, we recommend examining how adding a financial resilience component can protect such investments and enhance their long-term impacts. For those investing in poverty reduction, climate action and development at scale, we encourage a substantial rethinking of how such investments can exist without financial resilience in an increasingly complex global risk landscape. Essentially, financial resilience must be embedded in everything that philanthropies deliver for the communities they wish to serve, if they wish to serve them well, and sustainably.

These shifts in how philanthropy can engage with risk, resilience and development can open new pathways to financial protection with investments that recognise the deepening interconnections between financial resilience of farmers, businesses, communities and countries.

However, for those investing in climate adaptation and small-holder farmers’ resilience in particular, we recommend a revisiting of financed work. Risk goes to the heart of investments in farmers adaptation to climate change, undercutting decades of work delivered by both the development and philanthropic communities. This is because the inherent financial risk that threaten farmers’ production -from drought, and floods to desertification and pests, remains with them even if they take up new investments to build their climate resilience. They often simply do not. UNDP is using this approach in its work with the Bill and Melinda Gates Foundation, utilising insurance not only to financially protect farmers and their product but incentivise adaptation up-take as a result of stripping risk and uncertainty from farmers’ decision-making. The approach builds the financial resilience of the food value chain right up to the consumers at the top.

Increasing levels of financial protection through insurance incentivises and drives innovation and investment, creating a virtuous circle of insurance and economic progress. UNDP adopts this approach in our other work to build the resilience of agricultural and food systems, including the Tripartite Agreement financed by the German Government, and implemented in partnership with twenty of the largest insurance companies in the world. In the agriculture-focused projects of this initiative, in Tanzania, Uzbekistan, Mexico, and Colombia, UNDP and its industry partners develop large-scale agricultural financial protection initiatives and embed them into long-term development, not only protecting farms and farming communities right now but incentivising investment in those communities and agricultural for the long-term.

Philanthropic organisations are influential and important, deploying millions and even billions of dollars into development. Others have specialised expertise, sometimes backed by a parent company or corporation, which deploy technical and financial resources alike. Some have embedded their support to countries and communities over years, even decades. As important as such organisations are, the current model of doing business, which largely ignores financial resilience, is failing to underpin both philanthropic organisations existing investments in communities, or the long-term financial health of those same communities. Their investments will increasingly fail, and communities will fail in a future growing risk and shock.

Jan Kellet leads UNDP’s global practice on insurance and risk financing, working to put risk transfer at the heart of development.


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