Food systems investing in East Africa: the roles of funds in financing food systems transformation
Transformational Investing in Food Systems (TIFS) wanted to understand how investment funds are contributing to financing agroecological food futures in East Africa. Investors currently experience systemic barriers that are causing a lag in the deployment of funds for regenerative and agroecological innovators. When asked to invest in ‘unconventional’ business models, unfamiliar markets and small tickets, they also lack clarity on how these work or what to do, and find it difficult to verify/compare impact.
Investor interest in the food and agriculture sector has increased along with impact investing. As of 2023, over 900 investment funds are active in the food and agriculture space, managing more than USD 140 billion. An estimated 60% of impact investors intend to increase their capital allocations to the food and agriculture sector over the next five years. In addition, investors plan to stay committed to climate change mitigation and/or climate adaptation and resilience. These and other trends suggest that the food and agriculture asset class will be further institutionalised, and that the asset class will evolve towards agroecology.
The need for transparency
Investors are seeking transparency about intended impacts and funds that are designed to deliver financial and non-financial returns. They need tools to inform their investment decisions, alongside data to compare impact results with those of peers, reduced fragmentation across impact measurement frameworks, and impact data verification and transparency.
TIFS seeks to provide investors with more systemic/holistic information for use in their decision-making processes. For instance, TIFS, ISF Advisors, and Shona developed the Systemic Investment Assessment (SIA) investment screening tool. This incorporates the 13 principles of agroecology and is compatible with the B-ACT enterprise-level assessment tool. The SIA and B-ACT offer a comprehensive view of the intended impacts of funds and companies, respectively.
To demonstrate how these tools can inform investment decisions and to identify opportunities for financing agroecology, TIFS used the SIA to study 23 funds. In the report Food Systems Investing in East Africa: The Roles of Funds in Financing Food Systems Transformation, TIFS explores opportunities for funds to contribute – individually and collectively – to agroecological futures.
Opportunities for values-aligned investing
Investors have opportunities to invest in funds that are creating relevant financing innovations. The study identified several fund design elements that are more likely to meet the needs of agroecological companies:
- Blending capital: Blending grants, patient capital and commercial capital enables new investors to engage in sectors they may have considered too risky.
- Integrating multiple financial and non-financial returns: Combining appropriate financial capital with technical and business assistance, networking and other resources to allow customised approaches that meet target businesses’ needs
- Redistributing risk, reducing the cost of capital and creating scale: Reducing risks and aggregating portfolio financial results to meet the requirements of investors and communities.
- Supporting community wealth creation: Engaging deeply with intended partner communities and empowering businesses that share lived experience with communities.
Strategies that connect portfolios aimed at thriving people and the planet
TIFS and its partners compiled the 23 fund assessments in a portfolio dashboard. By 1) analysing the food systems investing landscape in East Africa, including the assessment of 23 funds, 2) identifying the current gaps and opportunities, and 3) exploring investment best practices, TIFS, Shona and ISF Advisors describe a regional portfolio of investments that contributes to more agroecological food systems. The regional approach ensures connection to local context and relevance to the regional agribusiness ecosystem.
Illustrative examples of values-aligned investment funds
Several funds have created investment strategies that are aligned with the principles of agroecology. These funds offer investors an opportunity to deploy financial capital in alignment with their values. Three funds are showcased below for illustrative purposes.
- Use the Systemic Investing Assessment Tool to analyze your fund or investments.
- Learn from other inspirational funds from our showcase section or the Transformative 25!
- We are planning to facilitate conversations for investors and fund managers to learn from each other: Stay in touch with us to become part of these conversations.