Agribusiness, food and water sector
€623 million
Invested towards decent work and sustainable economic growth
€212 million
Invested towards reducing inequalities through resilient and inclusive agricultural value chains
€253 million
Invested towards climate change mitigation and adaptation
Accelerating sustainable and resilient agricultural supply chains to increase food security
We invest in agribusiness, food and water to support and accelerate sustainable and resilient agricultural supply chains to increase food security.
More than 800 million people currently face hunger, and an even greater number of people lack access to nutritious foods. This number is expected to rise due to the current food crisis resulting from the effects of climate change and geopolitical tensions.
Improving access to food is crucial for reducing inequality, which requires higher economic development in rural areas and more investments throughout the agricultural supply chains. In addition, there is a need to transform the sector through sustainable, resource-efficient and resilient practices. The effect from climate change on food production and the contribution of the agriculture sector on rising GHG emissions, underscores the urgency of these measures.
Towards 2030
In line with our Strategy 2030, we seek to support sustainable and resilient agricultural practices throughout the agricultural and food supply chain. We also aim to enable local agricultural and food supply chains to increase production and improve local access to food, while reducing food waste and reliance on imports. Furthermore, we want to grow the number and quality of jobs supported, focusing on decent work and inclusion of smallholders and women in supply chains.
To achieve these ambitions, we are investing in global merchants, input providers, and food companies to increase sustainable practices along the (international) agricultural supply chain. In addition, we continue to expand our integral landscape approach to sustainable land-use and ecosystem protection and restoration. We do this through our work in forestry, climate-smart and regenerative agriculture, soil improvements, and improved livelihoods. Towards 2030, we will also increase our engagement with customers, helping them improve the resilience of their supply chains and aligning with the goals of the Paris Agreement.
Achievements in 2023
Sustainable economic growth
In 2023, FMO invested €623 million in the agribusiness, food and water sector, of which €551 million consisted of debt and €72 million of equity investments. Half of the investment volume was directed at agricultural processing (41 percent), agricultural production (2 percent) and agricultural trading (8 percent), with the remaining half invested in other activities.
The war in Ukraine has affected both the food and fertilizer production and trade, with direct implications for our portfolio in Ukraine. The conflict has also had a detrimental impact on food security in many of our markets, but especially in Africa, which is highly dependent on food and fertilizer imports. The high interest rates, which persisted throughout 2023, also posed substantial challenges for our customers, as most of our portfolio is USD denominated. Additionally, the sector was confronted with challenges, such as a poor rice harvest in India and the coffee market experiencing backwardation.28 The increasing frequency of such incidents due to climate change is expected to make agricultural production and food prices more volatile.
Despite the challenging context, we were able to significantly increase our investments in the agribusiness, food and water sector. We saw particularly strong growth in our sustainable aquaculture business this year. Another milestone was our inaugural investment in Brazil, marking a pivotal step for future growth of our portfolio in Latin America and the Caribbean, particularly in forestry. Approximately half of the investments made during the year were in new customers. The quality and impact of these deals proved to be crucial factors to be able to mobilize third party capital.
Jobs supported, including for women
By providing investments to our customers, we support jobs. In the agribusiness, food and water sector, jobs supported stem mainly from supply chain effects through, for instance, sourcing goods and services from others as well as through employees spending their wages in the economy (induced jobs supported). Some of our customers in this sector are financial institutions that focus on providing loans to SME agribusinesses, which also result in finance-enabling jobs.
In 2023, FMO’s customers in the agribusiness, food and water sector supported an estimated 145 thousand jobs (2022: 134 thousand), comprising of 19 thousand direct jobs and 126 thousand indirect jobs. A total of 35 percent of the direct jobs supported were held by women. The increase in the total number of attributed supported jobs is predominantly related to the incorporation of new customers into our portfolio and existing customers in our portfolio.
Reducing inequalities through resilient and inclusive agricultural value chains
In 2023, RI-labelled total new investments in the agribusiness, food and water sector amounted to €212 million, of which €55 million was invested in LDCs and €173 million in inclusive business. This represents an increase compared to 2022, partially driven by a large transaction with an existing customer that supports smallholder farmers in Africa. In addition, we financed a dairy company in Uganda and a new company active in Malawi and Zambia, which are all LDCs.
FMO targets smallholder farmers because they meet more than 70 percent of the world's need for food but have a weak market position and limited means to invest in business improvements.29 Smallholder farmers are marginal and submarginal farm producers that own and cultivate relatively small plots of land, have low access to technology, and have limited capital, skills, and risk management. They depend on family labor for most activities and have limited capacity for storage, marketing, and processing.30
We invest in companies that support smallholder farmers to improve their yields, and/or reduce environmental degradation, and/or improve social practices during the investment period. In 2023, companies financed by FMO supported 14 million smallholder farmers (2022: 5 million). The significant increase in the number of smallholders supported was driven by an investment in a large fund, which reported an increase in almost 10 million farmers. As we report smallholders supported as an unattributed figure, we account for all smallholders reached through the investees of funds in our reporting.
Climate action
In 2023, Green-labelled total new investments in the agribusiness, food and water sector amounted to €253 million, a substantial increase compared to 2022 (€133 million). Green volumes were largely driven by the portfolios in Latin America, the Caribbean and in ECA and MENA. In ECA and MENA this was due to investments in sustainable aquaculture and closing several large deals with long-standing customers in, for instance, Turkey and Moldova. In Latin America and the Caribbean, we closed several large transactions with new customers in, among others, Ecuador and Brazil which helped drive green production in 2023.
In 2023, AFW investment portfolio resulted in 1,604 ktCO2e financed absolute GHG emissions. The AFW portfolio is diverse, giving rise to different sources of GHG emissions. Manufacturing and processing of food products leads to CO2 emissions from energy usage. Primary agricultural production can have significant non-CO2 emissions such as methane from livestock and nitrous oxide from fertilizers. Emission removals, which mainly come from forestry projects, have not been included yet since we are still waiting for final guidance from the GHG Protocol.