At last month’s 6th GLF Investment Case Symposium in Luxembourg, we sat down with Olivia Elliott, Advisor to the Sustainable Protein Platform at the International Finance Corporation (IFC), part of the World Bank Group, to learn about their projects and progress this year.
In this video interview, we discuss IFC’s recently published practices for sustainable investment in livestock operations, addressing greenhouse gas emissions and biodiversity loss, and how the organization works with local banks to catalyze investment in sustainable value chains.
Can you tell us about IFC’s sustainable protein platform and the recently published paper on your practice for sustainable investment in livestock operations?
IFC has an investment portfolio of over USD 1 billion invested in our meat, milk and aquaculture companies around the world, and we believe these companies are critical to providing safe and affordable protein to the 2 billion people in the world who suffer from hidden hunger. , which is a term that refers to people who do not live a diet that relies primarily around starch, therefore lacking essential micronutrients such as vitamin A, iron and zinc that animal source foods provide.
Now, where the practice document you mentioned comes in is that we as an organization recognize that investing in livestock sector development in emerging markets brings with it some sustainability issues. And so, we’ve published IFC’s practices for sustainable investment in livestock operations, which aim to effectively communicate to financial institutions how and why we as IFC invest in these companies, as well as show how we mitigate risks, as I mentioned in sustainability. Challenges.
The Food and Agriculture Organization of the United Nations (FAO) recently updated the livestock sector’s contribution to greenhouse gas emissions to about 11 percent. How are you and IFC helping to address this?
In alignment with the Paris Agreement, we ensure that all our livestock clients estimate their total environmental footprint. And then, we work together with our companies to ensure that they increase productivity while reducing the intensity of their greenhouse gas emissions, meaning their emissions per kilogram of meat or liter of milk produced.
For example, we work with Zambeef, one of the largest agribusinesses in Zambia, and they have thousands of smallholder farmers in their supply chain. We worked with them in the first phase of the project to estimate their environmental footprint across all their operations, and we are now working with them in the second phase to come up with solutions that can further reduce this footprint.
So, for example, converting to cleaner fuels and recycling organic waste into fertilizer. Once someone implements these new solutions, they should reduce the equivalent of thousands of tons of carbon dioxide each year. And as a result, they have been recognized by the Government of Zambia for their exemplary adherence to national environmental regulations.
Returning to practice for sustainable investment in livestock operations: Practice 5 specifically refers to “preventing loss of biodiversity” and a large part of that, especially when it comes to livestock, is reducing or eliminating deforestation. How is the IFC dealing with this?
I’m going to come to that and answer, but I just wanted to talk about the term ‘deforestation’ first. At IFC, and in practice documents, we use the term ‘critical and natural habitat’ because we think these terms are broader and cover both forest and non-forest areas, eg, the Serengeti in Tanzania.
Going back to your question about how we actually apply exercise 5 to prevent biodiversity loss: In our due diligence phase, before we make an investment, we work with a company and do a biodiversity risk screening, which will show which livestock or food crops are a Originates from areas where critical or natural habitats are at significant risk of land conversion. Obviously, if there is significant risk, we will not enter into a transaction. And where we’ve invested in a company, we work with them to develop a supply chain management plan.
For example, we are working with COFCO International in Cerrado, Brazil, who are our long-time clients. The project is part of the Good Growth Partnership, funded by the Global Environment Facility and implemented by the United Nations Development Programme. And so, we worked with COFCO to create a fully traceable and sustainable soy supply chain.
Now, the company knows exactly where soy is being produced, going back directly to the farm level and can evaluate each of these farms using farm contours and GIS data on various social and environmental metrics. The project also includes some training of smallholder farmers, so more than 1,000 smallholder farmers have been trained in sustainable soy production techniques, free from deforestation and land conversion.
You mentioned Brazil. Are there any other examples of countries where you are working?
I think the first country that comes to mind would be Paraguay. In Paraguay, we’re working with the Smithsonian Institute, which specializes in biodiversity and conservation, and we’ve developed a tool called Chaco (Assist Chaco), an automated sustainable investment tool. I’m sure you probably know [the Gran] The Chaco is an area of western Paraguay with a beautiful, dry tropical forest. It is the second most biodiverse area in all of South America, but unfortunately, in recent years, the area has experienced massive deforestation.
So, in 2019, we signed this partnership agreement with the Smithsonian Institute to develop this tool – and when it’s released we want to make it publicly available – this tool will enable investors to look at land areas and evaluate them on a variety of issues. Environmental risks and biodiversity values, such as species present, environmental factors, landscape features, to enable and support their due diligence processes. The tool is not released yet. We are currently going through a validation process with local stakeholders, so with local banks where IFC has credit lines. We also included other development finance institutions in the process to ensure the tool is truly relevant to all investors investing in Chaco.
You mentioned the local bank. How can a large financial institution like IFC support and work with local banks to invest in areas where deforestation is a major problem without adding funds to deforestation or biodiversity loss?
This is exactly it. That’s exactly why we partnered with the Smithsonian Institute, because obviously, we at IFC faced the same problem ourselves. Through our line of credit with local banks, we would like to be able to invest in Chaco, but we are currently unable to do so due to the risk of deforestation. So, it’s a tool that we hope will help those local banks make those investments in the future, and all the Assist Chaco tools have Equatorial principles embedded in them, principles that are applied by many financial institutions around the world. .