Our financial system is fragmented.
As in other facets of our lives, distinctions between each desired outcome also characterize how we think about and manage money. Financing for agriculture is largely disconnected from financing for the environment; investments in commodities disregard the places that produce them; and development finance that is targeted to urban areas largely ignores connected rural regions.
Editor’s note: This post was originally published on Devex.
The attractiveness of these differentiations is obvious: they help make complex decisions simpler. However, scientific data and experience consistently tell us that social, economic, and ecological systems are interconnected. The numerous interconnections between the 17 Sustainable Development Goals are a prime example.
The United Nations Food and Agriculture Organization projects an additional $83 billion per year is needed in developing countries to meet future agricultural production needs. However, agriculture is a significant contributor to greenhouse gas emissions, biodiversity loss, soil erosion and it unavoidably impacts the communities in which it is practiced. If this funding flows through our current system that emphasizes sectoral divisions, we risk spending money on food production while harming the underlying ecosystem services on which it depends. While they may make for a tidy ledger, segmented financing structures don’t work.
Financing for an integrated world
Fortunately, the financial and investment world is beginning to see the need to change this model. Water funds in Quito, Ecuador; New York, and Bogotá, Colombia, as well as companies such as SABMiller, are increasingly demonstrating how investments can be designed to deliver ecological, social, and financial returns.