Editor’s Note: This article on investments and nutrition is Co-authored by Greg S. Garret, Executive Director of ATNI, and Patrick Elmer, Founder and CEO of iGravity, an advisory firm focused on impact investing and innovative financing for development.
We’re speaking about investments and nutrition and more specifically, investing intentionally toward nutrition outcomes. How? By unlocking finance to drive better inputs, production, aggregation, trading, processing, and marketing.
This will make healthier foods more accessible for all, particularly in low- and middle-income countries (LMIC) where the need is greatest. Crucially, such investment helps drive food and nutrition security and reinforces the link between food systems and climate change.
The investment case is compelling. We have known for nearly twenty years that nutrition offers one of the highest returns on investment. In 2008 a group of economists led by the Copenhagen Consensus Center evaluated various interventions that would help us best reach development goals. Similar assessments were completed in 2015 and 2023. Each of these analyses consistently shows that nutrition targets are among the smartest SDG targets with high social return on investment.
Local SMEs driving nutritional outcomes need finance
Nutrition also offers a finance opportunity, as demonstrated through different pipeline and landscape analyses as well as business cases.
One example is iGravity’s 2018 report, completed in collaboration with GAIN: “Investment opportunities in nutritious food value chains in Kenya and Tanzania.“ This research assessed the financing needs of 52 small- and medium-sized enterprises (SMEs) in Kenya and Tanzania, extrapolating a potential investable pipeline in this region alone close to USD 150 million.
Additional analysis was completed by Harvard in its 2018 paper, “Fueling the Business of Nutrition: What Will it take to attract more commercial investment into nutritious food value chains?” The 2021 Global Nutrition Report also estimated that nutrition-specific financing needed to meet maternal, infant, and young child nutrition targets was USD 10.8 billion per year between 2022 and 2030. Nutrition-sensitive needs were estimated at USD 39−50 billion per year.
Scaling creates profit/impact tensions
Many of the local enterprises delivering foods and potential nutrition outcomes to low-income households operate in difficult markets with weak financial systems, poor infrastructure, and low consumer education — often facing tensions between driving their financial profitability and envisaged impact as they scale. Most of these companies need a combination of working capital financing and a longer-term investment in productive assets (such as equipment for processing or fortifying foods) to increase production and improve efficiency.
Investors still ignore nutrition
While food and agriculture are some of the most common sectors of investment, with 61% of impact investors having an exposure according to the 2023 GIINSIGHT, hardly any investor applies a nutrition lens, as research by the Access to Nutrition Initiative (ATNI) has shown.
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In 2023, ATNI screened 120 agri-food impact funds in sub-Saharan Africa. ATNI also served as an advisor to the Transformational Investing in Food Systems (TIFS) initiative which screened an additional 23 impact funds investing in the agri-food sector. Among these 143 screened agri-food funds health and nutrition were identified as the primary missing impact theme. Not even Development Financial Institutions (DFIs) have a strategy or policy for nutrition investments in place.
Underinvestment in nutrition appears linked to a few overarching issues:
- Lack of knowledge by the (development) finance community about the importance of nutrition as an enabler of other SDG outcomes such as educational attainment, good health, and workforce productivity. As a result, impact investment theses for agriculture and food rarely, if ever, include nutrition.
- Underutilization by development partners of relevant innovative financing instruments to drive private finance for nutrition such as first-loss, guarantees, or outcome funding, as well illustrated by the GAIN discussion paper Innovative Finance for Nutrition.
- Nutrition-sensitive enterprises are often not seen as a market opportunity by investors — quoting limited pipeline, complex local regulation, commodity price fluctuations, and the perception that nutritious food products have limited market potential and profitability.
- Lack of (commonly adopted) nutrition metrics that are relevant and adequate to steer the business performance of local businesses and which inform impact investors and outcome funders. These also need to have a view of the long-term investment horizon as outcomes related to access to nutritious food only become measurable after a few years and with complex attribution pathways.
To address these and mobilize investments in nutrition, ATNI, and iGravity are launching a new partnership
The parties commit to raise knowledge and awareness among both development and finance actors building on what exists and our own organizations’ experience. We will each build on and complement our strengths. Since 2013, ATNI has built a business case for nutrition among dozens of institutional investors who together manage approximately $20 trillion in assets. We will build on this network through investor education activities and target impact investors with a business case that makes sense for emerging markets and SMEs.
Since 2018 iGravity has been assessing SMEs in the nutritious food value chain and designing innovative finance mechanisms. Some of this work is available here. In addition, ATNI and iGravity are working towards the launch of an impact-linked finance facility for nutrition to mobilize new impact-first capital in the space and reward local enterprises in Sub-Saharan Africa for the social value they create through their business operations.
Impact-Linked Finance, a novel but highly promising approach originally created by the Swiss Agency for Development Cooperation (SDC) and Roots of Impact, refers to financial solutions targeting market-based organizations, with financial rewards directly linked to the achievement of positive outcomes, for instance through Social Impact Incentives (SIINC) and Impact-Linked Loans. By providing “better terms for better impact,” Impact-Linked Finance provides financial incentivize to enterprises for additional generated outcomes, while continuing to grow their business.
Under this new partnership, ATNI and iGravity aim to make the business case for nutrition more compelling and finally ensure nutrition is squarely part of impact investing.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo Credit: Shutterstock.
