Investing in sustainable protein: a Q&A with Olivia Elliot

This article is brought to you by the Food Systems, Land Use and Restoration (FOLUR) Impact Program.

At last month’s 6th GLF Investment Case Symposium in Luxembourg, we sat down with Olivia Elliot, adviser 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 the IFC’s recently published practices for sustainable investment in livestock operations, tackling greenhouse gas emissions and biodiversity loss, and how the institution works with local banks to catalyze investment in sustainable value chains.

Can you tell us about the IFC’s sustainable protein platform and the paper you recently published on your practices for sustainable investment in livestock operations?

Olivia Elliot

IFC has an investment portfolio of over USD 1 billion invested in our meat, milk and aquaculture companies across the world, and we believe that these companies are crucial for 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 live off a diet that’s based mainly around starches, so lacking essential micronutrients, like vitamin A, iron and zinc that animal source foods provide.

Now, where the practices document that you mentioned comes in is that we as an institution recognize that investing in developing the livestock sector in emerging markets does come with certain sustainability issues. And so, we’ve published IFC’s practices for sustainable investment in livestock operations, which are aimed at financial institutions to communicate effectively how and why we as IFC invest in these companies and also to show how we mitigate risks, like the sustainability challenges I mentioned.

The Food and Agriculture Organization of the United Nations (FAO) recently updated its figure for the livestock sector’s contribution to total GHG emissions to around 11 percent. How are you and the IFC helping address this?

Olivia Elliot 

In alignment with the Paris Agreement, we ensure that all of our livestock clients estimate their total environmental footprint. And then, we work hand in hand with our companies to ensure that they are increasing productivity at the same time as decreasing their greenhouse gas emissions intensity, which means their emissions per kilogram of meat produced or per liter of milk produced.

As an example, we’re working with Zambeef, one of Zambia’s largest agribusinesses, and they have thousands of smallholder farmers in their supply chain. We have worked with them in phase one of the project to estimate their environmental footprint across all of their operations, and we’re now working with them in the second phase to come up with solutions that can further decrease this footprint.

So, for example, looking at transitioning to clean fuels and recycling organic waste into fertilizer. Once somebody has implemented these new solutions, they should abate thousands of tons of carbon dioxide equivalent per year. And as a result, they’ve been recognized by the government of Zambia for their exemplary adherence with national environmental regulations.

Coming back to the practices for sustainable investment in livestock operations: practice 5 specifically refers to “prevent the loss of biodiversity,” and a big part of this, especially when it comes to livestock, is reducing or eliminating deforestation. How is the IFC working with that?

Olivia Elliot 

I am going to come to that and answer it, but I first wanted to just talk about the term ‘deforestation.’ At IFC, and in the practices document, we use the terms ‘critical and natural habitat’ because we feel these terms are broader and they cover both forest and non-forest areas like, for example, Tanzania’s Serengeti.

Going back to your question about how we actually implement practice 5 on preventing 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 whether any livestock or feed grains originate from an area where there is significant risk of land conversion of critical or natural habitats. Obviously, if there is significant risk, we would not make a transaction. And where we have invested in a company, we work with them to develop a supply chain management plan.

As an example, we’ve been working in Brazil’s Cerrado with COFCO International, who are a long-standing client of ours. The project is part of the Good Growth Partnership, which is funded by the Global Environment Facility and being implemented by the United Nations Development Programme. And so, we’ve worked with COFCO to develop a fully traceable and sustainable soy supply chain.

Now, the company knows exactly where the soy is being produced from, going right back to the farm level, and can assess each of these farms on various social and environmental criteria using farm contours and GIS data. The project also involves some training of smallholder farmers, so over 1,000 smallholder farmers have been trained in sustainable soy production techniques, which are free from deforestation and from land conversion.

You mentioned Brazil. Have you got any other examples of countries where you’re operating?

Olivia Elliot 

I think that the country that springs to mind, first of all, would be Paraguay. In Paraguay, we’ve been working with the Smithsonian Institute, which is a specialist in biodiversity and conservation, and we’ve developed a tool called the automated sustainable investment tool Chaco (Assist Chaco). I’m sure you probably know that [the Gran] Chaco is an area in western Paraguay where there is a beautiful, dry tropical forest. It’s the second most biodiverse area and in all of South America, but unfortunately, in recent years, there has been huge deforestation in the area.

So, in 2019, we signed this partnership agreement with the Smithsonian Institute to develop this tool – and we want to make it publicly available when it’s published – the tool will allow investors to be able to look at areas of land and assess them on various environmental risk and biodiversity values, like the species that are there, ecological factors, landscape features, to enable and aid their due diligence processes. The tool hasn’t been published yet. We are currently going through a validation process with local stakeholders, so with local banks where IFC has lines of credit. We’ve also included other development finance institutions in the process to ensure that the tool is really relevant to all investors investing in the Chaco.

You mentioned local banks. How can a large financial institution like the IFC support and work with local banks to invest in areas where deforestation is a major issue without contributing funds to deforestation or biodiversity loss?

Olivia Elliot 

This is exactly it. This is exactly why we set up the partnership with the Smithsonian Institute, because  obviously, we at IFC faced the same problem ourselves. Through our lines of credit to local banks, we want to be able to invest in the Chaco, but we currently can’t because of the deforestation risk. So, this is the tool that we hope will aid those local banks to make those investments in the future, and all of the Assist Chaco tool has the Equator Principles embedded within it, which are principles that are applied by many financial institutions across the world.