Investing in sustainable rice production through “rice bonds” could secure food for 3.5bn people – over half the world’s population – against the impact of climate change, says a report.
The report, by think tank Earth Security Group (ESG), said public-private cooperation and new financial delivery mechanisms will be necessary to move towards “climate-smart” rice production.
It proposed a rice bond to finance sustainable rice value chains, taking advantage of the market for green bonds, which are specifically earmarked for climate and environmental projects. The market for green bonds is expected to grow from $167bn to a record $180bn in 2019.
“A rice bond would enable a global rice processor, trader, or retailer to provide farmers with capital to transition to sustainable production, improve farming practices, increase yields and revenue, and become more resilient to climate risks,” the report said.
ESG called on global companies such as Mars Food, Phoenix, Olam, Galaxy, which are “export oriented and off-takers of sustainable rice”, to consider issuing a rice bond.
“They can provide the necessary trust and guarantees for millers to pre-finance farmers based on agreed future purchases. This creates the conditions for a rice bond to enable global retailers to finance the growth of their sustainable rice sourcing process,” it said.
It also proposed developing a rice bond that uses the purchasing power of the World Food Programme to drive global demand for sustainable rice.
While rice is vital to global food security, producing the commodity uses 40% of the world’s irrigation water and is responsible for 10% of global emissions of methane, the report said.
Production systems are available to help farmers lift production, using fewer inputs and reducing methane emissions. However, the fragmented nature of the sector creates barriers to wide-scale adoption of sustainable best practice in rice production. There are currently 150 million smallholder farmers producing rice globally.
Meanwhile, climate change is imposing additional pressure on critically scarce water resources and reducing the availability of land suitable for rice cultivation. By 2050, stresses due to climate change could reduce productivity by 15% in key growing areas, the report said.
China and India, the world’s largest rice producers, are geographically large enough to relocate production in response to climate change, ESG said. However, smaller countries in Southeast Asia and West Africa are “uniquely vulnerable to the combined impacts of climate change, water scarcity and food insecurity”.
Alejandro Litovsky, CEO of ESG, said: “The failure of global food systems due to climate change is one of the biggest security challenges we face. A radical overhaul of existing rice production systems is needed in Asia – the epicentre of global rice production and consumption – as well as Africa, which is now also increasingly depend on rice imports to ensure food security.
“Our report is a call to action for global impact investors to put climate-smart rice farming practices at the centre of their impact investment strategies and for governments to use climate finance to attract private investment towards more resilient agriculture systems.”
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