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22 The Responsible Investor’s Guide to Commodities“Responsibleinvestment inagriculture isa necessity, notan option”—Graham Davies,Consultant, AltimaPartners, quoted atAgri-investingfor the long term,17 June 2011that over 50 of the world’s poorest nationshave economies almost 100% based on agriculture,the consequences for developmenthave been serious. The FAO estimates that anadditional $83 billion of annual investmentwill be needed to prepare agricultural systemsto handle the demand of 9 billion people.The world needs new approaches to foodsecurity. Strategies to increase food availabilityby simply bringing more land undercultivation, mining groundwater or applyingmore agri-chemicals to crops will not be sufficientto feed 9 billion people. Agri-chemicalsrely on non-renewable resources such asphosphorus for their production and scientistsalso have singled out the excessive use ofagri-chemicals (alongside the burning of fossilfuels) as one of the most critical oversteppingsof planetary thresholds 15 . Arable landis also a finite resource, and the current rateof arable land expansion cannot be sustainedgiven the limited size of arable land reserves.Water scarcity has begun to affect many agriculturalregions around the world. Futureagriculture must navigate these challengesby improving practices for both demandside and supply side management. Both thedeveloping and developed worlds must adaptto these challenges and do so with a greaterawareness for total system function. A systemthat fails to consistently deliver adequate,affordable nutrition to one-third of the worldcannot be called sustainable.The agricultural system, therefore, will requireinvestors that are attuned to the uniqueenvironmental, social and governance issuesinvolved in the production, distribution andconsumption of food. There are real opportunitieshere to direct capital toward financiallyand socially productive uses, but investorsmust educate themselves about the dynamicsof the world agricultural system to ensurethat their actions make a positive contributionto meeting long-term global objectives.8.2 Investments in soft commodityderivativesSupply-demand dynamics have led to decreasingfood reserves around the world and a dou-15. Rockström et al., “A safe operating space for humanity”, Nature2009.YESTERDAY’S APPROACHES......WILL NOT BE SUFFICIENT TOMORROWRESOURCEUTILIZATIONConvert potential arable landto croplandRapid scaling of irrigated landarea, overdraw on groundwaterAgriculture’s environmentalimpact accepted or ignoredDiminishing land availability, soil degradation,high environmental costDepleted ground water stores render urgentwater efficiency measuresEnvironmental sustainability as necessarystipulationPRODUCTIVITYGROWTHReliance on increased yields indeveloped countriesAcceptance of low smallholderproductivityYield growth in developing countries vital tomeet global demandSmallholder improvements critical to addressglobal hunger and povertySCOPEIMPROVEMENTPriority on calories and increasingcereal productionFocus on farm-level output andyieldImportance of crop diversity, nutritional contentand food affordabilityEfficiency in whole value chain necessary foraccess, food securitySource: WEF, “Realizing a New Vision for Agriculture”, 2010