The Critical Role of Capital in the Fight Against Food Waste

The Critical Role of Capital in the Fight Against Food Waste

Written by: Alexandria Coari

February 3, 2021

Food waste has enormous impacts on climate change, hunger, the economy, and more, but the good news is that a range of solutions already exists to reduce it. Some are breakthrough innovations, some are basic best practices, and many have a strong potential for investment returns. While many businesses, governments, jurisdictions, nonprofits, funders, and others are already making a substantial effort to address the challenge, much more needs to be done – and at an accelerated rate – in order to achieve national and international goals to reduce food waste by 50% by the year 2030.

Through an analysis in ReFED’s Roadmap to 2030 and Insights Engine, we estimate that an annual investment of $14 billion over the next ten years can reduce food waste by 45 million tons each year. That investment would result in $73 billion in annual net financial benefit – a five-to-one return. Plus, every year, it would reduce greenhouse gas emissions by 75 million metric tons, save 4 trillion gallons of water, and recover the equivalent of 4 billion meals for those in need. Over ten years, it would create 51,000 jobs – and achieve our 2030 reduction goal.

But where can and should this vital capital come from? In the fight against food waste, capital providers of all types play an integral role in funding the development and ultimate adoption of food waste reduction solutions.

Bolstered by the insights of an expert panel of capital providers (including foundations, impact investors, venture capitalists, private equity firms, and institutional investors) and food businesses, ReFED’s analysis provides a recommended mix of the $14 billion annual financing across nine different capital types:

  • Government Project Finance: $714.2M
  • Tax Incentives: $97.2M
  • Government Grants: $1.0B
  • Non-Government Grants: $1.2B
  • Impact-First Investments: $909.2M
  • Venture Capital: $1.4B
  • Private Equity: $1.1B
  • Corporate Finance & Spending: $7.1B
  • Commercial Project Finance: $617.3M

Effective action against food waste requires a smart matching of the correct type of capital with the appropriate opportunity, and in many cases, multiple types of capital are required to fund food waste reduction solutions from conception to adoption. While the majority of financing required to scale food waste reduction solutions is expected to come from traditional market sources, there is an equally important and crucial role for catalytic capital - investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment. ReFED estimates that $3 billion per year of catalytic capital, largely in the form of government grants, non-government grants, and impact-first investments, would unlock the additional $11 billion of necessary financing – since catalytic capital tends to be first money-in, it can have a multiplier effect that stimulates larger amounts of future funding and helps overcome system-level barriers.

ReFED’s Roadmap to 2030 reviews the role of these nine different capital types in supporting food waste reduction – within each capital type, we’ve highlighted the financing opportunities associated with the seven key action areas from the Roadmap to 2030, as well as the specific investment needed to fund the associated solutions.

Disclaimer: A particular financing need may be met from a variety of sources. As such, these estimates and funding mix recommendations are only approximations of the scale of resources needed to achieve our national goal to reduce food loss and waste by 50% by the year 2030.

 

 To learn more about catalytic capital and to get in touch with our team, please email us at: insight@refed.org

ReFED is a national nonprofit working to end food loss and waste across the food system by advancing data-driven solutions to the problem. ReFED leverages data and insights to highlight supply chain inefficiencies and economic opportunities; mobilizes and connects people to take targeted action; and catalyzes capital to spur innovation and scale high-impact initiatives. ReFED’s goal is a sustainable, resilient, and inclusive food system that optimizes environmental resources, minimizes climate impacts, and makes the best use of the food we grow.

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