Creating value while enhancing ecosystems

Published on: 23 January 2025

It is safe to say that a transition in food and agriculture is inevitable. And even though achieving financial returns while meeting growing food needs and preserving natural capital is not easy, it’s certainly necessary.


The sustainability of food systems and the preservation of natural capital are inextricably linked, as the Food and Agriculture Organization (FAO) points out. The FAO states that sustainable agriculture must “make more efficient use of increasingly scarce global resources, be resilient to and help mitigate climate change, and improve human well-being.” 


Various frameworks underscore the interlinked social, economic, and environmental dimensions of sustainable agriculture and the urgency of transforming food and land use systems to meet the United Nations SDGs and Paris Agreement goals. Private Natural Capital investments offer a means to create value while preserving and enhancing ecosystems. 


Sustainable food systems depend on healthy natural capital but can also deplete it if mismanaged. Here, food systems play a dual role: they rely on ecosystem services such as pollination, nutrient cycling, and climate regulation, yet unsustainable practices like deforestation, soil degradation, and water overextraction erode these resources. Solutions must account for local and global complexities, as no single model fits all food systems.


Mirroring global evolution of standards, and in collaboration with ABP, we as APG have refined our investment requirements. For instance, on behalf of our client we support practices in the field of regenerative agriculture that restore soil health and biodiversity. In relation to resource efficiency, we promote and implement innovations that optimize resource use, such as precision agriculture and water-efficient irrigation systems. Also, we encourage production systems and methods that reduce greenhouse gas emissions. Furthermore, we advocate for production systems that reduce overall pressure on terrestrial ecosystems, such as circular agriculture.

Investors in food and agriculture can create financial returns and at the same time play a transformative role

Transitioning global food systems to align with natural capital is a complex task and faces multiple hurdles. There is the public goods issue: Natural capital is often treated as a "free" resource, leading to underinvestment in its preservation. Establishing who pays for its true value remains a major unresolved issue. Another hurdle is the presence of economic barriers: a transition often involves high upfront costs, knowledge gaps, and long payback periods. This deters multiple farmers and producers, while for smallholders, undertaking transition is particularly risky. Meanwhile, national policies vary widely, with varying levels of willingness and capacity to support a transition toward more sustainable production models. These are influenced by multiple factors, including societal pressures and economic priorities. And whereas the valuation of ecosystem services and integration into financial models is evolving, it still remains challenging due to the lack of standardized approaches and common language.


Despite these challenges, investors in food and agriculture can create financial returns and at the same time play a transformative role by aligning their portfolios with natural capital principles. Opportunities include prioritizing investments that promote soil health, climate change resilience and measures that help enhance biodiversity and general environmental performance, alongside financial returns. An example is supporting projects like agroforestry that enhance biodiversity, sequester carbon, and improve water cycles. Simultaneously, investors can contribute to reducing waste and promoting resource efficiency throughout the food value chain while backing eco-friendly agricultural inputs, soil health monitoring tools, and carbon marketplaces. Equally important is to back frameworks that measure and report on the environmental impact of food production. Indeed, establishing clear KPIs is key to measuring environmental impact, whereas technological advancements allow for the continuous evolvement of due diligence, measurement, and monitoring.


What is APG’s role in all of this? APG plays an important role in supporting this transition, in part, via the Private Natural Capital portfolio we manage for ABP. Since its inception, our natural capital portfolio has grown to around EUR 3 billion in private forestry and agriculture investments. A recent comprehensive review of the strategy led to enhanced ESG and impact criteria that complement risk/return and cost considerations. These criteria serve a dual purpose. They help to identify opportunities that can generate real-world impacts alongside financial returns, as well as strengthen risk management by addressing long-term risks tied to natural capital depletion. The portfolio is expected to grow, focusing on investments that embed natural capital principles, foster climate resilience, and create equitable value chains benefiting producers, consumers, and the planet.


Ronald Wuijster is CEO of APG Asset Management