Climate change, food security, and capital flows are increasingly interconnected, creating a systemic challenge where each element influences the others. Extreme weather events are altering agricultural production conditions, while malnutrition and food accessibility pressures continue to rise. The efficiency of capital allocation is a critical factor in determining whether the transition to a more sustainable system can be accelerated and made more equitable.

Addressing this critical issue, Sean Kidney, CEO of the Climate Bonds Initiative (CBI), and Professor Shenggen Fan, Founder and Executive Chair of the Advisory Committee of the World Agricultural Forum for Innovation (WAFI), Dean of the Academy of Global Food Economics and Policy at China Agricultural University, and Board Member of the CGIAR, held an in-depth and practical dialogue in Beijing, China.

Their conversation focused on four key areas: enhancing the resilience of the food system, synergistically advancing nutrition and development goals, identifying and pricing climate risks, and shifting agricultural and food system investments from promoting concepts to delivering measurable, replicable, and scalable results.

Sean Kidney: The current agri-food system is under multiple pressures. In your view, what is the most urgent challenge? Which directions are most worthy of priority attention for investors?

Shenggen Fan: We face multiple challenges, but the most fundamental remain three issues: poverty, hunger, and malnutrition. Globally, over 700 million people still suffer from hunger. A more hidden, yet equally severe, issue is "hidden hunger," or micronutrient deficiency. Even with sufficient caloric intake, a lack of key nutrients like iron, zinc, vitamin A, and iodine can severely impact health. Approximately 5 billion people worldwide suffer from varying degrees of micronutrient deficiency, which affects children's intellectual and physical development, reduces adult labor productivity, and impacts the healthy lifespan of the elderly.

Climate change exacerbates this problem. Over recent decades, extreme weather has significantly impacted food production, making it difficult for poor smallholder farmers to be self-sufficient and to provide stable supplies for urban populations. Hunger and climate risk are intertwined and should be treated as top-priority issues simultaneously.

Sean Kidney: Is micronutrient deficiency more a result of income constraints or structural issues within the production system itself?

Shenggen Fan: It is both. On one hand, about 700 million people cannot afford a healthy diet. On the other hand, the global production system fails to provide low-cost, nutrient-rich food. Past investments and research and development have primarily focused on staple crops like rice, wheat, and corn, while nutritious crops such as vegetables, fruits, and legumes have been neglected.

The key solution still lies in technology and systemic investment. One important pathway is "biofortification," which increases the micronutrient content of staple crops through traditional breeding or modern techniques. For example, incorporating iron, zinc, and vitamin A into staples commonly consumed by impoverished populations, such as rice, wheat, corn, potatoes, and sweet potatoes. A successful case involves international agricultural research institutions using breeding techniques to increase the iron content in pearl millet in rural southern India, reducing the anemia rate among girls there from 70%-80% to 30%-40%. Similar examples include high-iron beans in Rwanda and vitamin A-enriched maize in Africa. Currently, hundreds of millions of people worldwide are consuming biofortified foods.

This effort relies on international gene bank systems, which preserve crop genes for drought resistance, disease resistance, heat tolerance, and high nutritional content. Scientists can create new varieties through selection and breeding, enhancing nutrition without genetic modification.

Furthermore, new varieties must enter the supply chain to have a greater impact. For instance, in parts of China and Southeast Asia, rice processing mills serve as hubs linking smallholder farmers, standardizing seeds and processing, and then supplying supermarkets. This model can be expanded to vegetables, fruits, and legumes.

Sean Kidney: Can the yields of green vegetables be increased like those of rice and wheat?

Shenggen Fan: Absolutely. Past investments have concentrated on staple grains, with insufficient R&D and infrastructure investment for vegetables and fruits. Policy has also supported grains and livestock, while vegetables and fruits have been neglected, or even taxed. If investments and subsidies are reasonably adjusted, it can not only improve nutrition but also reduce carbon emissions.

The problem is not a "lack of money," but "how the money is used." Currently, global agriculture receives about $700 billion in annual subsidies, primarily for fertilizers, water, pesticides, or price support for single staple crops. This often exacerbates environmental pressures without effectively improving nutritional outcomes.

Sean Kidney: How can investment and subsidies play a more effective guiding role?

Shenggen Fan: A feasible solution is for the public sector to adjust subsidy mechanisms, increasing support for R&D, supply chains, and the application of new technologies to reduce investment risks for the private sector in related areas. This can fill funding gaps in areas with social benefits that are not yet market-ready, enabling investments to achieve commercial returns while also improving nutrition, health, and the environment.

Sean Kidney: Beyond redesigning subsidies, what other key areas should agricultural investment focus on?

Shenggen Fan: Investment should concentrate on several key categories: · R&D: The goal must shift from solely pursuing yield to also considering environmental impact, nutrition, health, and resilience. · Supply Chain and Infrastructure: This includes cold chains, digitalization, and internet access to effectively connect farmers with markets, while also promoting decarbonization across the entire value chain. · Processing and Organizational Model Innovation: For example, in China and Southeast Asia, using rice processing enterprises as hubs to connect smallholder farmers with supermarket systems through contractual mechanisms.

Sean Kidney: From a longer-term perspective, where are the opportunities for the private sector?

Shenggen Fan: First, reducing food loss and waste. Nearly one-third of global food is wasted, predominantly at the later stages of the supply chain, where the cumulative value and carbon emissions are higher. Digitalization and artificial intelligence can significantly optimize matching efficiency. For instance, in China, platform-based supply chain management has reduced food loss rates from about 25% to 8%.

Second, innovation at the consumer end. Information disclosure alone has limited effect, but technology can change behavior. For example, China Agricultural University introduced an AI-powered cafeteria system that provides real-time feedback on price and nutritional information, leading to noticeable improvements in students' waste reduction and dietary structure. Such models can be extended to more universities, public canteens, and companies.

Sean Kidney: In other words, the key lies in the synergy between science, capital, and system design.

Shenggen Fan: Precisely. Through strategic guidance, we can better leverage pension funds, insurance capital, and private capital to jointly promote the transformation of the food system. The goal is to achieve higher nutritional levels, healthier populations, and a lower-carbon system.

Conclusion: As the dialogue concluded, a consensus emerged: climate, agriculture, and finance are not separate issues but different facets of the same problem. Agriculture is both affected by climate change and a significant source of emissions. Capital can either amplify risks or serve as a tool for driving transformation. The real challenge lies not in the availability of technology or capital, but in how to align them within a coherent framework to turn fragmented attempts into a sustainable pathway.

Another key message from this discussion is that the food problem is not primarily about "insufficient production" but rather a "systemic imbalance" within the agri-food system involving production, supply chains, consumption, and the environment. Achieving a more efficient, healthy, and sustainable agri-food system requires more than the actions of a single entity or sector; it necessitates a synergistic transformation at the system level. This includes using scientific innovation to enhance crop yields and nutrition, optimizing supply chains to reduce loss, leveraging public funds to mobilize private capital, and employing technologies like AI at the consumption end to guide consumer behavior, improve dietary patterns, and reduce waste.

Capital plays a pivotal role in the agri-food transformation. Public funding and policy must first take a "leading" role: by establishing more rational subsidy arrangements and providing stable long-term signals, they can reduce uncertainty and lower entry barriers, gradually attracting more social capital to participate in agricultural emission reduction, resilience building, and nutritional improvement. When science provides a clear path, policy offers a predictable environment, and finance continuously channels capital, the improvement of the agri-food system will no longer be just a development issue but will gradually become a sustainable, replicable investment direction with long-term returns.