Voluntary Sustainability Standards and Investments in Sustainable Agriculture

The document argues that financial service providers (FSPs) often avoid agricultural investments in developing countries due to perceived risks, but that VSSs can mitigate these risks by requiring sustainable practices and better governance. While VSSs show high coverage of legal compliance, soil and water conservation, and labour rights, they lack sufficient criteria regarding economic viability, transparency, and climate adaptation. The brief provides recommendations for FSPs, VSS providers, and governments to better align sustainability standards with financial requirements to close the investment gap.

• Financial service providers (FSPs) are reluctant to invest in agriculture in developing economies due to perceived risks, including weather, climate change, and market dynamics, leading to a significant investment gap. In 2014, UNCTAD estimated an annual investment gap of USD 260 billion for meeting Sustainable Development Goal 2 targets in developing countries.
• VSSs can reduce material financial risks by requiring farmers to implement practices that support environmental protection, social well-being, and legal compliance. They specifically help mitigate risks related to poor growing practices and legal infractions by ensuring farmers obey international, national, and local laws.
• Analysis of 12 VSSs shows high coverage of criteria for water conservation, soil conservation, and forest conservation, as well as labour rights and workplace health and safety. All 12 examined standards include soil conservation practices to prevent erosion and require that labour rights are upheld according to International Labour Organization (ILO) conventions.
• VSSs have significant gaps in criteria that FSPs consider highly important for risk assessment, particularly in the economic dimension. There is low to little coverage of corruption and bribery prevention, business transparency, and economic viability, with fewer than half of the 12 VSSs demanding business plans or productivity improvement measures.
• There is a lack of comprehensive VSS criteria for climate change, with only four of the 12 standards requiring climate adaptation activities and only one (Rainforest Alliance) requiring hazard emergency response plans. While most require energy-use reduction for mitigation, few have greenhouse gas emission sequestration requirements.
• FSPs can leverage VSSs to improve their investment processes by using them for ESG screening, structuring sustainability-linked loans with interest rates tied to VSS-aligned indices, and pre-selecting investees based on risk-impact profiles.

APA

Larrea, C. (2023). Voluntary Sustainability Standards and Investments in Sustainable Agriculture. International Institute for Sustainable Development. https://www.iisd.org/system/files/2023-04/ssi-brief-standards-investments-sustainable-agriculture.pdf

Chicago

Larrea, Cristina. Voluntary Sustainability Standards and Investments in Sustainable Agriculture. International Institute for Sustainable Development, 2023. https://www.iisd.org/system/files/2023-04/ssi-brief-standards-investments-sustainable-agriculture.pdf.

Wikipedia

{{cite report |last1=Larrea |first1=Cristina |title=Voluntary Sustainability Standards and Investments in Sustainable Agriculture |publisher=International Institute for Sustainable Development |date=April 2023 |url=https://www.iisd.org/system/files/2023-04/ssi-brief-standards-investments-sustainable-agriculture.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{larrea2023voluntary, author = {Larrea, Cristina}, title = {{Voluntary Sustainability Standards and Investments in Sustainable Agriculture}}, institution = {International Institute for Sustainable Development}, year = {2023}, month = apr, url = {https://www.iisd.org/system/files/2023-04/ssi-brief-standards-investments-sustainable-agriculture.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }