Hard Truths from a Decade of Investing in Regional Food Systems

The COVID-19 crisis has highlighted the inequities and fragility of our industrialized food system and accelerated the movement to create strong regional food systems that support local growers, provide food security, give communities agency over their food supply and yield environmental benefits.

These systems will remain out of reach, though, unless we address persistent, decades-old structural issues. Price pressures continue to challenge the viability of decentralized food systems and communities of color continue to be underserved — as farmers, food chain workers, supply chain entrepreneurs and consumers. We need to change both who we fund and how we fund if we want to create equitable, thriving regional food systems.

What will it take to achieve such massive shifts? RSF Social Finance has been reflecting on that question as we wind down our Food System Transformation Fund, a pooled loan fund launched in 2010 to help rebuild regional processing, manufacturing and distribution infrastructure that was lost as the food system industrialized. Restoring these supply chain links is essential to creating viable regional food systems, yet community-based infrastructure enterprises have limited access to both startup and growth capital.

The Food System Transformation Fund attempted to address that problem with program-related investments from foundations, on the premise that risk-tolerant debt could enable early-stage businesses to grow and eventually access traditional capital from banks and community development financial institutions. As we wind down the fund and move our food system investments into other RSF portfolios, we’re sharing what we’ve learned in hopes of advancing efforts to build a regenerative food system.

Over the past decade, the fund provided $6.5 million in debt to 27 organizations across 14 states. More than 25 percent of borrowers grew into our senior secured loan portfolio or accessed traditional debt, while nearly 20 percent had to cease operations or substantially change ownership.

The enterprises between those two poles continue to need patient, flexible and diverse capital structures. That’s not because they’re failing, but because the finance ecosystem has failed to develop tools fitted to the needs of food system enterprises. This truth informs three fundamental insights from our work in the field of food system transformation.

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