Editing IPCC:AR6/WGII/Chapter-5 (section)

=== 5.13.6 Increased Presence of Financial Actors in the Agrifood System ===

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Financial actors, markets, institutions and incentives have gained importance in agricultural commodities and farmland markets in the past two decades ( [[#Clapp--2018|Clapp and Isakson, 2018]] ; [[#Fairbairn--2020|Fairbairn, 2020]] ). New types of investment vehicles such as commodity index funds that track prices of commodities and farmland have emerged, and the use of older vehicles such as forward and futures markets has increased ( [[#Schmidt--2016|Schmidt and Pearson, 2016]] ; [[#Clapp--2018|Clapp and Isakson, 2018]] ). These trends are connected to climate change as financial investments are influenced by the likelihood that climate change will increase commodity and farmland price variability ( ''medium confidence'' ) ( [[#Cotula--2012|Cotula, 2012]] ; [[#Isakson--2014|Isakson, 2014]] ; Tadesse et al.).

Financial investors pool their investments through intermediaries, alongside other dynamic forces in the global economy, making unambiguous assessments of their effect difficult ( [[#Clapp--2014|Clapp, 2014]] ; [[#Clapp--2017|Clapp, 2017]] ). However, assessment of the broader trends at the interface of financial investment, food system dynamics and climate change shows potential connections.

Climate-induced variability in food production has the potential to introduce a new level of uncertainty into food and farmland markets, encouraging financial investment into products to capitalise on price volatility and to hedge risks. The new financial instruments enable investors to speculate more easily on the direction of food and land prices, especially when they are volatile ( [[#Ouma--2014|Ouma, 2014]] ; [[#Baines--2017|Baines, 2017]] ).

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