Consumers and policymakers are driving the shift towards more sustainable food and agricultural practices. As a result, the long-term prospects are good for providers of products and services that can help transform the global food system.
In Investing in food and agriculture: opportunities in feeding the world sustainably, Impax Asset Management outlines the favourable context for food-related investing in solutions ranging from natural feed additives and precision farming technologies to sustainable packaging and products that help cut food waste.
Secular trends argue for long-term investing
Interrelated structural trends support long-term investment in a more sustainable global food and agricultural industry:
- Global population growth means more mouths to feed, more land to be farmed, requiring greater productivity alongside less resource-intensive farming
- Conflict, climate change and high fertiliser prices mean less access to food
- Spreading obesity means a greater need for healthier, less processed food and a focus on more sustainable diets.
Below, we highlight promising business areas.
Growers & inputs
Natural feed additives can improve the health and welfare of animals, without many of the negative effects of inorganic additives and antibiotics. They can increase yields from livestock farming and cut the volume of feed needed.
Technology
Precision agriculture techniques make farming more efficient, cutting the environmental and financial costs of food production. This includes ‘smart’ machines, real-time weather information, and drones.
Food safety
Laboratory testing can help ensure that food is safe, reassuring consumers that produce can be trusted. We see opportunities in companies that run testing facilities and those that supply them with innovative equipment.
Sustainable packaging
Packaging companies whose products advance circularity in material use can help reduce the unnecessary consumption of virgin materials, which is a driver of deforestation. These range from reusable pallets to recycled and recyclable packaging.
Distribution
More efficient solutions for food distribution can help reduce greenhouse gas emissions and improve access to safe, nutritious and affordable food. Companies that supply commercial kitchens with equipment that improves the efficiency of operations can help mitigate food waste.
Basic foods & ingredients
Suppliers of healthier foods can support better nutrition. Some companies are adding vitamins and probiotics, while others are employing natural preservative processes to ensure food products stay fresh for longer.
Value-added foods
Reducing sugar and salt in products can have a positive health and environmental impact. Plant-based alternatives to animal proteins can act as substitutes for resource-intensive meat products.
Improving food health outcomes
Dietary trends have contributed to a rising prevalence of chronic health conditions. Medical devices that help people monitor and manage their blood sugar levels can deliver health benefits and cut the cost of treatment.
Gaining diversified exposure to sustainable agriculture
The breadth of solutions along the food value chain makes it possible to build a stock portfolio that is well balanced between economically resilient businesses and firms that are more growth-oriented and cyclical in nature.
Companies in this area tend to be more aware of, and resilient to, increasingly severe climate and environmental impacts.
We believe evolving consumer tastes and tightening regulation will drive a long-term shift towards a more sustainable food system, allowing active investors to pursue robust, risk-adjusted returns in the decades ahead.
This is an abbreviated version of Investing in food and agriculture: opportunities in feeding the world sustainably
