Technology can support lower-emission food production.GettyImages/AFP/Getty Images
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our homepage.
When Beyond Meat Inc. BYND-Q went public in 2019, its stock surged to around US$65 a share, an almost 165 per cent rise over its initial public offering price of US$25. That was based on speculation that meat alternative products like the ones the company produces would be the wave of the future.
Although the investment rose to as high as US$196 a share a couple of months after launching, it hasn’t been quite as appetizing. Since then, Beyond Meat’s stock has fallen dramatically as consumer demand was not as predicted. The stock currently trades for around US$6 a share.
Yet, more sustainable food systems still offer opportunities to investors – and remain a priority for the sake of the planet.
The use of animals for food, as well as livestock feed, is responsible for 57 per cent of all food production emissions, according to a study published in the journal Nature Food.
Furthermore, a recent special report that Royal Bank of Canada (RBC) produced entitled, “The Next Green Revolution: How Canada can produce more food and fewer emissions,” states that this country’s agriculture and food systems sector produces 93 megatonnes of greenhouse gas (GHG) emissions annually. That’s just more than 10 per cent of our national GHG emissions.
If Canadian farmers maintain current practices and market share, as the global population grows, these emissions could rise to 137 megatonnes by 2050. That’s the same year the world is trying to achieve net-zero emissions.
“This is a critical opportunity to grow food exports across Canada and cut our national emissions,” says Mohamad Yaghi, agriculture and climate policy lead at the RBC Climate Action Institute.
From agricultural technology (agtech) to investing directly in local farming initiatives, investors have many ways to put their money into sustainable food systems.
Current spending on more sustainable food systems amounts to US$20-billion annually, according to the International Food Policy Research Institute. That’s less than 4 per cent of total climate finance. The institute estimated that transforming the food system will require up to US$350-billion annually by 2030.
This significant challenge also creates space for big investment opportunities. According to Bain and Co., developed markets are supporting technology-enabled agriculture from advanced aquaculture (the farming of aquatic organisms) to self-driving tractors. Much of the innovation comes from startups, as large food companies spend only 1.4 per cent of revenue on research and development.
In recent years, exchange-traded funds (ETFs) – such as VanEck Sustainable Future of Food ETF, which trades on the London Stock Exchange, and VegTech Plant-Based Innovation & Climate ETF EATV-A – have given investors exposure to several players in the sustainable food product sector and the agtech industry.
Where might opportunities be found? The RBC report notes seven agtech technologies that can help reduce emissions and offer opportunities for Canada to lead. That ranges from anaerobic digesters (turning animal waste into renewable energy) to controlled environment farming (without the use of a field).
Global independent asset manager Wellington Management Co. LLP recently published a report on why sustainable food systems matter to investors, and noted the potential around precision agriculture – which reduces the use of water, fertilizers and pesticides – and innovative soil management tools.
For investors interested in green, vegan and sustainable food startups, the website Vegpreneur has an investing hub with listings of meat and dairy alternative companies, and organic fruit and vegetable providers.
Knowing where to direct investments can be complex. The Sustainable Finance Hub of the United Nations Development Programme and the Good Food Finance Network are working together to develop a Good Food Investing Framework. It includes a targeted guide to help financial institutions and enterprises evaluate investment opportunities in sustainable food systems that enhance long-term profitability and mitigate risks.
Some European countries are seeing greater investments in the local food processing and distribution infrastructure, as well as moves to encourage local food consumption to stabilize demand for farmers, says Alison Blay-Palmer, founding director for the Centre for Sustainable Food Systems at Wilfrid Laurier University in Waterloo, Ont.
“We want to have a food system that’s better for the environment, and more accessible to people. I think we got a taste of that through COVID because people naturally turned to their regional food systems,” she says.
There are models in Canada for investing in local sustainable food systems. In Nova Scotia, FarmWorks Investment Co-operative Ltd., based in Wolfville, offers small loans to local agricultural and food businesses. FarmWorks runs a Community Economic Development Investment Fund. It enables Nova Scotians to receive tax credits for investing in food-related businesses dedicated to increasing the viability and sustainability of agriculture, providing local food sources and protecting food security.
While the tools exist to invest in local farms and food production, the way we think about food needs to shift, too, says Linda Best, managing director of FarmWorks. For example, in Canada, we’re used to having grocery store access to strawberries in the middle of winter.
“It’s difficult to get people to change their point of view,” she says.
With a global population of 8 billion that’s headed to 9.8 billion in 2050, we’re challenged to feed the world in a way that’s healthy, reduces GHG emissions, and protects our land and water.
With rising concerns around global food security and an increase in catastrophic weather events due to the climate crisis, investors and the public at large may do well to consider sustainable food systems.
“We have a responsibility to make choices for better quality food that supports local production and supports the growth of really good quality food on good land,” Ms. Best says.
For more from Globe Advisor, visit our homepage.