That said, food prices are likely remain high on a historical basis as weather and geopolitical risks persist, contributing to concerns about inflation and food scarcity.


Empty supermarket shelves during the height of the pandemic exposed a food system that was not fit for purpose. The war in Ukraine amplified these existing challenges. Elevated food prices added to global inflationary pressures with rising food bills grabbing media attention in countries from the UK to Singapore and the US. Food security is expected to be a key topic at the upcoming G20 Summit in Indonesia—a country in a region that has experienced the impact of fragile food resilience.


We believe the solutions to this challenge lie in innovative technologies, circular economies, and sustainable agriculture, which also represent attractive investment opportunities.


In the short term, a key factor negatively affecting food security is high energy prices, which are translating into higher production costs in areas like chemicals, fertilizer, and animal feeds. While there is relatively little that investors can do to lower the pass-through of higher input prices and the cost of capital in the short term, we do not expect this to completely derail longer-term investments in areas that drive input use efficiencies. These include areas such as seed science, automation, and regenerative agriculture practices, which can help directly address current challenges while tapping into a growing market for sustainable solutions in areas like biodiversity and carbon.


In the longer term, geopolitics, climate change, and population growth will continue to be challenges for countries faced with food security issues. The increasing frequency and severity of weather events like droughts, hurricanes, and floods are likely to impact agricultural output. For example, recent floods in Pakistan attributed to the triple-barrel La Niña, an event occurring for only the second time since 1950, have put crop supplies at risk. According to the UN FAO, an increasing global population likely requires the production of around 70% more calories by 2050.


So, longer-term investments that increase crop resilience and agricultural yield and scale green technologies are well-positioned to address the negative impacts of climate change. In addition, investing across the value chain can promote outcomes associated with a circular economy, which can address issues linked to packaging, distribution, and food waste (estimated at over 30% from harvest to consumer by UN FAO and UNEP).


Investor takeaways:


  • We expect the era of security, which includes both food and energy security, to continue to generate attractive longer-term opportunities along the supply chain. We like investments across key SI themes such as "Agricultural yield", "Circular economy", and "Clean air and carbon reduction."
  • We also favor companies within the food and agriculture sector which actively address supply chain risk and are transparent on key issues such as human rights and fair employment. These material considerations should be incorporated into broader ESG leader strategies.
  • Food and agriculture companies remain critical in solving food security challenges globally. As such, we believe ESG improver and engagement strategies are key to addressing critical issues within leading players rather than outright divestment.

Main contributors - Amantia Muhedini, Antonia Sariyska


Content is a product of the Chief Investment Office (CIO).


Original report - Sustainable Investing Perspectives: Drought and your phone, forced labor, and food security, 11 October 2022