Global demand for food has continued to grow. However, there are limits to the availability of arable land, soil and freshwater. This means agriculture is set to remain a vital and resilient sector, while requiring innovation and investment to ensure its long-term productivity as well as reliable production.
Technological progress can help produce significant gains in efficiency, but it cannot fully overcome issues such as water scarcity, extreme weather, and soil degradation. Despite such constraints, we believe substantial investments can be made in areas including resource efficiency and restoring ecosystems.
Farmland – a compelling opportunity
We see a compelling opportunity for investors seeking to align financial returns and environmental and social benefits. Farmland can play a significant role in portfolios, Europe’s farmland in particular. It offers stability and growth potential, especially when food and environmental security are concerns.
European farmland can provide:
- Attractive long-term risk-adjusted returns
- Relatively stable annual income yields
- Diversification benefits due to its low correlation with other asset classes
- Inflation-hedging properties.
A tangible contribution
Sustainably managed farmland offers a tangible way for investors to act on climate change adaptation and mitigation and meets UN Sustainable Development Goals. This approach aims to foster resilient ecosystems, protect wildlife habitats and maintain biodiversity, aligning with investor demand for environmental stewardship.
By integrating farmland into their allocations, (institutional) investors can enjoy the benefits of diversification, steady income, and capital appreciation. Amid inflationary pressures and climate challenges, we believe farmland stands out as a real asset, promising not only actual harvests, but also robust returns and portfolio resilience.
Finally, with the current and upcoming generational turnover in farm ownership in Europe, we believe private capital will be key and there will be opportunities to invest in and consolidate parcels of land that come to market, bringing efficiencies of scale and improved oversight of issues such as long-term soil health and biodiversity protection.
Also read our full paper Securing tomorrow’s harvest: European farmland as a strategic sustainable investment.
