A broad spectrum of innovative solutions is required to feed the world’s growing population while reducing the environmental impact of farming. This second of a two-part digest [1] of a new paper by Impax Asset Management looks at solutions that offer investors exposure to companies developing products that meet consumer demand for healthier, more sustainably produced food.
The case for investing in food
Population growth and rising incomes have been lifting demand for food while resource-intensive, animal-based food production leads to adverse environmental impacts.
Access to nutritious, safe or sufficient food is under pressure – especially in less developed economies – from high fertiliser prices, conflict, and extreme weather events.
The promotion of healthier processed foods, alongside fruit and vegetables, is seen as essential to diets becoming more sustainable.
We believe more productive practices can play a key role in feeding the world sustainably. That includes tackling (the cost of) waste and losses across food production and making improvements in processing, retailing, storage and transport. Reinforcing supply chains against extreme weather, disruptions and conflict will help improve food security.
Consumer preferences and tighter regulation
We see two overarching trends that support the shift to a more sustainable food production system:
- Consumer preferences
- Government regulation
Increasingly health-conscious consumers are opting for food products that support their physical and mental wellness. Consultancy McKinsey & Company predicts the global wellness market will continue to grow at between 5% and 10% a year.
Consumers – particularly younger ones – are increasingly environmentally conscious in their food choices.
Governments seek to promote healthier food choices through regulation, and there are several national initiatives to address food waste and loss.
Investment opportunities across the food value chain
Companies that help meet rising demand for safe, nutritious food while lowering the industry’s environmental footprint come from many sectors.
- Food safety
Advanced laboratory testing can identify contaminants, pathogens, and the origin of produce with growing accuracy.
- Sustainable packaging
Companies that supply reusable pallets and recycled or recyclable paper-based packaging advance the circular use of materials. Emerging solutions include packaging made from microbial, degradable polymers and plants such as seaweed.
- Distribution
More efficient distribution can help reduce greenhouse gas (GHG) emissions and improve access to food.
- Natural, low environmental impact ingredients
Natural food colourings are considered less harmful than synthetic food dyes. Fermentation and the use of enzymes can help ensure food products stay fresh for longer.
- Innovative processed foods
Innovations in plant-based alternatives to animal proteins provide substitutes for resource-intensive meat products. One company’s plant-based burger requires 99% less water and 93% less land to produce than beef alternatives.
- Healthcare solutions to diet-based illness
Devices that help people monitor and manage their blood sugar levels can deliver day-to-day health benefits and cut the cost of treatment by reducing hospital visits. Anti-obesity drugs can lead to a permanent change in eating habits, reduce the incidence of diabetes and lower blood pressure.
A tailwind – Growing demand
Meeting the rising demand for nutritious food will require significant investment, which should be a tailwind for companies ranging from food producers that embrace more sustainable practices to suppliers of innovative technologies to the food industry.
This is an abbreviated version of an article that was previously published by Impax Asset Management.
References
[1] Also read Food for thought – Making farming sustainable offers many investment opportunities
