Investing to Address Global Food Insecurity

Grain blockades and the Russia-Ukraine conflict made worldwide food insecurity one of the most urgent issues on the agenda at this year’s World Economic Forum in Davos. This crisis cannot be resolved overnight: with climate change threatening agricultural yields, the need for a more sustainable and resilient global food system should be on every investor’s menu.

Speaking at the World Economic Forum’s annual meeting in Davos, David Beasley, Executive Director of the World Food Programme (WFP), had a dire warning for the global food supply. As a result of the ongoing conflict in Ukraine, he predicted massive food processing problems in the next 10 to 12 months, leading to hunger, starvation and a worldwide food availability problem.[1]

BNP Paribas Wealth Management previously flagged food security as a major theme for 2022, and the comments from the head of the WFP make it clear that this will be a multi-year trend.[2] Indeed, improving global food supply is already the target of UN Sustainable Development Goal 2, which aims to end hunger, improve nutrition and promote sustainable agriculture. Yet hunger affected over 720 million people in 2020, according to UN data, and climate change is adding to the problem.[3] By 2050, the effects of climate change could displace as many as 216 million people, the World Bank estimates.[4]

To solve the food crisis requires massive investment: the Food and Agriculture Organization (FAO) and the University of Bonn’s Center for Development Research (ZEF) estimate that eliminating hunger by 2030 requires a total annual investment of US$39 to US$50 billion.[5]

Sustainable choices

Securing global access to food will take time, money, and new technology – and individual investments can help make a difference.

For most investors, funds offer the most accessible and cost-effective route to direct capital toward positive uses. Many ESG-themed investments include companies in the food and agriculture sector, but there are also more focused options, such as exchange-traded funds (ETFs) linked to AgTech and food innovation companies whose growth and effectiveness require fresh capital.

Providing growth capital for promising start-ups offers investors a closer involvement with companies developing innovative products and services. Although direct investment can be challenging for investors who value liquidity, the Private Equity (PE) industry offers a growing range of food and agriculture-focused funds that see sustainability as a source of value creation. These take the guesswork out of finding relevant funding recipients, spread the risk, and shoulder all management tasks on behalf of investors.

Irrespective of the format, investors who would like to make a difference can look into funds that invest in solutions to combat malnutrition, via more effective water irrigation, fertilisers and technologies to boost crop yields, better food transport to avoid waste on the road to market and to the consumer, and companies that combat food waste.

The personal touch

To complement impact investing, individuals can make a difference in their daily lives – starting with their diet. Meat and dairy production occupies 30% of our planet’s land surface, and 70% of all agricultural land – as well as accounting for 8% of the water humans use.[6]  Switching to plant-based foods or reducing the amount of meat in diets has been shown to benefit health as well as favouring more environmentally friendly production methods.

Ensuring home waste is recycled as much as possible can also garner benefits. Globally, as much as 40% of food produced goes to waste, generating 10% of greenhouse gas emissions.[7]

Philanthropy also offers ways for individuals to make a lasting impact. Many non-profits and social enterprises offer hands-on opportunities for engagement – from helping to redistribute food to learning how to compost – and organisations such as food banks rely heavily on individual donors. For those too time-poor to volunteer, many of these organisations accept donations and run sponsorship events. In Singapore alone, several organisations welcome contributions: not-for-profit Food from the Heart has been running since 2003.[8] By the end of 2020, it had attracted more than 10,000 volunteers and reached an estimated 53,700 beneficiaries in Singapore.

Individuals can also help to drive systemic change by spreading the word about the benefits of a more sustainable lifestyle. Singapore’s efforts in this area illustrate the importance of building broad support for this shift in mindset. The 30 by 30 initiative, which aims to produce 30% of the city’s nutritional needs locally by 2030, brings together the public and private sector and is reinforced by school and public education programmes.[9]

The topic of food security will remain relevant for investors long after grain blockades and export bans are lifted – but the ways in which individuals can help are increasing, from simple measures at home to significant donations or investments. As economies rebuild after the pandemic, we can help to ensure that fewer people go hungry in the future.