The global food system faces a trilemma of geopolitical risks, climate change and rising production costs. Finding solutions opens up an array of enduring investment themes.
Many people hope that the high food prices caused by the pandemic’s dislocation of supply chains and the war in Ukraine will somehow ‘return to normal’. Yet our research indicates that elevated levels of inflation will be an enduring feature of the global food system.
Global food prices are on the rise due to geopolitical tensions, higher production costs and changes in consumer preferences. More fundamentally, the heat stress, flooding and higher sea temperatures that accompany climate change will pose increasing risks to the food system. Some risks may not be foreseeable because of the sheer complexity and interconnectedness of the global food system.
In response, the global food system is in a state of transition and innovation. Finding solutions that address supply pressures, changes in consumer preferences and the challenges of climate change opens up an array of investment sub-themes, that we expect to endure for many years to come. These include:
Agtech: precision agriculture, powered by artificial intelligence (AI) and robotics, has the potential to enhance crop yields and minimise resource use. Drought-resistant seed technologies will become increasingly important as climate change affects agricultural landscapes.
Alternative proteins: plant-based meat analogues and lab-grown meat may become increasingly important as we decarbonise our food system, which is currently a major contributor to C02 emissions.
Sustainable food production: more sustainable farming practices such as using lower-carbon fertilisers and vertical farming may help food security and resilience against climate change.
Waste not, want not: technologies and solutions that reduce food waste along the supply chain, from farm to table, have the potential to reduce energy and carbon inputs while increasing food security.
Changing dietary habits: Consumer food preferences are changing multiple ways across the world, from higher demand for animal proteins in developing economies, to online food purchases, weight-loss drugs and a focus on healthier lifestyles.
Safety and traceability: blockchain technology could improve the traceability and safety of food products.
The production, transport and consumption of food is complex, touching on multiple aspects of the natural environment and human society, but it presents numerous investment opportunities. By aligning financial goals with the broader goals of food security and environmental sustainability, investors can play a vital role in shaping a more secure and equitable future for all.
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