How to Spot Opportunities in Sustainable Food and Agriculture

Jun 10, 2020 9:05 AM ET

by Michael Landymore, Impax Asset Management 

The food and agriculture sector is in the early stages of a far-reaching transition toward more sustainable food production and consumption. Growing environmental and resource pressures, changing consumer demands, technological innovation and ever-tightening regulatory interventions are disrupting depletive practices and unhealthy preferences. This transformation is creating fast-growing insurgent companies and changing the business models of incumbent firms, creating compelling investment opportunities for active investors.

The food and agriculture sector both causes, and is vulnerable to, environmental degradation. Pressures are intensifying as growing populations and rising living standards drive increased consumption of resource-intensive foods. But awareness is rising, and consumption patterns are changing rapidly as consumers shift toward flexitarian diets that involve more natural and sustainably produced foods.

Meat alternatives are being developed rapidly, with sales of plant-based meats projected to expand by 25% per year over the next decade. Similarly, for companies in the natural food space, the slowdown in the consumption of branded, processed food has had a significant impact. 

There is a global universe of companies that are helping to address the sustainability challenges of this sector — companies working to reduce costs by improving efficiency, lower environmental impacts, facilitate the provision of safe and nutritious food and promote animal welfare standards along the food value chain.

The natural foods category, including better-for-you snacks such as fruit and nut bars and seaweed crisps, is growing globally at a compounded annual rate of nine percent, gaining share from processed foods. In response, large branded food manufacturers are developing new products and investing in the reformulation of existing products, replacing artificial ingredients with natural ingredients and removing ingredients linked to harmful health effects, such as sugar, fat and salt. Investment prospects in this area abound. 

Read Michael's complete article where outlines Disruptions and the Opportunties here 


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