How to Profit from the Global Shift Toward Environmentally Friendly Food Systems

Protecting the world in which we live is of absolute importance. Indeed, natural historian and national treasure Sir David Attenborough put it perfectly when he said:

“The truth is: the natural world is changing. And we are totally dependent on that world. It provides our food, water, and air. It is the most precious thing we have, and we need to defend it.”[1]

Modern scientific research has made it impossible to ignore the colossal impact of our lifestyles on our surrounding environments.

As a society, we are responding in earnest in many ways.

Recycling is now commonplace, more of us are cutting down our fossil fuel use, and many firms have committed to sustainable practices to reduce their environmental footprint.

Today, we are also starting to become increasingly mindful of the food we eat, moving towards more sustainable products and agricultural techniques.

With momentum now growing, this shift stands to become the single-most effective way in which we can restore balance to the natural world.

And, because of this, it is also opening a once-in-a-lifetime investment opportunity.

We all know that food is important.

What we are perhaps less aware of, however, is how the food we consume impacts the world’s resources.

The bottom line is food systems as they stand are unsustainable.

Did you know, for example, that food currently accounts for more than a quarter of global manmade greenhouse gas emissions, driven primarily by farming and deforestation?[2]

What about the fact that 78% of global ocean and freshwater eutrophication (the pollution of waterways) is caused by agriculture?[3]

It is not just the way we produce food, either – it is also the actual food itself.

Take beef for example, a regular staple of many Western diets globally.

Beef requires 20 times more land and emits 20 times more greenhouse gases per gram of protein than common plant-based proteins.[4]

Shockingly, one kilogram of beef requires an average of 15,415 litres of water in its production![5]

 

Consumer-driven shift

It is clear that food lies at the very heart of tackling climate change, water scarcity, pollution, and the loss of our forests and our precious biodiversity.

Especially, with rapid global population growth meaning that the environmental impact of our unsustainable food system will only worsen if left unchecked.

The good news is that we are now seeing change.

And most importantly, it is spearheaded by consumers themselves.

The coronavirus crisis has made us rethink our food purchasing habits. For example, a May 2020 survey by France’s OpinionWay found that around four in every five French consumer intended to purchase more environmentally friendly food products after COVID.[6]

The economies of this move towards new sustainable consumption patterns are impressive.

Take the shift away from meat into plant-based alternatives. One forecast by Statista predicts that the latter market could be worth as much as US$31 billion by 2026, up from just US$10 billion in 2018.[7]

That is just near-term forecasts, too. With the number of vegans in the UK alone quadrupling since 2014, it seems a confident bet that this market’s global long-term growth will be even more exciting.[8]

This scale of growth is on offer across the entire food system.

So, it is no surprise that we are seeing more and more companies coming to market with innovative, environmentally friendly solutions at every stage.

After all, it gives them the best chance of snapping up ground floor share in markets set to soar in value as the global move towards sustainable food continues.

The long-term returns on offer for the highest quality stocks has the potential to be exponential.

This is why we have created our Rize Sustainable Future of Food UCITS ETF.

All-encompassing approach

Alongside Tematica Research, we have created a proprietary classification system for the Sustainable Future of Food Investment Theme.

First, we categorise firms into nine key sub-sectors that cover the whole of the supply chain needed to build a more sustainable and equitable food system.

We then scan firms for critical sustainable criteria, removing those who do not tick all boxes. This includes factors such as exposure to cattle and other land-reared meats, GMO seeds, unsustainable packaging options, and a focus on companies with bio-based stimulants and crop-protection products.

We also consider Carbon Disclosure Project (CDP) scores of companies across Cattle, Soybeans, Timber and Palm Oil – the four most damaging Forest Risk Commodities.

Rize ETF are one of CDP’s “Forest Champions” as a result.

What’s left is a product that provides exposure to dozens of companies that are positioned to ride the tailwinds of the Sustainable Future of Food investment theme.

So, our clients will have exposure to firms developing precision farming techniques that increase the quantity and quality of crops produced on the same amount of land, improve efficiencies in the use of input resources (such as crop protection products, fertilisers, water, and fuel) and reduce the environmental footprint of agriculture.

They will have exposure to companies creating logistics and processing technologies throughout the food value chain to reduce the amount of food wasted and thus helping to reduce food prices and carbon emissions. According to the UN Food and Agricultural Organisation, over a third of all food produced globally is wasted.[9]

And they will have exposure to companies addressing the plastic crisis by creating food packaging options that are both sustainable and either reusable, recyclable, or compostable such as fibre-based options and solutions derived from recycled organic matter.

The themes go on, but the bottom line is that there are many different types of firms at the vanguard of the battle to protect our environment by altering the ways in which we produce and consume foods.

Our Rize Sustainable Future of Food UCITS ETF offers investors a chance to support those companies in a single trade.

 

Related ETF

FOOD: Rize Sustainable Future of Food UCITS ETF

 

References:

[1] World Wide Fund for Nature, “10 best nature quotes from Sir David Attenborough”, May 2020. Available at: https://www.wwf.org.au/news/blogs/10-best-nature-quotes-from-sir-david-attenborough#gs.vkbqkx

[2] Science Direct, “Agricultural and forestry trade drives large share of tropical deforestation emissions”, May 2019. Available at: https://www.sciencedirect.com/science/article/pii/S0959378018314365

[3] Our World In Data, “Environmental impacts of food production”, January 2020. Available at: https://ourworldindata.org/environmental-impacts-of-food

[4] World Resources Institute, “6 Pressing Questions About Beef and Climate Change, Answered”, April 2019. Available at: https://www.wri.org/blog/2019/04/6-pressing-questions-about-beef-and-climate-change-answered

[5] The Guardian, “How much water is needed to produce food and how much do we waste?”, 2021. Available at: https://www.theguardian.com/news/datablog/2013/jan/10/how-much-water-food-production-waste

[6] OpinionWay, “Do you intend to purchase more environmentally friendly food products after the lockdown?”, April 2020. Available at: https://www.opinion-way.com/en/opinion-political-surveys/published-surveys/opinionway-pour-max-havelaar-les-francais-et-la-consommation-de-produits-alimentaires-avril-2020/viewdocument/2297.html

[7] Business Times, “The future of food hangs on Asian innovation”, February 2020. Available at: https://www.businesstimes.com.sg/opinion/the-future-of-food-hangs-on-asian-innovation

[8] Food Manufacture, “Top 10 food trends for 2020”, February 2020. Available at: https://www.foodmanufacture.co.uk/Article/2020/02/13/Top-10-food-trends-for-2020

[9] United Nations News, “UN report: one-third of world’s food wasted annually, at great economic, environmental cost”, September 2013. Available at: https://news.un.org/en/story/2013/09/448652