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Food – Feature ESG


Insects could one day be hailed as humanity’s savour. Yet crick- ets, grasshoppers, termites and beetles face competition from- meat grown in labs, processed vegetable proteins or pills to provide the nutrition that will sustain us in the decades to come. Such a radical change to our diet appears inevitable and it could pay for long-term investors to understand the head- winds facing the food industry. For starters, there will be many more mouths to feed. Indeed, our planet will have more than 11 billion citizens by the end of the century, the UN believes, up from almost 8 billion in 2019. More people mean a greater demand for freshwater, which you cannot grow crops without. Yet its supply is fixed and there are already shortages in some parts of the world. Global warming is another factor effecting food production.


“Climate change and the food chain are intricately linked,” says Yuko Takano, who manages the Sustainable Global Equity, Sustainable US Equity and Future Food strategies for Newton Investment Management. “The warmer it gets, the greater the impact on ecosystems and the less arable land there will be.” The food chain has been globalised so companies can offer consumers what they want to eat no matter the season. Food chains have, therefore, become dependent on regions where rising temperatures and water stress are affecting production. “Changing temperatures are having an impact on yields, which is a critical issue for farmers,” says Agne Rackauskaite of Impax Asset Management and co-portfolio manager of the BNP Paribas SMaRT Food fund.


When it comes to climate change, food is caught between a rock and a hard place, says Yasmine Svan, a senior investment analyst in Legal & General Investment Management’s (LGIM) stewardship team. “Food is a significant contributor to the problem but is also feeling the physical impacts of climate change sooner than other sectors.


“While in the short term, countries that are already food inse- cure are likely to be more negatively impacted, an unmitigated temperature rise longer term would be catastrophic for global food supply chains,” she adds. Yet climate change could have an upside in some areas. “The impact of temperature change is variable. It will be negative in some regions, but positive in others,” says Brian Kernohan, chief sustainability officer, private markets at Manulife Invest- ment Management and its Hancock Natural Resource Group subsidiary. “Warming trends may create more sunshine and less fog, which will impact the production of nuts, for example,” he adds. “Cooler temperatures in other areas could limit the win- dow for planting and harvesting row crops.” Stéphane Soussan, who manages the CPR Invest – Food For Generations fund at CPR AM, a subsidiary of Amundi, agrees that rising temperatures could have a positive impact on crops


Issue 102 | April 2021 | portfolio institutional | 27


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