To meet the needs of a growing global population, food production will need to increase by 70 percent by 2050. Yet current methods of food production, distribution and consumption are unsustainable. The food system accounts for almost one-third of anthropogenic greenhouse gas emissions, 50 percent of the U.S. land use and 80 percent of freshwater use. Business opportunities related to shifting the food system to a more sustainable development pathway could be worth over $2.3T annually for the private sector by 2030 with the investment required to achieve these opportunities at approximately $320B per year.
Through interviews and input from over 25 industry experts in the food and agriculture space, we found that consumers are demanding more sustainable land management practices, better efficiency and greater transparency around the food they are buying. And they are driving dramatic change toward more sustainable food systems. New business models in sustainable land management, aquaculture, alternative proteins and cold-chain technologies are poised to generate substantial financial returns while acting as catalysts of change addressing social or environmental problems within the food system.
Investment in sustainable food systems can produce substantial environmental outcomes, improving soil health, reducing inputs and energy usage and conserving water. Similarly, sustainable production methods can improve nutrition and reduce health risks. Environmental health is one of the social drivers of sustainable food systems.
We identify farmland as a noteworthy investment opportunity, with farmland investors targeting a 9-15 percent internal rate of return (IRR). Investments in sustainable or regenerative farmland also generate environmental, health and social outcomes such as improving soil health and biodiversity, decreasing pesticide usage and water run-off, reducing carbon emissions, creating jobs, developing rural economies and improving access to nutritious foods.
Similarly, business models reducing energy and inputs throughout the supply chain are strong investment opportunities driven by consumer awareness and demand. Investors can capture the value of current food systems inefficiencies by investing in innovative business models and disruptive technologies throughout the value chain from pre-farm inputs to distribution and retail.
Consumer preferences towards local and sustainable foods are rising, and so are attractive investment opportunities to create regional food hubs. Our research identifies business models that support regional food system infrastructure and merit strong consideration from patient investors with preferences for high impact outcomes. Benefits of regional food systems investments include supporting the local economy, farmland preservation and viability, providing humane treatment and animal welfare, expanding community access to fresh food and demonstrating environmental stewardship.
Through this research, we also identify different risks affecting food and agriculture investments. Regulatory, climate, certification and other risks are analyzed to provide investors with a clearer understanding of risk identification and mitigation.
Similarly, this report provides an analysis of impact measurement tools and frameworks to help investors align their measurement techniques with their impact goals and outcomes. Through the interview process we consulted industry experts across asset classes to develop a list of recommendations for creating viable investments in sustainable food systems.
Despite the many challenges facing the food and agriculture space, targeted investment in sustainable food systems can create measurable social and environmental impact outcomes, ranging from improved economic positions of farmers and regenerated ecosystems to better health outcomes for the US consumers, as well as impressive risk-adjusted returns. Consumers are increasingly demanding more sustainable methods of food production, distribution and consumption, and the time is ripe for impact investors to drive more capital towards sustainable food system investments.