World Food Day 2023 draws attention to investment in sustainable agriculture
World Food Day, observed annually on 16th October, serves as a poignant reminder of the global challenges surrounding food security and nutrition.
While traditionally associated with humanitarian efforts and government policies, the importance of World Food Day has also grown significantly for institutional investors. This global observance sheds light on the intricate relationship between food security, sustainable investing and long-term financial success, making it a critical consideration for institutional investors.
Risk mitigation
Food security risks have a profound impact on economies and financial markets. Extreme weather events such as droughts, floods and storms, driven by climate change, can disrupt food production and supply chains leading to price volatility and market instability. Institutional investors have a fiduciary duty to protect their portfolios from such risks[1]. By recognising World Food Day they can better assess and address food-related risks in their investment strategies, including exposure to agricultural commodities, food companies and supply chain vulnerabilities.
Sustainable investing
Institutional investors increasingly embrace sustainable investment strategies focusing on environmental, social and governance (ESG) factors. Food security directly intersects with these ESG considerations. Investments in companies that promote sustainable agricultural practices, reduce food waste and improve nutrition align with ESG goals and can enhance a portfolio’s long-term performance. By acknowledging World Food Day institutional investors can integrate food security as a core component of their ESG analysis and investment decisions.
Long-term value creation
Food security is not just a short-term concern; it is a fundamental challenge that will persist for generations. Institutional investors with a long-term horizon recognise that addressing food security issues today is essential for future value creation[2]. By supporting initiatives on World Food Day, such as sustainable agriculture projects, they contribute to the stability of the global food system, which, in turn, can create more favourable conditions for economic growth and investment returns in the years to come.
Responsible investing
Institutional investors are under increasing pressure from stakeholders, including clients and regulators, to adopt responsible investment practices. World Food Day provides an opportunity to demonstrate a commitment to responsible investing by addressing the global food crisis. This includes considering the ethical implications of investments in industries that contribute to food insecurity such as agribusinesses involved in land grabbing or unsustainable farming practices.
Global market opportunities
As the world grapples with food security challenges there are also substantial investment opportunities. Innovative technologies, such as precision agriculture and alternative protein sources, are emerging to address food production and sustainability concerns. Institutional investors can seize these opportunities by allocating capital to companies and projects that offer solutions to food security issues, thereby generating financial returns while contributing to a more sustainable and secure food future.
Diversification
Institutional investors seeking to diversify their portfolios recognise the value of non-traditional assets[3]. Agriculture and related sectors, including agtech and sustainable food production, offer diversification benefits[4]. World Food Day serves as a reminder of the importance of including these asset classes in a diversified investment strategy as they can provide resilience in times of economic uncertainty and market turbulence.
In conclusion, World Food Day is not solely a humanitarian event; it holds substantial significance for institutional investors.
Recognising the importance of food security aligns with their responsibilities to manage risks, pursue sustainable investing, create long-term value and adhere to responsible investment principles.
By integrating food security considerations into their investment strategies, institutional investors can contribute to a more sustainable and prosperous future while also enhancing the resilience and performance of their portfolios.
[1] What is fiduciary duty? | PRI (unpri.org)
[2] Comment: Why investing in food security is investing in the future | Reuters
[3] Alternatives in modern portfolios – Institutional | BlackRock
[4] Why investors should consider sustainable agriculture and food production – BNPP AM Luxembourg professional investor (bnpparibas-am.com)