We’ve been contemplating launching an impact fund at AgFunder for a while now. With a background in environmental law, sustainability and impact investment, I’m acutely aware of the potential for technology to have a material positive impact on our environment and the lives of those operating within our fragmented food system. Not just emerging market smallholder farmers, but every person and business participating in the production, processing, and distribution of food globally.
The need to revolutionize our food system is becoming critical. The problems are manifold and acute. From the significant production challenges presented by climate change, to the effects of over-farming and the degradation of soils from the overuse of fertilisers, to the continuing widespread deforestation that’s compensating for declining land productivity.
And that’s just at the top of the food system.
Start looking at our opaque and inefficient supply chains, the impact of changing consumer demands, and the stresses imposed by rising population growth, and you begin to get a sense of how urgent this is.
Asia, for example, will be home to more than half of the world’s population by 2030 with an annual food spend likely to reach $8 trillion. But only one-quarter of Asia’s land-mass is arable land. And that limited land is mostly farmed by 450 million smallholder farmers, many of whom have faced famine after food supplies were interrupted by Covid-19-related lockdowns and closed borders, limiting the movement of workers. Furthermore, Asian agriculture is becoming increasingly susceptible to devastating storm events, drought and pests.
The Covid-19 pandemic has been the most recent and by far the most serious of an increasing trend of zoonotic diseases emerging from Asia over the past two decades. Fanciful conspiracy theories aside, a clear link has been drawn between the way we farm and interact with the animals we eat, and the rise and increasing frequency of diseases like Covid-19.
Developed markets are also suffering. At any given time, a part of Australia is suffering severe drought. The climate change-induced bushfires seen during the 2019-2020 season have badly impacted agricultural production in the country. The US and the European Union are predicting significant productivity losses as a result of water scarcity in key commodity crops over the coming decades as a result of climate-induced environmental changes. Across South America, governments are battling deforestation and an increase in degraded land.
We waste a full third of the food we produce, our wild fisheries have almost tapped out and our oceans are choking on plastic.
But the tide is turning.
Institutional investors are increasingly adopting sustainability as a key performance indicator for their portfolio companies; they see the application of ESG (environmental, social, and governance) principles as a key driver of operational efficiency, sustainability, and resiliency. Blackrock CEO Larry Fink made this clear in his open letter to CEOs stating that “climate change has become a defining factor in companies’ long-term prospects” that could “fundamentally reshape finance.”
“Evidence on climate risk is compelling investors to reassess core assumptions about modern finance,” he added.
Consumers are major drivers too as they increasingly align with brands that make sustainability and social impact a core tenet of their business philosophy.
Investing with an ESG lens is no longer a trade-off against positive returns. Incorporating environmental, social and governance considerations into investment decisions seems intuitively prudent and responsible. And so it is proving. A recent report by Morningstar found that almost 60% of sustainable funds have delivered higher returns than equivalent conventional funds over the past decade.
To this end, we are launching the GROW Impact Fund, our first fund that is focused entirely on technologies that will help deliver meaningful environmental and social impact across the food system. Every investment made by the GROW Impact Fund will be evaluated by reference to ESG principles and the potential for the technology to assist in the achievement of material, measurable and desirable environmental and social impact outcomes. Like the fund, each portfolio startup will be required to adopt an ESG policy to ensure the early integration of these principles and imbue them into company culture. We will evaluate and report to our investors on the performance of every portfolio company against specific Sustainable Development Goals.
Technology will play a key role in reducing poverty, driving supply chain resilience, and creating a socially inclusive, gender-equitable, and sustainable food production system.
To learn more about investing with us, please join one of our webinars next Thursday, August 6th.
Europe/Africa/Asia: 9am London, 10am Paris, 11am Nairobi, 4pm Singapore – sign up here.
Americas: 4pm Pacific, 7pm Eastern – sign up here.
Learn more about the GROW Impact Fund here.