Resource efficiency and food security remain important concerns. Switzerland's Union Bancaire Privée discusses the rationale behind the UBAM Biodiversity Restoration Fund and the importance of precision agriculture.

A scorching summer and disrupted supply chains continue to force a re-think about how agriculture adapts. There are also investment opportunities for getting on top of the changes taking place.

With farmers facing increasing challenges, Adrien Cambonie, portfolio manager of Union Bancaire Privée (UBP) Biodiversity Restoration Fund, says he is investing in precision agriculture, to produce more through using fewer resources.

The fund, which is a global equity strategy designed to invest in companies protecting and restoring natural ecosystems, is covered by article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR).

In an interview, Cambonie told this news service that the fund focuses on nature and protecting and restoring biodiversity. “It has indirect exposure to tackling climate change, while agriculture plays a big role in the portfolio,” he said. “The main areas include the circular economy, waste management, green infrastructure, forestry, agriculture and everything linked to water.”

Interest in regenerative agriculture and related types of food/resource production continue to capture attention against a background of concern about the loss of species, impact on soil from erosion, concerns about the use of human-made chemicals on the land, and other issues. This publication has looked at the area before, for example here, and here. As AI and nature-based investing impact equity investing, other investment managers are stepping up investment in food and farmland. 

Estimates of how large the regenerative farming sector vary, depending on definitions and the source of data. For example, a report from Grand View Research in 2023 said the the global market size is expected to reach $2.9 billion by 2030, equating to a compound annual growth rate of 15.7 per cent from 2023 to 2030. Some reports seen by this news service put the market size significantly higher.

Fund holdings
The fund’s holdings include Sumitomo Forestry, West Fraser Timber, as well as global water tech firms Xylem, Waste Connections and Veolia Environment, a French water and waste management firm.

“Agriculture is a key point of the strategy as it is needed to solve food security. It is one of the few areas that sits at the intersection of climate change, nature and food supply,” Cambonie said. “We manage listed equity funds. The most obvious area is precision agriculture to enable farmers to cut the use of fuel and inputs like pesticides and herbicides. It enables farmers to reduce pesticide use by about 20 to 40 per cent and have a good yield. It’s also important in ensuring weed control, enabling farmers to cut herbicide use by about 60 to 80 per cent and eliminate 98 per cent of weeds on the field...We also invest in precision irrigation, allowing 40 per cent in water savings.”

A top holding for Cambonie is US-based agriculture machinery producer John Deere which has introduced two new technologies: ExacShot and an electric excavator. ExactShot, which uses a sensor to register when each individual seed is planted into the soil, allows farmers to reduce the amount of starter fertiliser needed during planting by more than 60 per cent. The electric excavator, powered by a Kreisel battery, reduces jobsite noise, enhances machine reliability, and produces zero emissions. The see-and-spray system cut herbicide use by nearly 60 per cent across one million acres in 2024.

AGCO and Trimble also offer precision agriculture technologies which support more accurate application of inputs. Precision agriculture adoption is expected to accelerate in the future.

Regenerative agriculture extends the same logic. The fund's holdings include Ahold, Sprouts Farmers Market, Darling Ingredients and Vital Farms.

Cambonie said that precision agriculture results not only in environmental benefits but also cost savings for the farmer. “Of course, it comes with a significant investment,” he said. “The agriculture sector in the last three years has experienced a slow down. When Russia invaded Ukraine, agricultural commodity prices sky rocketed and farmers' incomes rose. They could invest in precision agriculture and reduce their costs. There was a peak in 2022 and since then there has been a bit of a slow down, partly as agricultural commodity prices normalised and now they are coming back up.”

“The Middle East conflict also increased the cost of fuels and fertilisers, adding to the down cycle for commodities. It has been a tough patch for farmers for the past six months,” he continued. “In the last month, we have also seen the consequences of the heat wave where agriculture was hit again. It has been very warm and yields have been a lot lower. Crop prices were high to compensate for the lower yields. Also there has been less animal feed due to the high temperatures and less crops. Animals have been less productive.”

“Even with regenerative agriculture, there would have been as many losses with global warming,” he continued. “It’s the adaptation measures. The heat waves will impact crop yields and could impact energy production.”

“Solutions like vertical farming were more popular five years ago, where growing crops indoors ensured more resilient production and availability. Also they use hydroponic systems so it is very water efficient,” Cambonie said. “Vertical farming may be something to re-examine; only a handful of companies are on the market and it’s a tough space. A lot went bankrupt.”

“We used to be in invested vertical farming and we would love to still be in it,” he said. “But a lot of those companies are still not making profits and face heavy investments which is not easy in a high interest rate environment. It has been an unfavourable environment for them since 2022. I wish we were invested in them and that there were better opportunities.”