After the US government published its National Strategy on Food, Nutrition and Health and its Global Food Security Strategy 2022-2026 last week, seeking to solve problems relating to food and nutrition, Franklin Templeton outlines why food and agriculture should matter to investors.
The war in Ukraine, pandemic-related supply chain problems, environmental concerns and food insecurity have forced governments and industries to rethink food and agriculture.
At a recent webinar, experts at Franklin Templeton and Unilever highlighted the need to move towards short, local supply chains, regenerative agriculture and the importance of private capital to achieve sustainable systems.
“Feeding a growing population amidst global challenges requires innovation in food and agriculture techniques,” Stephen Dover, chief market strategist and head of the Franklin Templeton Institute, said.
“This requires rethinking all the paradigms and investing in solutions that boost productivity and reduce the impact on the planet,” he continued.
Highlighting the importance of vertical farming, Marc Oshima, co-founder and chief marketing officer at Aerofarms said: “We are a pioneer in indoor vertical farming, enabling local production where the people are.”
“Innovation is at the heart of what we do. Essentially, it’s how to do more with less. We grow all year round, produce more and use up to 95 per cent less water with no pesticides, which impacts 12 of the UN Sustainable Development Goals,” he said.
Food security, supply and development are hot issues at a time when the Russian invasion of Ukraine – a country that produces a large amount of the world's tradable wheat, for example – has thrown these concerns into the limelight. Disruptions wrought by Covid-19 and deteriorating trade relations between the US and China have also added to costs.
Short supply chains
Patrick Vizzone, managing director and head of agri-food at Franklin Templeton Global Private Equity, emphasised how supply chains have come to the fore. “With the conflict in Ukraine, geopolitical tensions and rising energy costs, we’re seeing a rewiring of trade flows, with shorter, localised less risky, supply chains that are not purely built due to cost,” he said.
“Social issues, which are not as well understood as environmental issues, are also coming to the fore. There is a rising social conscious, with consumers factoring social factors into their decisions,” he added.
This was echoed by Hanneke Faber, president of nutrition at Unilever. “Food production is challenged by climate change. We are focused on getting resilient supply chains,” she said.
“Localising ingredients near the consumer is really important. Africa is a good example. We increased localisation there and we are doing this around the world. It makes supply chains stronger, and it's good for local communities and often cheaper,” she explained.
“We are also promoting regenerative agriculture. We are focused on agriculture practices that improve soil health, biodiversity, reduce emissions and water input to create resilience in the supply chain and support the planet,” she said.
“We are funding the transition with farmers around the world toward regenerative agriculture and have committed ourselves towards more plant-based nutrition, less food waste and positive nutrition,” she added.
Vizzone also highlighted how the war in Ukraine has impacted the grain market, but he explained that food inflation had already started in 2016. “A big reason for that is climate change and under-investment in the agriculture food supply chains. There are underlying issues and the need for adaptation is a longer-term issue,” he stressed.