Business as usual not Good Enough for Sustainable Agriculture


An independent group of highly regarded scientists from across the globe have released a report on the need for practices to change on a local and global level if we want to adapt to climate change, population growth, and scarcity of resources. These highlight more reasons to look at thematic investment, particularly in Environmental or Agriculture funds.

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The report, entitled “Achieving food security in the face of climate change” focused on analysing existing evidence around sustainable agriculture to make policy recommendations. The summary report, headed by Professor Sir John Beddington, was published on November 16th, and the results will be presented in Durban on the 3rd of December which is Agriculture and Rural Development Day 2011.The main conclusions were that sustainable agriculture is currently not given enough importance in policy, and as an issue that faces both the developed and developing world, should be given that importance.

The problem of sustainable agriculture

Food related problems are present in both the developed and developing worlds. The statistics in the report highlight this effectively: 0.9 billion undernourished and 1.5 billion overweight. The issue is both with creating more sustainable and healthy food practices, while ensuring that crop production is efficient and that the people can meet their basic nutrition needs.

One of the main problems is with increased scarcity and also increased volatility, the report describes the 2007/8 food price spike, and the recent estimate of tens of millions of people falling into poverty due to higher food prices over the past year and a half. Those who have high dependency on agriculture for sustenance, such as 80% of Kenyans, face high levels of risk from this agricultural yield and price volatility. The report also notes that these people must be taken into consideration when making policy changes, as any short term fall in agricultural activity would affect them the most.

A main cause of these problems is agricultural inefficiency; the report highlights the wide gaps between action and potential yields and the high levels of greenhouse gas emission from inefficient practices. The report highlights the interlinking elements of climate change, water scarcity, changing demographics and others, which all act together to increase pressures on agricultural production. If we continue on as usual, then our agricultural practices will lead us to pass critical levels of being able to feed the population.

The solutions

A list of policy recommendations is given, including integrating food security and sustainable agriculture into policy, raising investment in the sector, ensure basic nutritional needs and reducing wastage. These evidence-based recommendations are explained more fully in the summary report, and a more detailed report is scheduled to be released.

It also emphasises the fight against climate change, and notes “without a global commitment to reducing greenhouse gas emissions… no amount of agricultural adaptation will be sufficient under the destabilized climate of the future”.

What this means for Environmental and Agriculture thematic investment

This report highlights the important role that agriculture will play in the future. Key investment themes include fertilisers, irrigation efficiency and other efficiency solutions, particularly if legislation may change to incentivise these practices. There are also opportunities for companies involved in adaptation to these changes, many of which are considered in Environmental investment funds.

Fund context:

The Worldwise Investor Agriculture theme has a wide range of funds, from actively managed thematic equity funds such as Pictet Agriculture, to passively managed commodity funds such as ETFS Agriculture. These offer different approaches to investment, and access to different sub-themes. Many of the Agriculture funds have holdings in fertiliser companies, such as PotashCorp and Mosaic which are invested in by funds such as Blackrock Global Funds World Agriculture and Baring Global Agriculture..

This theme can also be accessed through Environmental funds, for example Pictet Environmental Megatrends, which invests partly into Pictet Timber, and also in other themes such as Clean Energy and Water. These Environmental funds will be looking for companies who are set to benefit from the kinds of global changes highlighted in the report, such as water scarcity and population changes.

Related funds:

Baring Global Agriculture
BlackRock Global Funds World Agriculture
ETFS Agriculture
Pictet Agriculture
Pictet Environmental Megatrend Selection

Useful links:

Worldwise Investor: Paradigm Shift in Commodity Prices
Commission on Sustainable Agriculture and Climate Change: Home
The Royal Society: Science and the sustainable intensification of global agriculture

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Louise Fallonall articles

Louise Fallon starting working for Worldwise Investor as an intern over the summer and has written a number of articles during that time.

Louise is studying for a degree in Mathematics and Economics BSc at London School of Economics and Political Science, and graduates next summer.


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