For too long, the alliance between sustainable agriculture advocates and Wall Street has been as thin as a single stalk of wheat on a cool autumn day.
But now, the relationship between people, planet and profits is growing genuine roots, as altruism and capitalism are learning to co-exist on farms and in agricultural research laboratories – just when the world’s poor need it most.
Opportunities to invest in domestic sustainable food and agriculture have grown dramatically in the last decade, states a new study; “Promoting Sustainable Food Systems Through Impact Investing”, by Elena Pons and Maud-Alison Long, of the Springcreek Foundation
“There now exists a vibrant ecosystem of investors, philanthropists, policy makers, food producers & processors, and advocacy groups, all in tireless pursuit of a solution,” the study adds. “At one time, our land abounded with flourishing agrarian communities. These were not without failure and strife, but the underlying structures and intentions were pure. Increasingly, though, human intelligence evolved these concepts of cultivation, nourishment and growth into the financial world, developing communities and tools to further our prosperity.
We’ll leave it to the academics and research scientists to figure out the best way to stretch scarce food resources to maximum availability across the globe (especially in impoverished nations.)
On the financial side of the equation, however, investors unfamiliar with the concept of sustainable agriculture may (and should) ask – “Is there room in my portfolio for sustainable food and agriculture stocks and funds?”
The short answer is ‘yes’ – and here are five reasons why.
1) A burgeoning demand for food
In the next three decades, Earth will add two billion people, and will need to hike agriculture production by 70%, states United Nations Food and Agriculture Organization. If it was oil, utility or water that needed to grow by 70%, investors would be swarming to stocks and funds in those sectors. The fact that’s not happening in the sustainable agriculture industry spells “opportunity” for opportunistic investors.
2) Huge investments from Uncle Sam
The U.S. Congressional Budget Office estimates that the U.S. government is about to spend $1 trillion or so on agricultural subsidies (both direct and indirect subsidies) over the next decade. That most recently manifested in the 2013 Farm Bill. That’s 56% higher than Congress spent on farm subsidies the last time it addressed the issue, with the 2008 Farm Bill. If you’re an investor who believes in ‘following the cash’, start kicking some tires on sustainable agricultural funds right now.
3) Institutional/capital funds on the rise
The seed money is increasingly available for startups looking to generate the next wave in sustainable foods. In 2013 alone, 26 new food and agriculture-only funding sources popped on the capital fund radar screen, and more are expected each year (the number doubled in 2014.) Take Food-Focused Angel Funds, which invests in early-stage U.S.-based food, beverage and food tech companies based in the U.S. Or how about the AgTech Innovation Fund, a $50 million venture capital fund that “wants to transform our food system by supporting technology innovation from field to plate.”
With these growing number of industry funding outlets, money is more readily available than ever for companies, new and current, to generate revolutionary breakthroughs in food technology in the next decade and more. (For a complete list of funds, check out this list.)
4) Industry funds, ETFs, poised for growth
Agriculture stocks, funds and other sector investment vehicles have lagged the market during the last year, but that’s primarily a factor of a slower global economy and resulting drop in interest rates that were made by global governments, but haven’t yielded fruit yet. That scenario is changing, as economies like the U.S., Russia, and China are seeing increased demand for goods, services, and new food generating technologies. Aim for exchange-traded funds (which offer low points of entry, low fees, and the ability to invest in a dozen or two sustainable food and agricultural stocks at once.) For investment funds that really pass the durability test, target ETFs that have net assets of more than $100 million, an expense ratio south of 1%, and an average daily trading volume of at least 10,000 on a recent historical basis. Powershares DB Agriculture (DBA) and Elements Rogers International Commodity Agriculture (RJA) both fit the ball on all three investment fronts.
5) Sustainable food on the agenda of many large organizations
According to the non-profit advocacy group ImpactAssets, worldwide consumers are “increasingly demanding organic and Fair Trade products including coffee, chocolate and quinoa. Consequently, corporations like Starbucks, Nestle, Green Mountain Coffee and Cargill are turning to smallholders for raw materials.” The group cites major international raw food firms like Ferraro, which has pledged to sustainably source 100% of its palm oil by 2015 and all coffee by 2020. “These types of corporate commitments motivate intermediaries and smallholders to meet demand for organic and Fair Trade products. These higher standards and better connections between buyers and growers lead to increased investment opportunities,” ImpactAssets states.
These aren’t the only reasons to climb aboard the sustainable agriculture investment express – but they’re near the top of the list.
It’s a list that a lot of global investors will be examining in the next year or so, so the sooner you get going, the better. And the bigger difference you’ll make to the world’s hungry.