There are two key drivers in the supply chain that investors cannot ignore:
Agriculture and the environment impact each other
The strategies behind a tremendous increase in productivity since the 1960s Green Revolution, including the proliferation of synthetic fertilizers and pesticides, are in need of an upgrade when viewed through a 21st-century lens of sustainability.
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AgTech
Environment & Agriculture
Technology’s Role
Technology’s Role
AgTech
Environment & Agriculture
Agriculture and the environment impact each other
Income effect as share of increase in overall food demand
Source: PGIM Thematic Research.
Investment Implications Across Food Supply
Technology will need to play a crucial role in finding new ways of production
Forward-thinking investors will want to focus on several key areas, including crop science, AgTech and “alternative agriculture,” that transform food production.
Key areas of innovation in food production
Source: PGIM Thematic Research.
Share of total daily calories from a “western diet”
emerging innovations in AgTech
The AgTech space, as well as emerging innovations in alternative agriculture, is leveraging technology to create more efficient methods of farming and boost productivity.
Precision agriculture
Market share to increase by 2030
Source: Straits Research
4X
Cultivated Meat
Source: Fortune Business Insights
In venture capital but remains a nascent industry
$1B+
Indoor Farming
Source: CivilEngineer.com
Greenhouse yields compared to outdoor farming
10X
The feedback loop between the environment and agriculture
The relentless push of technology and innovation into every corner of food production
1. AgTech driving smarter, more sustainable food production on small farms
Finding ways to enhance productivity of small-scale farms is critical to meeting future food demands
AgTech landscape is fragmented with many startups and can offer attractive VC investments
2. Farmland debt and equity offer a unique exposure and attractive investment
A range of risk-reward propositions for debt and equity investors
3. Crop science and feed additives solutions to boost productivity and sustainability
Leaders in Asia have local expertise and established distribution networks
California is especially attractive for investors because of its optimal climate and proximity to major exchanges, ports and highways
Leaders in Europe and North America offer real-world products and have diversified businesses and scale
4. Precision agriculture improves efficiency of larger farms
Opportunities in both large global agriculture equipment makers as well as tech startups
Latin America provides growth opportunities as farmers in Brazil and Argentina modernize
5. Fertilizers will remain essential to maintain and enhance crop yields
Annual need for some fertilizers provides steady source of demand that are not easily replaced
ESG-minded investors should strongly consider engagement with this sector as they will be vital to food production for some time
6. Cultivated meat: More sizzle than steak for investors
The market for cultivated meat is highly fragmented with serious challenges and much uncertainty
Investors should instead focus on production of simple proteins (i.e., whey or egg albumen) for commercial use
Agriculture
CLIMATE ENVIRONMENT
30% of global GHG emission
70% of freshwater consumption
80% of deforestation
12% crop yield decline
Up to 35% decline in fishery production
17% decline in milk production
IMPACT
IMPACT
1.
2.
1.
2.
Source: Fortune Business Insights
