Tara Clee is an investment analyst specialising in ESG (environmental, social and governance) at Hargreaves Lansdown.
The global agricultural and food industry contributes to around a third of global greenhouse gas emissions and is draining our planet’s natural resources.
Our net zero transition relies on improving the sustainability of our food systems. And this presents a great area of opportunity for investors.
The good news is that there are already pioneering technologies improving the efficiency of our practices and developing plant-based meat alternatives to meet our growing demand.
The World Wide Fund for Nature has estimated that over the next four decades, in order to feed our growing population, we will need to produce more food than we have over the entire human history.
With food prices surging as a result of the war in Ukraine, there is even more reason to invest in and diversify our global food supplies.
What thematic funds might you consider for your portfolio?
Investors can look at funds that take a thematic approach to get a broad exposure. Managers may invest in themes linked to the UN Sustainable Development Goals, such as:
– Zero hunger
– Responsible consumption and production
– Life below water
– Life on land
Any themes will typically be included on the fund factsheet or can be found on the fund’s website.
Baillie Gifford Positive Change (Ongoing charge: 0.53 per cent)
Invests in global high-quality growth companies to deliver positive change across four themes, including environment and resource needs.
The fund owns Beyond Meat, a pioneering plant-based meat alternatives producer which aims to reduce global meat consumption.
The company encourages behavioural change by partnering with fast food outlets, like KFC.
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Montanaro Better World (Ongoing charge: 1.00 per cent)
Invests in small and midcap companies with products or services that help to solve some of the world’s greatest problems.
The themes align with the Sustainable Development Goals, including environmental protection, nutrition, and innovative technologies.
One of the fund’s holdings, Chr Hansen, produces cultures and dairy enzymes and probiotics. Their products are helping to reduce food waste, increase crop yield and improve the health profile of food.
FP WHEB Sustainability (Ongoing charge: 1.03 per cent)
Focuses on high-quality global companies that will aid the transition to healthy, low carbon and sustainable economies.
The themes include environmental sciences and resource efficiency.
One of the fund’s holdings, Koninklijke DSM, develops innovative food and feed supplements for human and animal nutrition.
This reduces the environmental impacts of food production and supports more efficient global food supply chains.
JPMorgan Climate Change Solutions (Ongoing charge: 0.70 per cent)
Identifies long-term megatrends and themes and then invests in companies set to benefit over time. One of the key sub-themes is sustainable food and water.
Among the top 10 holdings, CNH Industrial is making agricultural manufacturing processes more effective, efficient, economical, and environment-friendly through the application of streamlined systems and technologies.
What specialist funds might you consider for your portfolio?
Alternatively, there are specialist funds that solely focus on sustainable food.
These funds carry a higher risk by concentrating on one area of the economy and should be held as a small portion of your portfolio.
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The most successful portfolios are ones that invest in a range of different themes, types of investments, countries and industries.
Rize Sustainable Future of Food UCITS ETF (FOOD) (Ongoing charge: 0.45 per cent)
Offers exposure to companies addressing many different aspects of the future of food, from plant-based food, precision farming and agricultural science to sustainable packaging.
One of the fund’s holdings, John Bean Technologies, develops food and aero technologies that can maximise food yield and reduce emissions.
iShares MSCI Global Agriculture Producers ETF (Ongoing charge: 0.39 per cent)
Aims to track the results on an index composed of global equities primarily in the agricultural sector.
The largest holding, Deere & Co, develops and manufactures precision agriculture technologies using cameras and machine learning to differentiate crops and weeds.
The sprayer then only applies pesticide to weeds, and fertiliser to crops, significantly reducing waste, and the impact on ecosystems.