Perspectives from our specialist investment managers on the challenge of feeding a growing global population in the midst of climate change, geopolitical shocks, and uncertainty and the critical need for innovation in food and agricultural technologies.
The food-water-energy nexus—where the interdependencies and complexities of the global economy peak—is where we at the Franklin Templeton Institute see the most potential for risk, price disruption and overall market impacts as we move into the next years and decades. In this paper, we examine the challenge of feeding a growing global population in the midst of climate change, geopolitical shocks, and uncertainty and the critical need for innovation in food and agricultural technologies. We hope you find the perspectives of our thought leaders and specialist investment managers on this topic to be insightful, thought provoking, and even encouraging in spite of the enormous task at hand.
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Foreword
I write this from Cambridge, England, where I just spoke with a group of investors, asset managers and researchers on the growing risk of climate change on increasing vulnerability to famine,1 which illustrates how critical food security will be in the coming decades. This conversation is happening while the war in Ukraine is a stark reminder of the geopolitical risk in agricultural supply lines. Disruption of the region’s critical wheat and fertilizer exports threaten to push an estimated 33 million–47 million more people in 81 countries to the brink of famine in the coming year.2 It struck me sitting in Kings College—nearly 600 years after it was founded by Henry VI—that we’ve seen extraordinary progress since that time, yet many people globally continue to face the existential challenges of hunger and war, and we all face the consequences of climate change. What gives me hope is we have a vision and a framework for the future, and the technology and finance to tackle these challenges.
I’m personally thinking of these challenges, set against the Sustainable Development Goal of “zero hunger,” which we are a long way from at present, despite the advances of the “green revolution” and the best efforts of humanitarian organizations. The United Nations World Food Programme is currently feeding no less than 115 million people displaced by war, famine and drought—and it forecasts it will raise less than half of the US$18.9 billion needed to feed an estimated 137 million people in 2022.3 On top of this, COVID-19 pandemic-induced inflation has increased food prices over 30%, creating an additional US$42 million in monthly costs to feed vulnerable populations.4
The investment needs are tremendous, which is where the deployment of new, smart capital can be so important. As my colleagues explore throughout this paper, feeding a growing global population in the midst of climate change, geopolitical shocks, and uncertainty over the coming decades requires innovation in food and agricultural technologies; re-thinking old paradigms; and, investing in solutions that not only boost agriculture productivity and food’s nutritional value but also reduce negative impacts on the planet—for which agriculture is a significant contributor—and improve the health of our global community.
As asset managers, our job is to actively identify opportunities and risks in the financial markets, and strive to protect our clients assets’ while pursuing sustainable risk-adjusted returns. Understanding investment and impact is what sustainability is all about: taking care of people, the planet and prosperity.
All contributors
Endnotes
- As global temperature rises, crop yields fall. By 2100, an estimated 2.5 billion people will be at risk of starvation. Africa and Asia are both projected to have over a billion people each dealing with acute hunger. This will create global consequences. Source: Allwood, J. “Valuation and risk as the rhetoric-action gap on climate mitigation closes.” Paper presented at the Fiduciary Investors Symposium, Cambridge, UK, April 20, 2022.
- Source: World Food Programme (WFP). 2022. Projected increase in acute food insecurity due to war in Ukraine. Rome: WFP.
- Source: WFP. 2022. Unprecedented needs threaten a hunger catastrophe. Rome: WFP.
- ibid.
WHAT ARE THE RISKS?
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