AgTech: Sustainable investment opportunities for pension savings

15 February 2024

First seen on Money Marketing

In just 26 years time, the world population will reach 9.7 billion.

However, the statistic that I find most striking is that collectively, according to the United Nations Environment Programme, we need to increase global food production by 56% to feed them all!

AgTech investment opportunities for pensions savings

Many are now looking to agricultural technology (also known as AgTech) innovators to deliver the solutions to this food productivity conundrum. Consequently, this market which encompasses a wide range of technologies including biotechnology, big data analytics, sensors and connected devices, is set to triple in size to nearly $76bn over the next eight years.

As AgTechs develop, they begin offering a range of investment opportunities for those who are in charge of the allocation of pension savings. It’s all become a lot more complicated than simply investing in more fertilizer factories being built by household name, listed pharma companies. That was the last century’s idea, and whilst it increased food production sharply from World War II onwards, there was an environmental price to pay. It is now estimated that somewhere between 60-70% of all agricultural soil in Europe has become ‘degraded’ as a direct result of unsustainable agricultural practices since the end of the second World War.

AgTech innovations will need to enable widespread change in farming practices, helping us towards more sustainable, higher quality food production rather than simply more food production. AgTech therefore offers part of an increasingly complex puzzle of innovations which we must back through our pensions savings. It is our industry’s role to find the right investment opportunities of this type which don’t expose future retirees to too much risk with their hard earned savings.

Sustainable Pensions

To concentrate the mind, it’s worth considering our potential future in the event that we don’t invest in these innovations and fall short of our increased food production targets by 2050. We will have food shortages. Here in the western world, we will deal with these shortages through the price mechanism. Those of us who are well off will pay more for our food, with prices rising until some people are forced to go hungry. We may see more people relying on handouts of nearly out of date provisions from foodbanks.

The lessons for pension savers and advisers from all this are clear. Firstly, we would be prudent to target a pension income that will increase throughout our retirement years, so our finances are robust enough to bear price increases if we don’t hit those ‘mega change targets’.

Secondly, we need to think about what could happen if we fall a long way short of food production targets. The polite and genteel reallocation through the price mechanism would give way to unruly pushing and shoving. Pensioners don’t fare well when law and order breaks down. So, it really is in all our interests for our investment allocators to pay attention to these existential issues like increasing food production sustainably, by investing in a way that will boost sustainable farming. There are already some investment funds that specifically target food opportunities ‘from field to fork’. And others will include it as part of a range of sustainable investment themes which together make the world a safer, more sustainable and more comfortable place for us all.

To end on a positive note, the people doing great things on climate change are also alert to the need for food production changes. On the very first day of COP28 in Dubai last December, 130 countries committed to including thinking around the transformation of food systems as part of their national commitments. And in July 2023 the EU proposed a new Soil Monitoring Law to address key soil threats within the region such as erosion, floods, loss of soil organic matter, contamination, and more. The ultimate objective is to have all soil across the EU in healthy condition by 2050.

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