As it stands today, agriculture is a double-edged sword. With 9.2% of the world living below the poverty line of US $2.15, 10% of people affected by hunger, and need to increase the quantity of food grown to feed the world by 2035 by 69%, it’s clear that cheaper food needs to go to more people. This need will only increase to in order to sustain the estimated 9.2 billion people on the planet by 2050. However, agriculture poses significant environmental challenges and is an industry that is a major contributor to climate change, accounting for 10% of the total CO2 emissions. For that reason, it is necessary to find a way to balance the expansion of food production and the reduction of negative effects.
The Environmental and Social Impacts of Traditional Agricultural
The environmental impact of traditional agricultural practices, including the use of pesticides, deforestation of farmland, and the high usage of water cannot be ignored. 70% of the world's water consumption goes to farming annually and the use of pesticides can severely impact the quality of soil, turning it barren through the death of microbial bacteria. This makes it necessary to acquire more farmable soil, and farmland expansion already drives almost 90% of deforestation. Forests are essential for reducing emissions globally as they capture carbo dioxide from the air. And the loss of the natural habitats of the world represents a significant decrease in biodiversity across the world with animals such as orangutans, tigers, and monarch butterflies at risk. Ironically enough, many of the tools farmers use to farm their crops are the very ones leading to the increased risks associated with global warming.
Farmers face intense risks, including drought, and mass crop failure. These issues put their livelihoods at risk, and they are often forced to accept low prices from distributors. Socially conscious groups like Fairtrade, however, are making strides to address these issues, but there's still much work to be done.
Sustainable Agriculture
To meet the increased demand of an ever-growing world while also benefiting the climate, more sustainable agricultural practices are needed. This involves implementing systems such as crop rotation to avoid nutrient depletion, the use of genetically modified organisms (GMOs) for higher yield, technological innovation, and a shift away from animal feed production. Some innovative solutions like vertical farming and bio-based systems are already being implemented alongside drones and AI. For example, companies like Aero Farming are already using 95% less water than regular field farmers through their use of vertical farms. This shows that these practices don’t just reduce the carbon footprint of agriculture but also decrease water usage and fuel consumption.
The Role of Impact Investing
Scaling these systems up and making them accessible to smallholder farmers require significant capital and investments in infrastructure, education, and research and development. In some countries, policy and regulatory barriers can hinder the growth of sustainable agriculture, and impact investing can play a crucial role in promoting sustainable agriculture in these places. Companies such as Tandem Nano, which develops agrochemicals for the agriculture industry, are already showing value in investing in these practices. The global agricultural nanotechnology market, in which Tandem Nano operates, is projected to grow at a CAGR of 12.06% from 2022 to 2032, already at a value of $284.2 billion in 2021.
Challenges
One thing to consider when making investments in sustainable agriculture is that they may involve higher risks and longer payback periods compared to conventional investments. And while consumer demand for sustainably produced food is growing, it is still a niche market. Sustainable agricultural practices have to be price competitive with less sustainable options to succeed in the market. Alongside this, there is also a need for standardized metrics when it comes to the impact of implementing these techniques. Greenwashing is a clear risk that transparent reporting can help in ensuring that impact investments are achieving their intended outcomes.
Looking Forward
Despite these challenges, the potential benefits of impact investing in sustainable agriculture are immense, both environmentally and economically. The journey toward sustainable agriculture is a challenging one, but with time and effort, a significant difference can be made. Investing in companies that prioritize sustainable practices can support the transition to a more sustainable food system, creating a healthier planet and a more equitable world.