Profit and impact are often aligned in the food and agriculture sector. Global food production could rise by 60 percent from 2007 to 2050, driven by a growing population and shifting demand patterns. Meanwhile, depleting soil quality and climate change pose challenges for production in a sector that is by far the largest employer in the world.
It’s no surprise, then, that The Bridgespan Group’s impact investing team has seen a lot of investments in food and agriculture. Since 2016, we’ve analyzed over 400 individual potential investments in privately held companies, mostly in private equity. Over 10 percent of those companies have been in the food and agriculture sector, giving us a bird’s-eye view of themes emerging about the kinds of impact that are possible.
Big Investments for Smallholder Farmers
In such an enormous sector, where are the greatest opportunities for impact likely to be found? A prominent theme in our database is supporting the livelihoods of farmers and agricultural workers. The food and agriculture sector employs over one billion people worldwide; half are smallholders who farm plots to support their families. Thus, some of the strongest impact investments aim to engage smallholder farmers at scale. The farmers typically need reliable markets in which to sell their products; technical support; money for seeds, fertilizer, and other needs; and the ability to make the sometimes small but critical investments necessary to help them overcome the effects of rapidly shifting weather patterns and degrading soil.
Investments Heating Up for a Warming Planet
Increasingly, we are also seeing more impact investments at the intersection of food and climate change. Food production is threatened by the effects of climate change, making the sector a climate adaptation priority. And food and agriculture accounts for over a quarter of the world’s greenhouse gas emissions.
Climate scientists have argued that food and agriculture solutions are among the most promising ways to avert additional greenhouse gas emissions, because soil and wetlands are a major carbon sink, capable of storing vast amounts of carbon that might otherwise enter the atmosphere. Globally, croplands and other managed lands could absorb or reduce 242 gigatons of carbon, nearly seven years’ worth of global emissions.
The good news is that there are a wide range of investable solutions to improve carbon stores in soil—everything from low-tech changes, such as shifting to regenerative practices, to high-tech ones, such as novel biopesticides and modified seed coatings that draw carbon from the air and capture it in the soil. A number of companies are working on this issue. For example, Indigo Ag, a vertically integrated seed treatment producer, has launched Terraton, an initiative to pay farmers to sequester carbon in the soil through the sale of carbon credits. Indigo estimates Terraton has the potential to remove one trillion tons of carbon dioxide from the atmosphere.
Read the full article about impact investing in the food and agriculture sector by Stephanie Kater and Kate Collins at The Bridgespan Group.