What investors can do to improve our soil (and why)

Summary: Investors need to care about the state of our soil globally. It's not a problem just taking place 'over there'. It impacts us directly, via the food we grow on the soils in our home region, and indirectly, through the food we import. Impacting the supply chains of all companies in the food industry. But it can feel like an almost intractable problem. The good news is that solutions are known, we just need to find ways of implementing them. Fortunately, finance-based innovation is something we are good at.

Why this is important: The experiences of the last year or so, the surge in food prices, and more recently ongoing shortages, have been a wake up call. Food security isn't about 'can we get the food we want cheaply?' It's more about 'where will our food reliably come from in five, ten and twenty years time?' Companies need to start building resilient supply chains, that can cope with the food production volatility that is our new normal.

The big theme: The impacts of climate change are increasing in frequency and intensity around the world, particularly life-threatening heatwaves, floods, storms, and droughts - leading to further and longer-term impacts such as food insecurity, entrenched poverty, and economic losses. Climate change has already reduced global agricultural productivity growth by 21% since 1961, and by up to 34% in Africa.

In a recent Quick Insight, we looked at how Europe is exposed to the global soil degradation issue through the food it imports to eat, and the raw materials it buys to process and export.

Quick Insight: healthy soil elsewhere drives our economy

Europe relies on the world for the supply of a material proportion of it’s imported low value raw materials, that we turn into food for ourselves, and into exports of higher value processed products. Which means that our way of life is supported by soil health, not just within our own region, but gl…

The Sustainable InvestorSteven Bowen

For this blog we consider why investors should care about the state of our soils globally, and what they can do to contribute to the solutions. This should help inform not just investing decisions, but also engagement. Because this is a challenge that needs informed and focused engagement. The good news is that the technology to fix this challenge is already well understood - our role is to assist in its roll out at scale. Why would we want to do this? Because it makes good sense from a long-term value perspective. Sustainable supply chains can create financial value.

This started off being a blog about the actions that farmers can take, but in researching the topic, I understood that there is an important step before this - what can investors do that encourages companies to support the farmers who want to change? The original blog, on what farmers can do, will come soon.

Why agriculture is a sustainability issue

The market for food is a global one. According to the UN Food and Agriculture Organisation (FAO) the monetary value of food exports globally reached US$1.4 trillion in 2020. Fruit and vegetables accounted for 20% of the total, followed by cereals and preparations (14%). Fish and meat each were 10–11%.