According to the United States Department of Agriculture (USDA), agriculture, food, and related industries account for 5.4% of the nation’s gross domestic product, including about 1% directly tied to farms. Furthermore, 52% of US land is used for agricultural purposes.
Considering its stature in the country’s economic and physical profiles, many have identified sustainable agriculture as a key opportunity for addressing climate change—especially since agriculture was responsible for 10% of the country’s greenhouse gas emissions in 2017.
The stakes are significant, but for investors, it is a space that is still being sorted out.
What Is Sustainable Agriculture?
Given the intricacies of the world’s agricultural complex, the definition of the still relatively young concept of sustainable agriculture is difficult to pin down. While some may point to the organic food movement, others may emphasize farmers, their communities, and farmland environments.
The United Nations’ Food and Agriculture Organization developed the following definition: “Sustainable agriculture conserves land, water, and plant and animal genetic resources, and is environmentally non-degrading, technically appropriate, economically viable and socially acceptable.”
More pragmatically, Sustainable Agriculture Research & Education, a grants and education program backed by the USDA, concludes that in spurring departures from longtime conventions, agricultural sustainability efforts rest on three pillars:
- Profit over the long term. Reversing years of industrialized practices, such as turning cows away from confined feeding systems and into pastures, can improve farmers’ bottom lines.
- Stewardship of our nation’s land, air, and water. Reviving classic land management strategies like cover crops conserves water, bolsters soil health, and protects fields.
- Quality of life for farmers, ranchers, and their communities. Supporting nontraditional farmers, such as women and minorities, helps strengthen struggling rural communities.
Investing in Sustainable Agriculture
Not surprisingly, sustainable agriculture investment opportunities are varied, although baseline demand is not insignificant: while the Global Impact Investing Network reported that 10% of impact assets were dedicated to food and agriculture, 58% of impact investors surveyed indicated that they allocate at least some funds to the space.
Where? Nonprofit research firm Croatan Institute identified several primary investment themes, including sustainable production and consumption, agricultural technology, conservation and climate change mitigation, and social equity and sustainable livelihoods.
Within those themes, Croatan authors highlighted a diverse cross-section of investment strategies ranging from certificates of deposit with agricultural community lenders to funds that invest directly in land used for agricultural purposes. Public debt and equity markets offer several approaches, including investments in developers of agricultural technology and shareholder engagement efforts to sway companies to emphasize sustainable agricultural practices in their supply chains. Additionally, Croatan found that sponsors of private debt, private equity, and venture capital funds are increasingly developing targeted offerings.
Although sustainable agriculture is a relative newcomer to impact investing conversations, its position at the intersection of environmental well-being, food systems, and community livelihood make it unlikely to disappear any time soon.
Want to learn more about sustainable agriculture? Read:
- ForwardFarming Works to Achieve Sustainable Agriculture
- Agri-Food Systems: Understanding and Measuring Challenges in Agriculture and Food Systems
- Do Sustainable Food Systems Promote Stable Communities?
- New Technology in Agriculture Creates Opportunity
- As Arable Land Shrinks, Global Need Grows