Morgan Stanley
  • Institute for Sustainable Investing
  • Dec 14, 2015

A Global Food Challenge Looms

New Oxford University report sees food demand on the rise, and with it, greenhouse gases and the cost of groceries.

Getting people to appreciate the danger of climate change can be a challenge when it’s expressed as a debate about a 2 degree Celsius warming of the planet.  Alarm bells might ring louder once people realize what’s going to happen to their grocery bills.

Frequent, dramatic spikes in food prices, like those in 2008 and 2011, could become “business as usual” in coming years, according to a recent report by Oxford University’s Smith School of Enterprise and the Environment.

The Report, called “Sustainable Food: Challenges and Opportunities in Global Food Production,” was supported by Morgan Stanley’s Institute for Sustainable Investing. It outlines the inefficiencies in today’s global food production system, broken out by region, and explores opportunities for investors.

Vicious Cycle

The Oxford report details how failing to improve the world’s food production and distribution system could contribute to a vicious cycle of increased greenhouse gas emissions, climate change, droughts and floods, rising sea levels, soil erosion, and more. If that's the case, then ultimately, one of the many effects will be a dwindling amount of arable land and potentially increasing pressures on food prices globally. All this will be exacerbated by soaring demand for food which is forecast to increase 60%-70% by 2050 from 2007 levels.

It points to a forecast increase in world population - from around 7.2 billion today to 9.7 billion in 2050 - as the main driver of demand. The Report also notes that growing incomes and urbanization around the world are leading to more emission-intensive protein consumption, namely meat and dairy.

In a nutshell: “The great challenge will be to transform the global food system into one that meets the nutritional needs of all in an ecologically sustainable manner,” states the Oxford report.

Today agriculture contributes about 25%-30% of global greenhouse gas (GHG) emissions annually - double what it was 50 years ago -  and 70% of all water withdrawals. 1


The Report points to livestock as the biggest culprit. GHG emissions along the entire livestock supply chain – feed production and the fertilizers used, animals’ "enteric fermentation" or digestive gases, manure, distribution of animal products and related deforestation -  make up the majority of agricultural emissions and 14.5% of all human-induced GHGs. That puts it on par with cars and other forms of transport.

That’s a problem when meat eating is on the rise in emerging countries. Beef and dairy cattle are responsible for the majority of the livestock sector’s GHG emissions.2


Climate Change 2014: Mitigation of Climate Change, IPCC Working Group III
*Agriculture, Forestry and Other Land Use

The agri-tech space offers potential investment opportunities, according to the Oxford report, with everything from improvements in production to water efficiency systems and even new ways of reducing emissions from cattle.

Insurance against climate extremes is another emerging investment opportunity, along with innovations in finance, production and distribution methods to make small farms more competitive with factory farms on the world markets.

CRC: 1371037 exp 12/14/2016 

Source: 1. Oxford Report and Food and Agricultural Organization of the United Nations (FAO).
Source 2. FAO


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