Innovation and Investment Opportunities Brought by AgTech
In our most recent article, we introduced the potential of renewable energy initiatives to combat climate change. Today, we dive into the importance of agricultural technology (AgTech) in reducing global emissions and the investment opportunities it presents.
When it comes to climate change and sustainability, most people first think of clean energy as the obvious solution. Renewables certainly play a key role in reducing CO2 emissions in order to meet the aggressive targets required to limit global warming to 1.5 degrees Celsius. However, our global food system– encompassing production, processing, and distribution– is responsible for 26% of overall emissions, making the case for more innovative agricultural practices strong [1]. Production is the main culprit, accounting for more than half of emissions connected to food, mostly from methane produced by livestock and pesticides used in crop production. Demonstrative of this is that, if cattle and dairy were a nation, they would be the second largest emitter of greenhouse gases in the world right after China, larger than India and Russia combined [2]. As the world’s population is set to grow to 9.9 Billion by 2050 [3] and more people are entering the middle class, agriculture is under pressure to match this rise. Agricultural expansion however, leading to the conversion of forests and grasslands into pastures and cropland, is also a major carbon dioxide emitting activity. Finally, post-farm processing, packaging, and distribution of food to end consumers make our food supply chain emissions-heavy [1]. Necessarily, there must exist growing numbers of opportunities along the food chain which decarbonize our agricultural systems and contribute to a healthier planet.
Not only is agriculture negatively impacting our climate by way of greenhouse gas emissions (GHG), but climate change is also negatively impacting our agricultural systems and our ability to produce food effectively. The agricultural industry as it stands today is facing several challenges, which will be compounded by the effects of climate change. First, the variability of weather patterns exacerbated by climate change makes food production vulnerable [4]. Changes in rainfall patterns put crops at risk of both flooding and droughts, both of which reduce crop yields [4]. More extreme temperatures and a wetter climate also increase the prevalence of new pests, pathogens, and weeds that thrive in these environments, threatening crop viability [4]. Evidently, our approach to agriculture and food production systems needs an overhaul. There is plenty of room for innovation in this space, and for private investors to drive the shift towards the next agricultural revolution– AgTech.
Our conventional approach to agriculture and farming is undergoing a technological revolution, providing ample investment opportunity by private actors. AgTech describes trends in the industry, including precision agriculture, the internet of things (IoT), and the use of big data analytics to drive farming and production efficiencies [5]. Global agriculture is worth $5 trillion dollars [6], and the “smart agriculture” industry will be worth $22 billion by 2025 [7]. Innovations such as urban and vertical farming make use of nonconventional spaces for growing food, reducing both reliance on large croplands and source-to-consumer distance [5]. Precision agriculture, which makes use of artificial intelligence, drones, and soil sampling, helps farmers make more informed decisions and prevents resource waste [8]. Meat alternatives, such as plant-based or lab-grown meat, are becoming more mainstream thanks to companies like Beyond Meat, whose burger is produced using 90% less GHG emissions than beef [9]. All of these innovations have the potential to reduce emissions and climate-proof our food production systems, and can be accelerated through private capital injection.
True North recognizes AgTech’s potential through our advised investment into Local Leaf, a Toronto-based player that transforms unused, urban industrial space into vertical farms. Local Leaf leverages its climate-control technology and cloud-based monitoring to efficiently grow and deliver produce to local food retailers, using 95% less water than traditional agriculture. We believe the market is moving towards AgTech, and we are aiming to expand our True North Impact Fund I to include innovative companies that aim to make agriculture more efficient and reduce its impact on our climate.
To learn more about our True North Impact Fund I and how we connect investor capital based on the UN SDGs with impactful ventures around the world, please contact Fund Manager, Kai Chen (kai@truenorthimpact.com).
[2] McKinsey - Agriculture and climate change: Reducing emissions through improved farming practices
[3] Our World in Data - Future Population Growth
[4] US EPA - Climate Impacts Agriculture and Food Supply
[5] Oliver Wyman - Agriculture 4.0 - The Future of Farming Technology
[6] McKinsey - Global agriculture’s many opportunities
[7] Markets & Markets - Smart Agriculture Market by Agriculture Type
[8] European Comission - Industry 4.0 in agriculture: Focus on IoT aspects
[9] UMichigan - Beyond Meat’s Beyond Burger Life Cycle Assessment