Agricultural land, natural capital the new investment frontier

As of 2024, over 294 million people in 53 countries around the world live in severe food insecurity. This is an increasing figure for the sixth consecutive year: the net balance of worsening situations in 19 countries and improvements in 15 territories, according to the latest United Nations Global Report on Food Crisis. The challenges posed by the growth of the world's population and the scarcity of natural resources, starting with water, also leads the world of finance to define investment strategies aimed at offering solutions.

Natural capital, farmland and forestry, and sustainable and evolved agricultural systems can be alternative assets to diversify portfolios and make a real impact on the environment and counter food insecurity.

Nuveen Natural Capital, for example, is participating in a multi-year initiative to investigate how essential ecosystem services, such as pollination and biological pest control, can improve sustainable food production and help address climate change factors. "The soils in Chile, for example," says Martin Davies, global head of Nuveen Natural Capital, "show high variability in terms of texture and biological activity. Our teams are using composting worms to enrich the soil conditions in which the hazelnuts grow. Using three different types of composters, we transform pruning residues, leaves and other community waste into a liquid rich in nutrients, humic acids and microorganisms that improve soil conditions and crop development. This project supports 250 acres of hazelnut cultivation in the Maule and Ñuble regions of Chile.

The developing world has a growing middle class that, as it becomes more prosperous, will consume more protein, as well as food products in general. The OECD estimates that consumption of major animal proteins in developing countries will increase by 12.6% by 2032. ""To produce a single kilogram of beef protein requires about five kilos of feed grains. An increase in global protein consumption will lead to a sharp rise in demand for cereals,' Davies comments. 'Another issue is the increasing scarcity of water: agricultural land with sustainable water resources, including surface and groundwater, could see an increase in assessments. Given the need for water in agricultural production, agricultural exports are a way to transfer water from countries with abundant water resources to those with scarcer resources,' he says.

One example is China, a country that feeds 18 per cent of the world's population on about 10 per cent of the total arable land, with the availability of arable land decreasing as urbanisation progresses. 'In addition,' Davies adds, 'it faces significant drinking water challenges that limit its ability to allocate additional land for production or improve the productivity of existing land. With population expansion, urbanisation and improved nutrition, China, the world's most populous country, will become increasingly dependent on agricultural imports'.