Food & Agri

20 july 2023

Feeding the World: A Perspective on Sustainable and Affordable Food

This article is part of a series of short blogs by the Food & Agri team of Anders Invest. Here, we outline our perspectives on key themes that are relevant to the Food & Agri sector and explain how we try to make an impact with our portfolio companies and investment strategies.

As the world's population inches closer to 10 billion, the escalating food demand is unignorable. To meet this, global food production must ramp up by 50-70%, a challenge intensified by the 2.3 billion individuals already grappling with food insecurity. In addition, there is the simultaneous necessity to mitigate climate change impacts, underscoring the dual challenge of affordability and sustainability that more and more defines the food and agricultural sector.

The challenge is that we’re trying to feed the growing world population while also needing to take care of our climate and all the different kinds of life on our planet. This situation has led to two different ways of thinking: agroecology and ecomodernism. Agroecology supports sustainable food production, leaning towards organic farming that takes care of the soil, clean water, biodiversity, and nutritious food. On the other hand, ecomodernism focuses on using technology and producing a lot of food on a small piece of land, suggesting a strict separation between farmland and other ecosystems where nature can flourish.

Strike the right balance between satisfying the imperative demand for accessible food and tackling the pressing issue of climate change, and you'll find yourself caught in the midst of a high-stakes struggle.

Volkert Engelsman, the founder of Eosta BV / Nature & More, simplifies this complex dilemma: “We are losing 30 soccer fields of fertile land every minute, profit can only be profit if it doesn’t jeopardize people and planet. While affordability is undeniably vital, it is equally important that we conduct comprehensive calculations that account for both the positive and negative externalities associated with nutritious food, social inclusion, and ecosystems.”

Nevertheless, Hidde Boersma, in his thought-provoking piece for the Correspondent, sheds light on the ecomodernist view: “Through the adoption of intensified farming techniques, we possess the capacity to free up farmland spanning the entirety of Russia. This staggering feat can be achieved by harnessing the power of a 25% boost in crop productivity.” Boersma passionately argues that this preserved land, no longer under the plow, could be transformed into thriving natural ecosystems, becoming havens of biodiversity and environmental balance. However, Boersma's ideas regarding factory farming rest upon a set of assumptions that blur our understanding of ecosystems and microbiomes, misrepresenting their true workings. An oversimplification of nature allows for easy commodification and scalability but diminishes the intertwined complexities that constitute as nutritious food utilizing only a fraction of the required DNA of plants and neglects the importance of sunlight and instead using LED lighting.

At Anders Invest Food & Agri Fonds, we understand that a one-sided approach risks overlooking the intertwined complexities of social development and environmental sustainability. In the short-term, there is a contention that a solely organic system lacks affordability for all, without taking into account negative externalities such as the increasing healthcare costs associated with food-related diseases, water pollution, and nitrogen intensification. Conversely, an excessive focus on agricultural intensification disregards environmental considerations, biodiversity depletion, water pollution, and the potential dependency of developing countries on western technology.

As we analyze the crux of the matter, a distinct pattern comes into focus. It becomes increasingly apparent that the organic system exhibits minimal to no yield loss for fruits, while grains suffer a more substantial decline. Considering this significant revelation, we propose a focused strategy: let us channel our efforts into cultivating fruits using entirely organic methods, effectively demonstrating the positive impact on consumer prices while the lower yields justify a slight premium for the grains. After all, to provide affordable and organic sustenance for our rapidly growing global population, it is imperative that we address the global power dynamics within the food and agriculture sector. This involves reducing the substantial portion of land currently allocated to animal production, which currently stands at 70%, and prioritizing the availability of nutritious food worldwide. We will dive into these subjects in a later blog. Stay tuned! 

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04 june 2024

Food & Agri

Unfolding CSRD This article is part of a series of short blogs by the Food & Agri team at Anders Invest. This article is specifically written for individuals and companies that are interested in or affected by CSRD. In total, 50,000 companies will need to comply with this legislation in the coming years. Additionally, companies who do not need to report will face additional pressure to supply information and data regarding their sustainability performance from B2B customers. Are you involved with a company that will need to comply with the CSRD or needs to generate impact data? Then this article is meant for you. Let’s unfold it’s basic concepts together.   The Corporate Sustainability Reporting Directive (CSRD) is a piece of legislation developed by the European Union which passed on January 2023. Starting January 1, 2024, CSRD intends to ensure that large and listed companies will  report and disclose sustainability information in an elaborate and consitent framework in their management reports. It builds upon previous legislation through: an extended scope including a gradual integration of large companies, standardized requirements, assurance requirements, a digital format, and integration into management reports. Given the extensive scale of the directive, it is very likely that most companies are affected by this directive (either directly or indirectly). Let’s put together some basic concepts in this article to unfold CSRD and understand it’s mechanisms. Why did CSRD came into effect? CSRD aims to address climate change, stakeholer salience and governance malpractises. The driving force behind the CSRD is the European Union's ambitious goal, as outlined in the European Green Deal, to become the first climate-neutral continent and achieve a pollution-free environment by 2050. The Green Deal is the overall sustainable growth strategy of the EU. To direct capital to investments that drive sustainable solutions, the EU made an Action Plan on Financing Sustainable Growth (APFSG) which consists of a set of policy initiatives. To prevent greenwashing and set aligned activities for sustainable investments, the EU taxonomy regulatory framework came into effect in 2020. Basically, CSRD is required to increase transparancy through disclosure of sustainability information, enabling EU taxonomy to work. Overall, CSRD’s goal is not to report for the sake of reporting, but for the sake of transitioning to a green economy with the relevant public information to do so. However, it is difficult to asses how much of the effort will be translated to actual impact. How will CSRD impact the business climate of Europe? Starting in 2025, the first companies need to report on their ESG impacts and opportunities over the year 2024. CSRD compliance is phased in, depending on the type of company. The first report year for the application of the new regulations will be structured as follows: In 2025, companies already subject to the previous non-financial reporting standards, particularly large public-interest entities with more than 500 employees. The subsequent year, 2026, marks the inclusion of other large companies, specifically those with over 250 employees. By 2027, the reporting requirements will extend to include listed Small and Medium-Sized Enterprises (SMEs). Finally, in 2029, non-EU companies generating more than €150 million in revenue within the EU will also be required to comply with these reporting standards. Gradually, more than 50.000 companies will need to report a maximum of 11.000 datapoints per year. The European Reporting Advisory Group (who prepared the standard) estimates that the one-off costs are around €287.000 and recurring cost are €319.000 for companies the first companies to start in 2025. For later companies the costs are €146.000 (one-off) and €162.000 (recurring). As you can see, the amount of work and costs involved with the mere compliance, let alone impact, are significant. Next up, what is in the actual report? What will be in the report? Before CSRD, the annual report consisted of a management report, followed by an audit report and financial statements. The sustainability statements are based on the European Sustainability Reporting Standards (ESRS) and consist of General Information (ESRS-1), General Disclosures (2), Environmental information (ESRS-E), Social Information (ESRS-S), Governance Information (ESRS-G). Thus, CSRD is the piece of legislation as directed by the EU, ESRS are the standards that specify what to report.                List of topical standards: ESRS E1 Climate change ESRS E2 Pollution ESRS E3 Water and Marine Resources ESRS E4 Biodiversity and Ecosystems ESRS E5 resource use and circular economy ESRS S1 Own Workforce ESRS S2 Workers in the value chain ESRS S3 Affected communities ESRS S4 Consumers and end-users ESRS G1 Business Conduct ESRS 1 and 2 serve as a guideline for the general sustainability reporting. The cross-cutting standards define the information to be disclosed about material impacts, risks and opportunities related to sustainability aspects. An understanding of the structure, concepts and general requirements for the preparation and presentation of sustainability information is to be reported. For the topical standards, one is required to conduct a double materiality assesment to map impact, risks and opportunities in relation to the different topics. All topics that are material in the value chain of the company have to be reported and substantiated with data. Accordingly, all topics whose impacts are either materially related to the environment or society (impact materiality, inside-out) or which have a short-, medium- or long-term financial impact on the company and can thus significantly influence the company's development and performance (financial materiality, outside-in) have to be reported. Once all material points are covered, the report will be auditted by an external assurance party. As you may see, it will prove difficult to operationalise this directive and the amount of abbreviations by itself is a real headache. In the next article, we will go in more detail on the impact on the business landscape for Food & Agri and what our strategy involving CSRD is.

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02 may 2024

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