Top of main content
Washington DC cherry blossoms

The future of food: Solving the global food conundrum

ESG and Sustainable Investing

The future of food: Solving the global food conundrum

Nov 8, 2022

We live in a world where food poverty and food waste go hand in hand. One-third of all food we produce is lost or wasted, yet one in nine people globally are hungry or malnourished1. The world is also facing the enormous challenge of feeding a rapidly growing population without putting further pressure on our environment and compounding climate change.

We need a more sustainable food system. But how can we get there?

“There’s no silver bullet to solve the global food conundrum,” says James Cheo, South-East Asia CIO, HSBC Global Private Banking and Wealth. The transition to more sustainable food is inevitable, but will require governments, scientists, corporations, consumers and investors to play their part.

“As the race towards net zero continues, I believe that private capital will continue to finance this transition, and the food sector is likely to be a beneficiary.”

Thinking from the ground up

The problems in the food system are complex and have many contributing factors, from demographics and distribution, to upgrading to the newest technology and even politics. 

The global population is expected to jump to 8.5 billion by 20502, and feeding everyone will require food production to ramp up at huge environmental cost. Indeed, food-related greenhouse gas emissions are responsible for 26 per cent of global carbon emissions.3

Meanwhile, food is not always getting to where it needs to go.

“As the world deglobalises, nationalisation and food security within borders becomes more prevalent,” says Wai-Shin Chan, Global Head of ESG Research at HSBC. He points to India blocking exports of wheat and other countries blocking sugar exports due to the war in Ukraine as one example. National security and food security are closely interlinked.

“The crux of the problem is, is quite simply, we actually produce enough food in the world. We just don't get it to the right people in the right nutritional value in the right volumes at the right time,” explains Chan. “That's essentially the whole hunger and waste problem together globally. It’s a distribution and efficiency issue.”

Agriculture: Polluter and problem solver

Innovation in the agricultural sector could have an important role to play in developing a more sustainable food system. The stakes are high, as agricultural producers are themselves extremely vulnerable to the effects of climate change, such as extreme weather and drought, while at the same time contributing to carbon emissions. 

“The most important agricultural regions in the world will face substantial decline in agricultural output due to climate change, whether it’s extreme heat or flooding,” says Cheo. This will intensify the push towards improving our fragile food system, he adds. 

We’re already seeing progress. Technology and data are aiding better farming practices, increased productivity and lower emissions with precision and satellite-based agriculture. Agricultural players are employing carbon management tools, calculators or digital information platforms to measure, monitor and manage the impact of their climate action strategies throughout the entire food chain. 

One initiative, the Midwest Row Crop Collaborative project, supported by HSBC4, is working with farmers to introduce cover crops, nutrient management and reduced tillage on large-scale farms in the US. The goal is to improve soil health and increase resilience in the US food system, while reducing carbon emissions and boosting profitability.

New ingredients and alternative proteins

Alternatives to dairy milk are already mainstream in much of the world, and meat alternatives are moving in that direction. The market for alternative proteins (meat, eggs, dairy and seafood products) could grow from USD40bn to USD140bn by 2030,5 and includes plant-based, insect-based and lab-grown food.

Hong Kong-based social venture Green Monday, for one, aims to shift the world to a more plant-based diet, and its food tech arm OmniMeat produces plant-based pork alternatives. 

There are a few key ingredients needed for alternative proteins to be successful, says Cheo. “First you need wide adoption by consumers – are they willing to switch to alternative protein? Then, much more crucial is the end price point. How do you improve the technology such that you can scale it and reduce the price so it becomes cheaper to produce cultured chicken than the real thing?” 

Research and development is helping this area scale up, and prices will fall as meat alternatives go increasingly mainstream, he suggests.

Reducing food and food packaging waste

Another important area of innovation is food packaging and waste reduction. The United Nations Sustainable Development Goal (SDG) 12.3 aims to halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains.

From the sell-by dates printed on the labels (and making the labels themselves out of sustainable materials), changing portion size, and using more sustainable packaging such as bio-plastics, there are a lot of things companies can do to help reduce food waste.

But it’s a double-edged sword, explains Chan. While it’s clear that excessive packaging consumes resources and adds to landfills, inadequate packaging does not preserve the life of food – from production to transport to sale to someone’s fridge –contributing to food waste. “It’s about finding an appropriate balance.”

The investment case

Investors don’t necessarily see sustainable food as a standalone investment theme, suggests Chan. Rather, it feeds into different ESG issues such as sustainability within the consumer sector, climate change, demographics, agriculture, production and circularity. 

Investors wanting to get involved could look towards large consumer-facing companies that have food-related business lines, or they could make a pure play by looking at companies that specialise in sustainable food themes. This could include the technology providers developing AI solutions, or the logistics and warehousing companies making food transportation more efficient, for example.

The most important part of the retail supply chain is traceability, argues Chan. This means being able to trace where your food came from, how it was processed, who picked it, and everything in between.  All this data can help consumers and retailers make more conscious choices along the supply chain. 

“Proper traceability is a key area that investors could invest more in. Then, armed with that knowledge, you could make more targeted investments into, say, packaging or transportation or seasonality,” he notes. 

Cheo suggests a diversified approach with a mixture of established and more nimble and innovative companies in portfolios. Investing for a sustainable future will be a long-term theme, he notes, but is likely to face short-term volatility. So working with an established investment expert in this area – such as HSBC – can help you identify the risks and the opportunities.

As industries transform and develop solutions to address food security and climate concerns, investment opportunities will open up. Read more about our Top Trends and High Conviction Themes here, and about sustainable investing basics here.

This material is issued by HSBC UK Bank plc which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK. It has been issued for your information purposes only.

Please note that HSBC does not provide tax or legal advice and clients should seek professional advice from their tax advisor. Any reference to tax is based on our knowledge of the current and proposed tax regime and is subject to change.

In the United Kingdom, this document has been approved for distribution by HSBC UK Bank plc whose Private Banking office is located at 8 Cork Street, London, W1S 3LJ.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC UK Bank plc. Copyright© HSBC Private Banking 2024. 

Listening to what you have to say about services matters to us. It's easy to share your ideas, stay informed and join the conversation.