GLOBAL shifts in incomes and populations, geopolitics and climate change are combining to drastically alter the outlook for the world’s food supply. 

Taimur Hyat, chief operating officer at PGIM, joined the What Goes Up podcast to talk about his research paper Food for Thought: Investment Opportunities Across a Changing Food System.

Here are some highlights of the conversation, which have been condensed and edited for clarity.

What made you look into food as a topic to research?

There were two reasons why we went into this. First, food is not just 10 per cent of GDP, but (also) 40 per cent of the labour force, so a lot of people work in this industry. We are defining food as from farm to fork and everything in between – processing, packaging, preparing the seeds, all the way to end-retail. It’s a big part of the labour force, and there’s been a lot of focus on labour and inflation. So that was one driver. 

The second reason is we think food is where the energy sector and this whole talk about the energy transition was about 10 years ago. We are 10 years behind in the thinking. And it’s going to catch up, because the current food system is simply not fit for purpose. It’s not going to work for our planet, and it’s not going to work for our consumption needs, for a variety of reasons.

That debate on how we transition this – even if it takes 20, 30 years – to the new food system of the future has happened. There are carbon-transition funds, there’s renewable energy, there are opportunities, there’s the Inflation Reduction Act, and lots of money going there. It hasn’t happened to food yet, but we think it’s about to.

A NEWSLETTER FOR YOU

Friday, 12.30 pm

ESG Insights

An exclusive weekly report on the latest environmental, social and governance issues.

Sign Up

You talk about when a society becomes more affluent, when per-capita income goes up, people’s diets change. Can you talk to us about what changes in a diet as a society gains more income?

Historically, the main reason we needed more food for the planet was that there were just more people on it. But an important shift is happening. Now, we have – as perhaps an increasing influence – the fact that Asia in particular is developing a new emerging middle class, and they have the same wants and needs and desires as people in developed markets do.

That means not just more calories, but more protein and increasingly converging with what we call the “Western diet”. So there’s more meat in it, there’s more chicken in it, there’s more pork in that diet. And those are calories that need to be exported. You can’t just all get them in Vietnam or in Thailand or in China. 

Supply chains, which people have been trying to simplify since Covid, are ironically going to get more complicated because people want the same food in more and more countries of the world, rather than just the local food. And that food itself has a bigger climate footprint because of all the methane and greenhouse gas emissions that come from the farming system.

That means much more pressures on the governments in these countries to provide the resources, to provide the infrastructure so that people can get these new forms of Western diets, that are frankly maybe a little less healthy for them, definitely more costly, and require much more importing of things from around the world than before.

Finally, it means the food system doesn’t just need to cope with a bigger population – it needs to provide many more calories even to each person on the planet. 

Talk to us about where you see the cultivated-meat market going.

There are lots of areas we are excited about investing in, but they’re a bit like Bitcoin and other cryptocurrencies in the crypto space – there are definitely some bubbles in the food chain as well.

And cultivated meat is maybe not a bubble – our main issue as an investor is that it’s too early to invest. There are literally hundreds of companies around the world that are trying to do different kinds of cultivated meat, and it’s pretty much impossible at this stage to know which one’s going to win and which one’s going to lose.

So we would say even as a venture capitalist, it’s too early to go in. There will be some winners over time. They’re the ones who are going to solve the scale problem. It is just so expensive to get that chicken nugget or that beef steak cultivated at this point, that it’s just not feasible for it to become a mainstream food item around the world.

What are the geopolitical implications of all these changing trends?

The climate interlinkage is actually quite interesting and complex because it goes both ways.

First of all, the fact that the climate is changing our food supply chains. You have fewer fish in the ocean when oceans are warming up, you have new kinds of fungi, and new kinds of insects that require new pesticides, because of climate change. And with heat, it’s harder for people to work in conditions in many parts of the world where you have manual labour – 80 per cent of Indian farms, for example. And crop yields have declined. 

A more extreme climate reduces crop yields, creates more variability, adds new threats and risks. You’ve also got the fact that the food system, as we have it today, changes the climate. Something like 30 per cent of greenhouse gas emissions, which cause global heating, come from the food system.

Seventy per cent of freshwater consumption is not just all of us drinking water. It’s because the food system needs that water to grow crops. So you’ve got a very complicated interrelationship, and frankly, it’s one that’s unsustainable and needs some new ways to think about food to create a food system that can meet our needs for the future. BLOOMBERG