Beyond Bulls & Bears


The future of food is technology

In our new piece from the Franklin Templeton Institute, we examine the challenge of feeding a growing global population in the midst of climate change, geopolitical shocks and uncertainty. Head of the Institute, Stephen Dover, looks at the future of food and the innovation and technology that will be needed to safely produce and distribute the food we need from the perspective of an investor.

The following is an excerpt from the Institute’s recent paper, “Food innovation: Investing to feed our future.”

I am not an expert on climate change. Therefore, I will leave it to those experts and environmental, social and governance (ESG) specialists to talk in detail about the impacts of climate change on our food system and which government policies are required to address or decrease impacts. I am looking at the future of food and the innovation and technology that will be needed to safely produce and distribute the food we need from the perspective of an investor. That said, it is clear the food system—which makes up 10% of the global economy1—is increasingly a major driver of climate change, and at the same time is disrupted by climate change. This disruption will impact global investors across asset classes—in equities alone, food makes up US$4.9 trillion or approximately 4% of global market capitalization.2 So, it’s critical that we think about how investors respond—whether they focus on ESG or not—to identify opportunities in the market and potentially avoid risk that could materially impact their portfolios.

I have some history in agriculture being from a fourth-generation ranching family in Montana. Anyone associated with a ranching family gains a lifelong education on the food supply chain, commodity prices, and the challenges ranchers and farmers face every day to get their product—whether it’s a cow or a bushel of wheat—to market. Despite this experience, I am somewhat surprised by the level of sophistication in today’s food business. Food is no longer a story just about land, water and weather; it is a story about technology, innovation and the future. It’s clear to me that food innovation, and the future of food production, will play a major role in markets over the coming decades.

Three reasons food matters for investors

  1. Food industry innovation requires innovation in financing

So, what does this mean for investors? In my view, three main points. First, innovation in the food industry must be financed. Whether it be funding for improving traditional farmers’ production, the move to high-efficiency indoor agriculture, startups developing alternative proteins, or helping companies build supply-chain resilience, all will require large capital inputs from equity, fixed income, and private markets. And, if we’re expecting the food industry to innovate, the asset management industry must also innovate to create investment vehicles to address these large-scale changes. This may require rethinking traditional funding models, including the duration and types of loans, direct impactful investing and aligning investments to long-term sustainability goals, such as the UN Sustainable Development Goals (SDGs). And, due to the significant impact agriculture has on greenhouse gas emissions, it is critical that carbon trading and carbon markets develop as soon as possible.

  1. Investors should consider unintended consequences

Second, the food system is highly complex and interconnected, and deployments of capital must consider unintended consequences (read: negative externalities). Changes in the system create ripple effects that have long-term impacts and can lead to severe disruptions. We’ve seen these disruptions during the COVID-19 pandemic. One ripple effect I have seen firsthand is how the change in diet in China has affected the health of Chinese people and the environment globally. When I first started traveling to China in the early 1980s, most of the diet was plant based with just a small amount of meat—usually pork. In the early 1980s, the average per-capita consumption of meat was just over 13 kg per year.3 Obesity, diabetes and other diet-related diseases were rarely reported during the 1980s in China. With the opening of China’s economy and subsequential rise in average incomes and a growing middle class over the last few decades, meat consumption now hovers over 60 kg per year.4 The significant increase in meat in the Chinese diet corresponds to a nearly 7x increase in beef consumption since 1990.5 Increasing appetite for beef in China is linked to accelerating deforestation of the world’s greatest carbon sink, the Amazon rainforest, where many cattle are now being raised.6

The change in diet is not limited to meat—we’re seeing increased consumption of sugar and fat, resulting in significant increases in type 2 diabetes in China’s populace. Less than 1% of China’s population suffered from type 2 diabetes in 1980; that number is now close to 12% in 2022— in raw numbers, roughly a jump from fewer than 10 million to over 170 million people.7 This increase has economic ramifications. In 2015, it was estimated that type 2 diabetes generated US$1.32 trillion of negative impact on the global economy, and, by 2030, it is estimated to have a negative impact of US$2.25 trillion–US$2.5 trillion.8 With the world’s largest population, China leads the globe in financial loss from type 2 diabetes. That loss is projected to grow to consume 3%–5% of China’s forecasted 2030 gross domestic product (GDP).9 As China becomes a larger segment of the emerging market index—and it really should be considered a developed market, in my opinion—this could have a significant impact on investors’ assets going forward.

  1. We need better financial incentives and environmental impact measurements

Third, as we invest in innovation to help reduce negative externalities, a market-based approached where we more effectively measure and price environmental impact will be necessary. More directly: the economic value of natural systems and the risks to these systems’ further degradation must be accounted for in asset pricing. To give context, the World Economic Forum (WEF) and PricewaterhouseCoopers (PwC) have estimated that more than half of global GDP, is moderately to highly dependent on natural systems under threat—essentially, half of global GDP has significant risk exposure to changes in nature.10 Like me, I expect that number may make you gasp. However, for investors, there is opportunity on the other side of this equation. The opportunity is to help fund the global economy’s transition to a nature-positive economy—which the WEF has defined as “enhancing the reliance of our planet and societies to halt and reverse nature loss.” It is estimated this transition will generate US$10 trillion in additional business revenue and cost savings and over 395 million jobs by 2030—of which US$3.6 trillion and 191 million jobs are directly related to changing the food system.11 Examples in the food sector include funding regenerative agriculture; creating sustainable and healthy fisheries; stopping biodiversity loss (food production is one of the leading contributors); reducing food waste; and creating efficient, transparent and sustainable supply chains.

I encourage you to read more about this important subject from our thought leaders in this space. Download our paper, “Food innovation: Investing to feed our future.”



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1. Source: van Nieuwkoop, M. “Do the costs of the global food system outweigh its monetary value?,” World Bank Blogs, June 17, 2019.

2. Source: FactSet, as of February 21, 2022. Calculation contains market cap of 2,114 companies in these categories: food distributors, food retail, hypermarkets and super centers.

3. Source: United Nations (UN) Food and Agriculture Organization (FAO). Note: Data excludes fish and other seafood sources. Figures do not correct for waste at the household/consumption level, so they may not directly reflect the quantity of food finally consumed by a given individual.

4. Source: UN FAO. Data excludes fish and other seafood sources. As of February 2022.

5. Source: Organisation for Economic Co-operation and Development (OECD), Meat consumption indicator. As of February 2022.

6. Source: Trase, China’s exposure to environmental risks from Brazilian beef imports, Trase Issue Brief 3, June 2020.

7. Source: Yuan, H. et. al. 2017. Type 2 diabetes epidemic in East Asia: a 35-year systematic trend analysis. Oncotarget, vol. 9(6), 6718–6727.

8. There is no assurance that any estimate, forecast or projection will be realized.

9. Source: Food and Agriculture Organization of the United Nations (FAO). 2009. High Level Expert Forum—How to Feed the World in 2050. Rome: FAO. There is no assurance any estimate, forecast or projection will be realized.

10. Source: WEF in collaboration with PwC. 2020. Nature Risk Rising, Geneva: WEF.

11. Source: WEF in collaboration with AlphaBeta. 2020. The Future of Nature and Business, Geneva: WEF.

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