Food investors warned against future climate losses worth US$38tn

Investors in the food industry could suffer US$38 trillion in losses by 2050 due to climate change-related threats to production, sustainable finance researchers warn.

According to First Sentier MUFG Sustainable Investment Institute’s Climate Risk and Adaptation in Global Food report, the global food system faces significant risks from six key extreme weather events: temperature extremes, heavy precipitation, flooding, droughts, extreme storms and compound events.

These have the potential to harm infrastructure, food value chains and wider natural ecosystems with a projected cost of US$38 trillion by 2050 under a 2.5ºC temperature rise scenario – if nothing is done to prepare the food industry for these changes.

Preparing for food industry shifts

The report identifies five upcoming shifts that are likely to disrupt the food industry in the coming years. First, the geographic spread of food production will change in a warming climate, with higher-value food likely to be produced in cooler regions. 

Second, the type of food we eat will also change as farmers seek to grow and rear more climate-resilient crops and species. This shift will also be driven by changing consumer preferences and disrupted trade routes.

At the same time, technological developments and AI can help the industry adapt to climate change and maximise yields.

With the report, the Institute urges investors to take action now to avoid the worst of these impacts, primarily by engaging with companies within their portfolios to start implementing climate adaptation measures now.

Food investors’ second warning about climate risks

This is the second time in two weeks that food investors are being warned about upcoming losses related to climate change, and asked to act and adapt. At the beginning of April, a group of whistleblowers from the industry wrote an open letter to financiers to raise the alarm on the lack of action by boards and CEOs.

The letter urged investors to ask specific questions to the companies they own or lend to, in order to drive greater recognition of the challenges ahead, and to spur action to protect businesses, communities and investments.

Now, the Sustainable Finance Institute makes similar recommendations: it encourages investors to support the disclosure of value chain maps, climate risk and input price scenarios, nutrient density trends, emissions trajectories across all scopes, natural resource consumption, and expected impacts from carbon taxes, among other elements.

Based on these disclosures, investors can then formulate and implement an investment strategy to “steward their portfolios away from significant climate risk and towards a more resilient future”, the Institute adds.