The Overlooked Giant In The ESG Conversation? Agriculture

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In the new world of ESG-everything, agriculture has a $3 trillion challenge looming around its bottom line. That’s the estimated global environmental cost to feed humans right now — from emissions like methane gas, to the usage of pesticides, fertilizers and freshwater.?

To be clear, farmers have long been stewards of our lands. Yet the growth of our populations and the corresponding scale of food demand have weighed heavily on the environment. As much as 17 percent of global greenhouse gas emissions have come from the sector in recent years.

But the ways we choose to feed a growing population are more than ever being weighed against the tradeoffs to our ecosystem. Investors are increasingly rewarding agricultural initiatives that are aligned around ESG (environmental, social and governance) and penalizing those that aren’t.

More and more farms are taking concrete steps to reduce their ecological footprint — and I’m not just talking about switching to organic. With the help of new and existing technology, farmers are increasing productivity while reducing environmental impact. Just as importantly, they’re quantifying this shift with hard data that shows precisely the difference they’re making.

Indeed, as an industry that touches every single human being on the planet, it’s becoming clear that agriculture can be one of the most powerful ESG investments in the world. Here’s how.?

When we talk about ESG having an impact on agriculture, it’s important to understand these changes are not driven solely by reactions to investor attitudes.

Farmers are taking the lead on ESG … and not just to please investors

The ESG or impact investing movement has been led in part by Blackrock CEO Larry Finck, who set out in 2019 to reshape global capitalism with a focus on sustainability and social issues. Finck wrote to shareholders this year: “Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?”

In agriculture, we’re already seeing the impact, as large multinationals prioritize relationships with suppliers dedicated to reducing their environmental footprint. More farms are investing in technology that powers data-driven decision making, enabling them to optimize their use of resources.

Yet, for many farmers, improving sustainability is not merely a matter of satisfying investor sentiment — it’s an operational necessity.?

The entire world of agriculture has had to figure out how to produce more with less right now. Farmers find themselves in the midst of a pressure-cooker scenario like the world has never seen. Fertile land is in decline, while freshwater needs far exceed supply. Meanwhile, a growing population expected to approach 10 billion by 2050 means more mouths to feed. (For perspective, that’s the equivalent of adding a city of around 1.5 million people to the planet every single week … for the next 28 years!).

So when we talk about ESG having an impact on agriculture, it’s important to understand these changes are not driven solely by reactions to investor attitudes. Many farmers are already deeply committed to improving sustainability and using technology right now to reduce inputs and costs. On an individual farm, this may only represent a modest environmental impact. But scaled globally, across billions of acres of farms, improved agricultural efficiency promises to be transformative.

However, this transformation is about more than just good intentions. It’s enabled by a new era of agricultural technology. ?

Innovation — not organic — at the forefront

When people think of sustainable agriculture, they may have an idyllic vision of a hobby farm, or possibly a larger organic operation. But while those things are great, they’re not scalable to feed a growing population under the conditions farmers are facing today.?

Indeed, some of the most significant ESG-related gains today are coming from the integration of new technology — and better data — into large-scale commercial farming. Methods like precision agriculture, indoor growing and regenerative agriculture allow farmers to increase yields while reducing inputs such as water, fertilizer and pesticides. On a global scale, even small efficiency gains translate to enormous environmental savings.??

It's little wonder that agriculture technology saw record investment last year, with $5 billion invested in venture-backed startups throughout 2021 — a 50% increase over the previous year. These sums reflect the magnitude of the challenge, as well as the potential impact of advanced agricultural technologies to help feed the world while also supporting an ESG mandate.?

Farm data fights greenwashing

For all of its lofty goals, however, ESG investing is plagued by a serious Achilles’ Heel: greenwashing. And agriculture isn’t exempt.

As the corporate world scrambles to make promises that appease impact investors, many of them are stretching the truth. In fact, a recent poll showed 68% of American executives admitted their companies were guilty of greenwashing on sustainability pledges. The United Nations is even wading into the conversation, striking an expert panel to sift through corporate pledges and hold companies accountable.?

When it comes to farming, how can investors — not to mention end consumers — know that ESG promises are truly being met and that “eco-friendly” claims go beyond labels? This is where data-driven technology represents a powerful source of truth. Sensors and record-keeping platforms in fields today are capturing detailed, granular information on everything from water consumption to pesticide usage. This is allowing farmers to definitively quantify their ESG impact as technology helps them uncover greater efficiencies.??

Right now, agriculture is fast evolving from a $3 trillion ESG liability to a $3 trillion ESG asset. Empowered by new technologies, farmers are showing that feeding a growing population and sustaining the environment aren’t conflicting goals, but rather inseparable. Couple that with next generation technology capable of quantifying their impact on air, soil and water in absolute terms and the ESG impact becomes clear.???

As investors look for their next sustainable investment, I’d urge them to ask one question — what could be more important than increasing food security for our growing population while reducing harm to the planet we call home??

Thanks for reading! I'd love to know your thoughts in the comments below. For more insights on taking business to the next level and what the future of farming looks like, be sure to?subscribe?to Growth Hacking, my new newsletter.

(A version of this post originally appeared in Agfunder.)