The global demand for food has continued to grow. However, there are limits to the availability of arable land, soil and freshwater. This means that agriculture will remain a vital and resilient sector, while innovation and investment are needed to ensure productivity and reliable production in the long term.
Technological progress can deliver significant efficiency gains, but it cannot fully solve problems such as water scarcity, extreme weather conditions and soil degradation. Despite such limitations, we believe that substantial investments can be made in areas such as resource efficiency and ecosystem restoration.
Agricultural land – an attractive opportunity
We see an attractive opportunity for investors looking to align financial returns with environmental and social benefits. Agricultural land can play an important role in portfolios, especially European agricultural land. It offers stability and growth potential, especially when it comes to food and environmental safety.
European agricultural land can provide:
- Attractive long-term risk-adjusted returns
- Relatively stable annual income returns
- Diversification benefits due to low correlation with other asset classes
- Inflation hedging features.
A tangible contribution
Sustainably managed agricultural land provides investors with a tangible way to take action on climate change adaptation and mitigation and meets the UN Sustainable Development Goals. This approach aims to promote resilient ecosystems, protect wildlife habitats and conserve biodiversity, in line with investor demand for environmental stewardship.
By integrating agricultural land into their allocations, (institutional) investors can enjoy the benefits of diversification, stable income and capital growth. Amid inflationary pressures and climate challenges, we believe that farmland stands out as a real asset, promising not only actual harvests but also robust returns and portfolio resilience.
Finally, we believe that, given the current and coming generational turnover in farm ownership in Europe, private capital will be critical and there will be opportunities to invest in and consolidate land parcels coming onto the market, delivering economies of scale and better oversight of issues such as long-term soil health and biodiversity protection.
Also read our full article Securing tomorrow’s harvest: European agricultural land as a strategic sustainable investment.
Disclaimer
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any opinions expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and make different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate can go down as well as up and investors may not get back their initial outlay. Past performance does not guarantee future returns. Investing in emerging markets or specialized or limited sectors is likely to be subject to above-average volatility due to a high degree of concentration, greater uncertainty due to less information available, less liquidity or greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less certainty than most international developed markets. For this reason, portfolio transaction, liquidation and preservation services on behalf of funds invested in emerging markets may involve greater risk.
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