VanEck launches Future of Food ETF
Asset manager VanEck has listed the VanEck Sustainable Future of Food UCITS ETF on London Stock Exchange and Deutsche Börse Xetra.
The firm writes that with the new ETF, investors can invest in a pooled selection of innovative food companies from around the world and thus contribute to more sustainably produced food.
Feeding the world's population is a major challenge that requires high levels of investment, the firm says. According to the United Nations, the world's population is forecast to grow by a quarter and consume up to 70 percent more food by 2050. After all, it's not just the population as a whole that's growing, especially in emerging markets. The newly emerging middle classes also eat differently; especially more protein, the production of which consumes many resources.
“The production of food, especially meat, harms both the environment and health. This is due to fertilisers, weed killers and other artificial additives in livestock feed, hormones used in raising animals for slaughter, deforestation to make room for farms, air pollution from long transport routes and methane emissions from large farms”, explains Martijn Rozemuller, CEO at VanEck Europe. “Without profound changes in agriculture and food production, the world will not be able to stop climate change. With all this in mind, consumers around the world are now demanding alternatives.” The demand for cleaner, healthier and sustainable food is increasing.
The VanEck Sustainable Future of Food UCITS ETF closely tracks the performance of the MVIS Global Future of Food ESG Index. This index adheres to ESG criteria and is set up as a pure-play product. This means that only companies that generate at least 50 per cent (25 per cent for current components) of their revenues in the food sector or with innovative agricultural technologies are included. In addition, companies that produce organic food and those that have high standards relating to food waste, food safety or environmental impact are also included in the index. Investment opportunities are primarily offered by alternative proteins, new types of dairy products and the technologies used to produce these foods. In its individual stock selection, VanEck therefore focuses on the following key areas:
Technology is the key to reducing the environmental impact of agriculture. Meat from plants, for example, consumes less energy, uses less land and water than cattle farming, and significantly reduces emissions of harmful climate gases: Calculations from 2018 by the nongovernmental organisation GRAIN and the Institute for Agriculture and Trade Policy show that the five major corporations JBS, Tyson, Cargill, Dairy Farmers of America and Fonterra together produce more emissions in a year than major oil companies like Exxon, Shell or BP. 20 of the world's largest meat and dairy companies together are responsible for more greenhouse gas emissions than Germany or France.
The land requirements of traditional agriculture are too great to be sustainable in the future. Solutions can be found through automation, sophisticated Big Data analysis of weather and soil conditions, and more efficient farming methods.
Fossil fuels are needed to produce nitrogen fertiliser, while other agricultural chemicals can be carcinogenic. Alternatives include fertilisers produced with green hydrogen and renewable energy – in combination with biological crop protection.
With the new ETF, investors will invest in about 35 stocks that are positioning themselves early for the transformation of the food industry, which is still several decades away. “By its very nature, the transformation of food production also addressing issues to solve the challenges and demands of our global food system.”, explains Dominik Schmaus, Product Manager at VanEck. As a Article 9 SFDR fund, the ETF is managed according to strict “green” criteria, including impact measurement.