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1、PGIM|FOOD FOR THOUGHT 1 MEGATRENDSFOOD FOR THOUGHTInvestment Opportunities Across a Changing Food SystemSPRING/SUMMER 2023For professional investors only.All investments involve risk,including possible loss of capital.2 FOOD FOR THOUGHT|PGIMAbout PGIMPGIM is the asset management business of Prudenti
2、al Financial,Inc.(PFI).PFI has a history that dates back over 145 years and through more than 30 market cycles.With 47 offices in 18 different countries,*our more than 1,400 investment professionals are located in key financial centers around the world.As a leading global asset manager,with$1.2 tril
3、lion in assets under management,PGIM is built on a*foundation of strength,stability and disciplined risk management.Our firm is comprised of autonomous asset management businesses,each specializing in a particular asset class with a focused investment approach.This gives our clients diversified solu
4、tions with global depth and scale across public and private asset classes,including fixed income,equities,real estate,private credit and other alternatives.*30 market cycles represent PFIs asset management expertise through PGIM and its affiliates and its predecessors.For additional information rela
5、ted to market cycles visit:www.nber.org*PGIM is the investment management business of Prudential Financial,Inc.(PFI).PFI is the 11th largest investment manager(out of 431 firms surveyed)in terms of worldwide institutional assets under management based on Pensions&Investments Top Money Managers list
6、published June 2022.This ranking represents institutional client assets under management by PFI as of December 31,2021.Participation in the P&I ranking is voluntary and open to managers that have any kind of U.S.institutional tax-exempt AUM.Managers self-report their data via a survey.P&I sends the
7、survey to previously identified managers and to any new managers asking to participate in the survey/ranking.No compensation is required to participate in the ranking.PGIM|FOOD FOR THOUGHT 1 INTRODUCTION From farm to fork,our global food system is vast,complex,inefficient and increasingly unfit for
8、purpose(Exhibit 1).But with the global food system representing just 10%of global GDP,why should institutional investors care?1 We believe understanding and navigating the rapid evolution of our fragile global food system isimportant for asset owners for four primary reasons:1.Vulnerabilities in the
9、 food supply chain drive critical macroeconomic outcomesFood can be a key driver of consumer price inflation.This,in turn,impacts a whole array of critical macroeconomic outcomes.High food inflation can influence central bank monetary policy as well as government regulatory and fiscal actions.And hi
10、gher food prices from disruptions in food supply chains can have a dampening effect on overall economic activity as discretionary consumer spending may get crowded out especially in emerging markets where food can account for up to 40%of household spending.In addition,food policy is a significant pa
11、rt of fiscal budgets,with global support and subsidies for farmers totaling over$700 billion.22.Food security is critical in evaluating domestic political stability and geopoliticalrisksFood insecurity is a key driver of domestic political instability,especially in emerging and frontier markets.Most
12、 recently,food shortages and inflation led to the toppling of governments in Tunisia and Egypt during the Arab Spring of 2010.Equally important,the food sector employs 40%of the global workforce and has tremendous political influence.From France to Peru and from India Exhibit 1:Current tensions in t
13、he global food system Unequal distribution ofcalories Over 800 million people are affected by hunger (one of every nine humans)3 29%of global population living under moderate or severe food insecurity4 Over two billion people worldwide are obese or overweight5 G8 obesity rates over 25%with people on
14、 average eating 50%more calories than needed6 Food security aspirations vs.reality COVID and the war in Ukraine highlight the vital role of food security for national security The need to meet caloric needs and preferences of a growing and more affluent population in emerging and frontier markets In
15、creasing reliance on food imports and long supply chains as diets converge 2.5 billion tons of food lost or wasted each year throughout the food value chain 7 Farming methods from different eras coexist 21st century precision agriculture in the Americas and Europe using AI and advanced analytics Lar
16、ge-scale mechanized farming in Argentina,Brazil andChina In India,more than 80%of farms are smaller than 10 acres and rely on manual labor8 1960s“Green Revolution”technology still used in South Asia and AfricaThe interaction between climate and agriculture 40%of global cropland has already been expo
17、sed to water scarcity9 Climate change will cause a 12%decline in crop yields and up to a 35%decline in fishery production10 Agriculture accounts for:30%of global greenhouse gas emissions11 80%of deforestation12 70%of freshwater consumption13 2 FOOD FOR THOUGHT|PGIMto China,this power manifests itsel
18、f in electoral outcomes,vast subsidies,regulatory changes and trade barriers.Food security is also re-shaping geo-politics.Given the recent impact from COVID-19 and the fallout from the Ukraine War,food security is increasingly seen as national security.The growing bi-partisan political pressure in
19、the US to curtail Chinese-linked ownership of agricultural land is an example of growing tension around access to food.14 Similarly,the focus on acquiring or leasing agricultural land as part of the Chinese governments Belt and Road Initiative has raised significant concern across multiple countries
20、 in Latin American,Asia and Africa.153.There are attractive investment opportunities in public and private markets as the global food system is transformed With the global food system rapidly transforming,investors will find a shifting landscape of opportunities and risks.The evolving investable opp
21、ortunity set ranges from cold storage and many elements of“AgTech”to typically under-allocated sectors such as farmland debt and equity.Equally,there are real investment risks around over-hyped trends such as alternative meats and vertical farming.4.Investing in the food system provides opportunitie
22、s for investors to further ESG goals and have measurable impact In some ways,todays food system,resembles the energy sector from a decade ago.It provides a vital good for human survival but does so with some important negative externalities.This creates both tensions and opportunities for ESG-driven
23、 investors.Given the complex interlinkages and feedback loops between climate change and food production,there are significant opportunities for investors to make a tangible difference as they invest behind a more inclusive,sustainable and nutritious food system.For investors,it is especially critic
24、al to identify the powerful supply and demand forces re-shaping the entire global food value chain(Exhibit 2).Exhibit 2:Overview of the food value chain Farmland Inputs&Crops Food Processing Food Manufacturing Distribution&Storage Packaging&Branding Food Service&RetailersDemand Drivers Growing afflu
25、ence in emerging markets Rising population in sub-Saharan Africa and South Asia Shifting consumer preferences Covergence of global dietsSupply Drivers Impact of climate change Technology and innovationSource:PGIM Thematic Research.SUPPLY DRIVERS Impact of climate change Technology and innovationDEMA
26、ND DRIVERSFarmland Inputs&CropsFood ProcessingFood ManufacturingDistribution&StoragePackaging&BrandingFood Service&Retailers Rising population in sub-Saharan Africa and South Asia Growing affluence in emerging markets Convergence of global diets Shifting consumer preferencesPGIM|FOOD FOR THOUGHT 3 T
27、o understand the emerging investment opportunities and hidden risks from this ongoing transformation of the food system we have drawn on the insights of over 40 investment professionals across PGIMs fixed income,equity,real estate and private alternatives managers as well as leading policymakers,aca
28、demics,entrepreneurs,private equity and VC investors.We unpack the critical drivers and resulting investment implications of the new global food system in the rest of this report.Starting with the demand side,Chapter 1 evaluates investment opportunities and risks emerging from rising incomes(and pop
29、ulations)as well as changing consumer food preferences.Shifting to the supply side,Chapter 2 focuses on investment themes linked to climate change and an array of innovation across the entire food supply chain,from AgTech through lab-grown meat.Finally,Chapter 3 examines the menu of cross-portfolio
30、options for CIOs to consider when they consider the opportunities and risks embedded in the global food system.Given the recent impact from COVID-19 and the fallout from the Ukraine War,food security is increasingly seen as national security.4 FOOD FOR THOUGHT|PGIMTABLE OF CONTENTS01 01 RISING AFFLU
31、ENCE&SHIFTING PREFERENCES ARE RESHAPING FOOD DEMAND Page 50102 02FOOD SUPPLY:CLIMATE AND INNOVATION ARE TRANSFORMING PRODUCTION Page 130203 03PORTFOLIO-WIDE INVESTMENT IMPLICATIONS Page 23034 FOOD FOR THOUGHT|PGIMPGIM|FOOD FOR THOUGHT 5 01CHAPTER 1 RISING AFFLUENCE AND SHIFTING PREFERENCES ARE RESHA
32、PING FOOD DEMAND“Rising incomes,convergence of global diets and a shift to convenience and healthier options are critical in shaping demand.”223316 FOOD FOR THOUGHT|PGIMCHAPTER 1 RISING AFFLUENCE AND SHIFTING PREFERENCES ARE RESHAPING FOOD DEMANDUnderstanding the drivers of global food demand is key
33、 to any investment decision across the food system.Going forward,three factors will be critical in shaping demand.First,the shift from population growth to income growth will be an increasingly important factor.Second,the convergence of global diets is altering food supply chains and agricultural pr
34、oduction.And third,changing consumer preferences towards more convenient,healthier and safer food options factors that are inextricably linked but not always congruent.1.Alongside population growth,affluence will drive future food demand Over the past 60 years,the worlds growing population has been
35、the main driver of food demand.Looking ahead,global population is poised to increase 25%to almost ten billion by 2050 with more than 80%of this growth coming from South Asia and sub-Saharan Africa.Population growth so narrowly concentrated in one or two regions is a deviation from the past where gro
36、wth was more widely dispersed.That population growth will be highly concentrated in lower-income countries has direct implications for food demand.As countries grow in affluence,their food consumption patterns change drastically.There are multiple stages to this evolution also known as Engels law.16
37、 For lower-income countries,food consumption increases sharply as income rises before leveling off as they approach middle-income status.This income effect will be a key driver of future food demand(Exhibit 3).In fact,some research suggests this income effect could be substantially larger over Exhib
38、it 3:Rising income is becoming an increasingly important driver of food demandShare of incremental food demand driven by income growth10%30%50%70%90%-20-2050Low EstimateHigh Estimate(Forecast)(Forecast)Source:PGIM Thematic Research analysis,International Institute for App
39、lied Systems Analysis,World Bank and International Food Policy Research Institute.Note:Low and high estimates based on the Shared Socioeconomic Pathways(SSP).PGIM|FOOD FOR THOUGHT 7 the next 30 years than in the past and may very well account for most of the increase in food demand over that time.17
40、 In addition,higher income causes diets to shift towards more resource-intensive foods such as meat,fish and processed foods.To understand the implications,it is crucial to consider the energy needed to produce food compared to the calories they provide.For example,every calorie of beef consumed req
41、uires about 25 calories of energy in production.That is,it takes 25 calories of energy to produce every edible calorie of beef a 25 to 1 ratio.Other meats are rather energy inefficient as well pork has a ratio of 9 to 1 and poultry 5 to 1.18 One consequence of the shift towards more animal-based pro
42、teins is greater demand for feed grain like corn and soy.It is no coincidence that as Chinas pork consumption grew between 2010 and 2020,its soybean imports almost doubled to 102 million tons.19Consequently,as consumers become more affluent and shift their diets,the energy required to meet their dai
43、ly intake increases significantly.Importantly,the regions where population growth is most concentrated over the next 30 years South Asia and sub-Saharan Africa will also increase their meat consumption sharply given their expected income growth(Exhibit 4).2.Diets are converging globallyIncome growth
44、 not only leads to more resource-intensive diets,but it has also led to a convergence of diets across regions.This is the second factor driving future food demand.Over the last 60 years,emerging and frontier markets with growing per capita income have seen not only an increase in meat consumption bu
45、t a general shift to a diet heavy on animal proteins,dairy products,wheat,oils and sugar often referred to as a“western diet”(Exhibit 5).20Exhibit 4:Meat consumption increases with affluenceSub-Saharan nations versus rest of world020406080100$0$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$
46、45,000Kg per capita,annuallyGDP per capita,PPPMeat consumptionSub-Saharan nationsSource:World Bank and Food and Agriculture Organization of the United Nations.Note:GDP per capita in PPP,constant 2017$US.Higher incomes cause diets to shift towards more resource-intensive foods such as meat,fish and p
47、rocessed foods.8 FOOD FOR THOUGHT|PGIMThe convergence of global diets has three key implications.First,the distance food needs to travel from where it is grown to the end-consumer will increase.Second,the reliance on food imports and multinational supply chains will create new infrastructure and tra
48、nsport needs while simultaneously increasing the risk around disruptions of supply and its impact on food security.Third,the merging of global diets means we are increasingly dependent on fewer crops,making our food system less resilient to crop-specific disease or pests.3.Global consumer preference
49、s are evolving in different waysThe third key factor shaping food demand is evolving consumer preferences.While many changes will prove to be short-lived fads,some will endure and are critical to understand.Developed-market consumers seeking out healthier food optionsAs diets have moved from legumes
50、 and vegetables towards meat and processed foods high in sugars and sodium,there has been a measurable increase in hypertension,diabetes,obesity and cardiovascular disease.In 2017,over 20%of all deaths worldwide were related to diets.21,22 Both consumers and the food industry are increasingly aware
51、of the critical linkages between diet and health,and it is becoming a factor in driving consumer behavior.For an increasing number of consumers in developed markets,the importance of health and wellness influences their product choices,from ingredient sourcing to food processing.23 Food manufacturer
52、s and processors are adapting to these shifts by tilting towards healthier formulations higher in fiber and lower in sugar and fat.For example,production of high-fructose corn syrup in the US has declined by about 20%since peaking in 1999.24 This change in preferences is being further supported by p
53、olicy shifts in developed markets.In both the US and EU,government initiatives are aiming to increase transparency around nutrition claims as well as funding medically tailored food meals designed and approved by nutritionists to address specific chronic conditions or diseases as part of health insu
54、rance.25 Exhibit 5:Global diets are convergingShare of total daily calories from a“western diet”0%10%20%30%40%50%60%70%South KoreaChinaBrazil19602020Source:United Nations,Food and Agriculture Organization.Note:In this chart,“western diet”refers to animal proteins,dairy products,wheat,vegetable oils
55、and sugars.Over the last 60 years,emerging and frontier markets have seen a general shift to a diet heavy on animal proteins,dairy products,wheat,oils and sugar.PGIM|FOOD FOR THOUGHT 9 Convenience becomes paramount for globalconsumersThe trend towards greater convenience in dining at home was accele
56、rated by the pandemic and is still thriving.26 Additionally,urbanization and smaller household sizes have changed eating habits universally.As people reduce the number of meals prepared at home,consumption of packaged foods and delivered food has increase manifold,especially in emerging markets.27 T
57、oday,the food-for-delivery segment spans far beyond restaurant deliveries and includes ghost kitchens as well as subscription services for ready-to-cook meals.Global demand for prepared foods and meals is set to grow by 60%to$250 billion by 2029.28 Increasingly,grocery stores are also changing distr
58、ibution models to facilitate online orders and adapt to value-conscious and health-driven customers.In the US,online grocery will comprise almost 30%of the food-at-home market by 2030.29 This has led to an expansion of grab-and-go offerings by supermarkets that offer healthier options to traditional
59、 fast food.30 Food Loss and Waste*As much as 40%of food that is grown or produced roughly 2.5 billion tons or$1 trillion worth goes uneaten around the world each year.31 In fact,consumers in developed countries waste almost as much food as the total food production of sub-Saharan Africa.This has a s
60、ignificant toll on food security,economic well-being and the environment.The land,water and other resources used in its production account for approximately 4.4 gigatons of greenhouse gas emissions(GHG)making it the worlds third-largest emitter after China and the United States.32,33 Food loss happe
61、ns at nearly every stage of the value chain,but the degree of loss at each stage varies across the world.For example,in industrialized nations,over 40%of total food waste happens at the retail and consumer stage.By comparison,in developing regions,post-harvest losses during processing amount to roug
62、hly 40%of total food loss there.34For investors and policymakers,this means the opportunities to minimize food loss and bolster food security will vary by region.For example,investments in cold storage in emerging markets improve the infrastructure of the food supply chain outside the farm gate and
63、can contribute meaningfully to limiting fruit and vegetable loss in developing regions.In developed markets,finding ways to repurpose discarded fruits and vegetables as feedstock for other animals or incorporating it as an input in processed foods may limit food loss as well.*The UNs Food and Agricu
64、lture Organization defines food loss as the decrease in quantity or quality of food between harvest up to but not including the retail level.Food waste refers to the decrease in quantity or quality of food from the retail level until end-consumers.10 FOOD FOR THOUGHT|PGIMInvestment ImplicationsThree
65、 demand drivers population and income growth,converging diets,and shifting consumer preferences will transform food demand over the coming decades.They represent deviations from the past and have significant investment implications.There are five themes that will be paramount for investors to consid
66、er as they evaluate opportunities and risks:1.Meat producers offer a contrarian opportunity,while plant-based meat has peakedPlant-based meats have dominated headlines,but reality does not match the hype.35 The steep growth rates for plant-based meats producers have either plateaued or peaked.Only a
67、 few years ago as fast-food chains began to offer Beyond Meat burgers there were expectations for continued exponential growth and drastic changes in consumer preferences.But growth rates have faltered,and today,the alternative meat market remains a tiny sliver less than 0.2%of the$1.7 trillion glob
68、al meat market.36 In fact,alternative meat demand is in decline while global demand for animal-based meat is set to grow by 14%by 2030.37 Almost universally,consumers demand more meat in their diet as income grows.Global meat producers are poised to benefit from this growing demand especially among
69、the rising middle class in emerging markets.Livestock is a commodity-based business dominated by economies of scale.There are a handful of players operating at the global level Tyson Food and OSI from the US or JBS from Brazil that are diversified across both meat products as well as regions.These c
70、haracteristics enable leading producers to better manage cyclical supply factors and make for stable cash flows.38 From an ESG perspective,the carbon emissions and environmental impact of conventional meat production can be problematic.But investors should consider the opportunities to make measurab
71、le impact by actively engaging with(rather than excluding)a range of firms in the food system.This is discussed further in Chapter 3.2.Cold storage and transportation provide global growth opportunitiesAs consumers demand more fresh foods,online grocery and food delivery,expanding the stock of refri
72、gerated warehouses becomes essential.For investors with an ESG lens,investments in the cold transport chain also represent an opportunity to reduce food loss at various stages of the supply chain.In the US,cold storage real estate is particularly compelling.The US is the largest single market for co
73、ld storage,and its consumers are most accustomed to year-round variety and food delivery.New direct-to-consumer businesses(such as Imperfect Food and Misfits Market)also provide real estate investors with customers for existing cold storage facilities as well as new ones with proximity to urban popu
74、lation centers.Investors can find cold storage opportunities in Asia and Latin America as well.A growing middle class in these regions is adopting e-commerce and demanding higher-quality and fresher food options.This not only has led to higher rents for cold storage properties compared to general wa
75、rehouses but is also driving a booming cold storage market from China to Vietnam to India and Mexico with expected growth rates well above 20%in the next decade.39,40Logistics providers in Southeast Asia and Latin America,such as Nichirei and Frialsa,respectively,also benefit from the increasing con
76、vergence of diets and have established cold-chain operations to serve producers and retailers.41,42 Equity and debt investors may find such companies attractive given their strong growth,steady cash flows and recession resilience.Certain specialized transport companies,such as Investors can find col
77、d storage opportunities in Asia and Latin America,where a growing middle class is adopting e-commerce and demanding higher-quality food options.PGIM|FOOD FOR THOUGHT 11 US-based Echo Global Logistics,may be especially attractive as they provide both warehouses and long-haul transport and benefit fro
78、m demand for both cold transport as well as storage.For example,many vegetables and processed foods need temperature-controlled hauling and are susceptible to damage such as freezing,breakage or spilling.3.Packaging offers steady cash flows,no matter the underlying food fadsChanging consumer prefere
79、nces have a direct impact on packaged food.Prepared meals necessarily involve packaging but also create a need for convenience such as resealable pouches and innovations to address concerns around excessive packaging.43 But the increased demand for packaging goes beyond the rise in ready-to-eat meal
80、s.It is also driven by the desire to reduce food waste and diets that are increasingly dependent on food imports.44 Established food-packaging players are a way of taking advantage of the growing market for prepared foods without depending on volatile consumer behavior or the latest food fad.The dem
81、and for packaging is sticky but at the same time requires constant innovation to improve characteristics(e.g.,lightweight or resealable)as well as recycling rates and overall sustainability.Investors should look for companies that are leaders in their market segment such as Novolex or Berry Global i
82、n the US.One segment that has seen strong growth over the past few years has been single-use metal containers.The growing demand for beer and energy drinks makes US companies such as Ardagh Metal Packaging and Crown Holdings potentially attractive investments.The specialized machinery and equipment
83、required for food packaging also offers potentially interesting opportunities for investors.For example,the now ubiquitous plastic pouches with resealable spouts commonly used for apple sauce or baby food require specialized machinery for packaging.Large players in the space like Duravant in the US
84、or Germanys Krones have strong cash flows to fund new innovations,are relatively resilient to recessions and have a sticky customer base.4.Health and wellness options drive grocery and food innovationConsumers are increasingly conscious about healthier food options.45 While still early in their deve
85、lopment,startups that present healthier and sustainable products may offer attractive venture opportunities for investors.In the US,companies like Voyage Foods focus on producing alternatives to ingredients with health,environmental or social challenges.Their line of products includes nut-free peanu
86、t butter(for those with allergies)and cocoa-free chocolate and coffee(both cocoa production and coffee trade can be unethical).Another example is the growing list of personalized meal services such as Hello Fresh and Dinnerly in Europe and the US targeted at the health and wellness segment by supply
87、ing ready-to-eat meals that meet specific dietary restrictions.Investors looking for VC investments should seek out companies closing the gap on price and taste,rather than those relying on compelling consumers to change their behavior or preferences.The health trend has also created opportunity in
88、food retail.Regionally dominant grocery stores,like privately owned Wegmans and Hy-Vee in the US or publicly traded Tesco and Carrefour in Europe,are particularly well positioned for these changes.Customers are increasingly loyal to retailers private label brands,and these players have expanded thei
89、r offering to include healthier and higher-margin products.As a result,these grocers have greater flexibility in pricing.The super-regionals are also leveraging technology and digitization to provide consumers with the convenience of either an advanced online or physical shopping experience.46,47 Es
90、tablished food-packaging players are a way of taking advantage of the growing market for prepared foods without depending on volatile consumer behavior.12 FOOD FOR THOUGHT|PGIM5.Convenience and food safety drive emerging market opportunitiesConcerns around food safety and unpacked products have led
91、to a marked uptick in demand for recognized brands,ready-to-eat snacks and packaged foods in rapidly urbanizing countries such as India,Brazil and China.48,49 Investors should seek companies that offer exposure to food and beverage staples,with strong brand names and local logistic expertise.For exa
92、mple,Asia offers investors opportunities in publicly traded companies such as Indias Britannia(producer of baked goods)or Varun Beverages(PepsiCo and Tropicana beverages).Concerns around food safety and unpacked products have led to a marked uptick in demand for recognized brands,ready-to-eat snacks
93、 and packaged foods in rapidly urbanizing countries.Similarly,Indonesia-based and family-owned Indofood specializes in convenience foods instant noodles,beverages and ready-to-eat snacks in Southeast Asia and Africa.In Latin America,investors may want to consider the debt of family-owned businesses
94、like Grupo Bimbo the largest baking company in the world given their trusted brand and excellent distribution networks throughout the Americas.Investors may also want to consider bottling companies such as Central America Bottling(PepsiCo)and Coca-Cola FEMSA,which offer global brand exposure as well
95、 as vast local distribution networks.These are examples of companies in Latin America and Asia that will continue to see growth from the shift to convenience and converging diets.Chapter 1 examined the dynamics altering the food system from the demand side.The next chapter will review the major forc
96、es driving change from the supply side.Namely,how climate and technology are reshaping agriculture and food production.PGIM|FOOD FOR THOUGHT 13 CHAPTER 2 FOOD SUPPLY:CLIMATE AND INNOVATION ARE TRANSFORMING PRODUCTION“022The global food system,despite all its imperfections,provides over 20 trillion c
97、alories every day.”113314 FOOD FOR THOUGHT|PGIMThe previous chapter focused on the key factors driving demand and how they are shifting the investment landscape.We now turn to the supply side of the global food system,which,despite all its imperfections,provides over 20 trillion calories every day.5
98、0 There are two key drivers in the food supply chain that investors cannot ignore.First,how agriculture and climate change really impact each other.Second,the relentless push of technology and innovation into every corner of food production.1.The feedback loop between the environment and agriculture
99、While there is much discussion around climate change and the food system,what is frequently overlooked is the complex two-way causality(Exhibit 6).While the adverse effects of climate change on food production are well-reported,less attention is paid to the large imprint the food system leaves on th
100、e environment.In fact,global food production accounts for 70%of freshwater consumption and 30%of greenhouse gas emissions.51 Food production impacts the environment andclimate change The basis of todays global agriculture especially in key crops like corn,wheat and rice can be traced to the 1960s Gr
101、een Revolution.52 The tremendous increase in productivity from that time was driven by a combination of new seed breeding techniques as well as the proliferation of synthetic fertilizers and pesticides.Even today,these methods remain dominant in most parts of the world.However,as we view food produc
102、tion through a 21st-century lens of Exhibit 6:Agriculture and the environment impact each otherAgriculture 30%of global GHG emission 70%of freshwater consumption 80%of deforestationClimate and Environment 12%crop yield decline Up to 35%decline in fishery production 17%decline in milk productionSourc
103、e:PGIM Thematic Research.CHAPTER 2 FOOD SUPPLY:CLIMATE AND INNOVATION ARE TRANSFORMING PRODUCTION 30%of global GHGemission 70%offreshwaterconsumption 80%of deforestation 12%crop yield decline Up to35%declinein fishery production 17%declinein milk productionAGRICULTURECLIMATE ANDENVIRONMENTIMPACTIMPA
104、CTPGIM|FOOD FOR THOUGHT 15 sustainability,it is clear this template for agricultural production needs upgrading.53,54 Synthetic fertilizers can impair water sources and marine lifeWhile fertilizers are a simple and effective way to boost crop yields,the persistent use of nitrogen-based fertilizers c
105、ontributes to environmental degradation in several ways.55 Current methods of farming that have few cover crops,less fallow time and lots of tilling do not allow for the soil to replenish nutrients on its own.This results in the need for more synthetic fertilizers just to keep growing crops.56 It is
106、 estimated that one-third of the fertilizer applied to US corn crops each year is merely to compensate for the ongoing loss of soil fertility costing farmers more than$500 million.57Methane emissions from livestock productionLivestock production has damaging effects on the environment including defo
107、restation for pasture or to grow feed crops.Also,any credible plan to curtail GHG emissions must include food production.Livestock account for roughly 15%of global emissions.58 Much of this is in the form of methane which is 80 times more potent as a GHG than carbon dioxide.Cows,sheep and goats prod
108、uce methane in their stomachs as they digest hard fibers from grass.Most of this enteric methane from livestock digestion is expelled into the atmosphere and accounts for roughly a third of all methane emissions globally.59 With greater demand for animal-based food products,livestock methane emissio
109、ns are projected to grow 30%by 2050 under current policies and practices.60 Climate change directly impacts agriculture in multiple waysAside from remote polar regions,the direct impact of climate change namely,extreme heat,water stress and rainfall variability on crop yields is detrimental.61 For e
110、xample,in 2022 India experienced its hottest March in over a century.The blistering heat reduced wheat yields by an average of 15%and prompted the country to ban wheat exports.62 This is not an isolated situation limited to one crop or one region either.Global corn production is forecast to decline
111、by as much as 20%by 2030 due to climate change.63 Water scarcity is another source of concern for farmers and can no longer be considered a hypothetical risk.Research suggests roughly 40%of global croplands have already experienced water scarcity and the upper end of future estimates are nearly twic
112、e that figure.64 For example,Europe is emerging from a drought that may be its worst in 500 years,and yield forecasts for corn,wheat and other staple crops are being slashed by 25%or more.65,66 Livestock are less productive with heat stressHeat stress the combination of high ambient temperatures,hum
113、idity and solar radiation has a negative impact on animal welfare and reduces the productivity of livestock.Animals respond to heat stress by reducing their feed intake by up to 5%for every additional degree of warming.67 This diminishes weight gain,dairy production and fertility generally,but affec
114、ts larger livestock,such as cattle,more acutely.Total losses in milk and meat production from heat stress alone are expected to reach$40 billion annually with the US,U.K.and West Africa projected to lose up to 17%of milk production by the end of the century.68,69The effects of rising sea temperature
115、s are oftenoverlookedGlobal warming impacts not only temperatures on land but also ocean and sea temperatures.Evidence is mounting that rising sea temperatures are already reducing seafood production in some parts of the world.70 Fish and other marine life have limited ability 40%of global croplands
116、 have already experienced water scarcity and the upper end of future estimates are nearly twice that figure.16 FOOD FOR THOUGHT|PGIMto regulate their body temperature and even subtle changes in their aquatic surroundings can have a substantial impact on their health.71 In fact,ocean warming has alre
117、ady led to material declines in fishery production between 15%and 35%.72Indirect effects of climate change are numerous and costly as wellClimate change has a range of indirect effects on agriculture,from spreading weeds and pests to the declining nutritional value of crops.Going forward,climate cha
118、nge and its impact on food production will add substantial pressure on the food system to meet growing demand.73 Many weeds,pests and fungi thrive under warmer temperatures and increased CO2 levels.In fact,increasingly milder winters can trigger an expansion of the geographic range and reduced effec
119、tiveness of natural pest controls(e.g.,winnowing of older generations from sustained cold temperatures in winter).These changes can lead to invasive insect species in new areas and more insect-transmitted plant fungi and diseases.74 And these changes can be costly as well US farmers already spend mo
120、re than$11 billion annually just to fight weeds.75 2.Technology and innovation are critical to increase food sustainability and productivityTo meet the challenges of the future,technology and innovation will need to play a crucial role in finding new ways of growing and producing food.Innovation and
121、 adoption of modern technology are already taking place throughout the food value chain.It is important for investors to recognize that both tech startups and global incumbents are driving change at every stage.Forward-thinking investors will want to focus on several key areas including crop science
122、,AgTech and“alternative agriculture”that transform food production(Exhibit 7).Crop science can boost climate resilience and crop yieldsCrop science often refers to the development of new varieties of seeds or plant breeding as well as new fertilizers.Farmers have been breeding their own plants for c
123、enturies,and advances in seed varieties like cross-bred or hybrid seeds were a key element of the Green Revolution.Today,crop science continues to be a driver of innovation and adaptation across the agricultural landscape.Seed varieties optimized for local soil,water and climate conditions can enhan
124、ce yields materially.Furthermore,seeds bred with resistance to new pests,diseases and fungi are an effective way to mitigate indirect effects of climate change as well.Specifically,breeding varieties with shorter(or longer)growing cycles to adjust to a shorter(or longer)growing season can enhance cr
125、op yields.Additionally,modifications of seed pathways can lead to faster-growing,more nutrient-rich crops or greater photosynthetic efficiency all of which are ways to extract greater food production from a system that has largely maxed out on arable land and water.New crop varieties can also propel
126、 a more resilient food system.For example,short-stacked corn is more resistant to high winds and extreme weather events than its predecessors.And breeding plants to have deeper and longer root networks can enhance resistance to drought and heat.Biologicals offer minimal environmental impact but face
127、 adoption challengesSynthetic fertilizers and crop protection come with environmental consequences.However,a whole new set of compounds are emerging that use natures own biology to safeguard plants against pests,prevent disease and improve yields.The segment is split roughly between biostimulants wh
128、ich improve nutrient availability,uptake or efficiency to enhance growth and biopesticides,which provide plant Forward-thinking investors will want to focus on several key areas including crop science,AgTech and“alternative agriculture”that transform food production.PGIM|FOOD FOR THOUGHT 17 Exhibit
129、7:Key areas of innovation in food productionInnovation in food productionCrop Science New Crop&Seed Varieties Biologicals Biostimulants BiopesticidesAgTech Precision Agriculture Smart Apps&Sensors Autonomous MachineryAlternative Agriculture Cellular Agriculture Indoor FarmingSource:PGIM Thematic Res
130、earch.protection.76,77 These new compounds known as biologicals are largely created from living organisms or natural materials and catalyze biological processes.These characteristics allow for a considerably smaller environmental footprint than conventional compounds.The global market for agricultur
131、al biologicals is still small about one-sixth the size of the conventional crop protection market but is expected to more than double in size by 2030.78,79 While adoption of biologicals is relatively high in Brazil and Europe,it is lagging in North America and Asia.80 One challenge the industry face
132、s is difficulty in clearly demonstrating that subtle changes to plant processes can lead to enhanced crop yields.With traditional herbicides,for example,the destruction of a weed is a clear demonstration of efficacy.With biologicals,the changes in internal organic processes may act over time and not
133、 be as obvious,making validation of efficacy more ambiguous.81 From tech to table:AgTech boosts productivity and sustainabilityThe basic inputs for agriculture are simple and little changed over time:seed,sun,water,fertilizer,pesticide and labor.AgTech often refers to leveraging technology to create
134、 more efficient methods of farming that reduce the need for these inputs thereby increasing productivity and sustainability.Precision agriculture Precision agriculture is an advanced example of AgTech.It refers to a range of farm management techniques that enhance productivity and address some envir
135、onmental concerns around farming.It relies on measuring and responding to plant and crop variability across a field.Sensors embedded in crops monitor variables like temperature,moisture,and levels of key nutrients(like nitrogen)in the soil and air.This real-time data serves as an input for predictiv
136、e analytics software to determine when and how much water,fertilizer or fungicide to deliver to specific areas of the field.It enables farmers to reduce their cost of inputs and boost productivity while also minimizing water usage and reducing some environmental impacts like nitrogen or chemical run
137、-off.82 However,as a nascent technology,precision agriculture faces challenges including a fragmented landscape for different components that may not be standardized.This can make it difficult for sensors to work seamlessly with software as well as water and nutrient delivery systems because they do
138、 not share a common tech platform.Furthermore,in some fields,internet or mobile connectivity can be inconsistent or weak.83 Last,the sensors,software and delivery systems needed to engage in precision agriculture require a significant investment as well as ongoing New crop varieties can also propel
139、a more resilient food system by creating plants that are more resistant than its predecessors.INNOVATION IN FOOD PRODUCTIONCrop ScienceAgTechAlternative Agriculture New Crop&Seed Varieties Biologicals Biostimulants Biopesticides Precision Agriculture Smart Apps&Sensors Autonomous Machinery Cellular
140、Agriculture Indoor Farming18 FOOD FOR THOUGHT|PGIMinfrastructure and maintenance.The operational costs for this may be prohibitive for smaller farms and the payback period too long.Alternative agriculture offers innovative food production methodsCellular agriculture and cultivated meatGlobal demand
141、for meat has tripled over the last 50 years,reaching 340 million tons in 2021.84 Indeed,the$1.7 trillion global market for meat reflects the primal human desire for it.85 Cellular agriculture involves growing agricultural products directly from cell cultures using fermentation and biotechnology proc
142、esses to stimulate cell growth.This raises the prospect of producing proteins in ways that may be more sustainable.Cultivated meat is one example of cellular agriculture.Meat can be produced from a small sample of animal cells which are then fed nutrients and grown at high volume and density in enor
143、mous steel vessels called bioreactors.86 These innovative production techniques may help meet future demand while minimizing land and grain use.They also offer the promise of reducing methane emissions from livestock as well as carbon emissions from long-haul transport of meat,as production can easi
144、ly be moved closer to end consumers.However,the industry is at a very early stage and faces significant challenges.First,consumer acceptance remains unclear.If the short-lived growth period of plant-based proteins is any indication,it is not certain consumers will easily adopt any alternative to con
145、ventionally raised meat.There also may be the stigma of“genetically engineered”food and hesitations around eating something perceived as created in a lab rather than on a farm.Second,for cultivated meat or fish to compete against conventionally raised meat,it must be cost-competitive.This is an enor
146、mous challenge given the energy-intensity of current processes and the vast difficulties in scaling production.87 Analysis of the economies of scale that could be achieved estimate a production cost of roughly$11 per pound of cultivated ground beef compared to the marked-up grocery store price of un
147、der$5 per pound for conventionally produced beef in the US.88 Even optimistic forecasts for its declining cost curve suggest the price of cultivated meat products may not be competitive with livestock meat for more than a decade.89 Indoor farmingPlants have been raised in greenhouses for hundreds of
148、 years,but recent technology opens new possibilities.Growing crops in greenhouses or in buildings offers several promising features.The prospect of growing fruits and vegetables in places where climate and land are not supportive or reducing carbon emissions by growing crops closer to end markets is
149、 very appealing.Despite being a tiny country with limited arable land,the Netherlands is a major agricultural exporter primarily because of the 24,000 acres of crops growing in greenhouses.90 With an acre of greenhouse yielding as much lettuce as ten outdoor acres,the Dutch have mastered the efficie
150、ncies and innovations of indoor growing with natural light.91 However,greenhouses can be energy-intensive given the cost of heating and cooling vast indoor spaces.Vertical farming,which relies on artificial light rather than the(free and dependable)sun can demand even more energy and is difficult to
151、 operate at the kind of scale that greenhouses can.When energy prices spike,the unit economics of indoor farming can become unattractive and may even cause some growers to shutter operations altogether.92 This can introduce an unwelcome source of volatility in both the price and availability of food
152、.93 Cellular agriculture involves growing agricultural products directly from cell cultures using fermentation and biotechnology processes to stimulate cell growth.PGIM|FOOD FOR THOUGHT 19 Investment ImplicationsThe evolving landscape of agriculture and food production creates a range of investment
153、opportunities.Some innovations are already being applied at scale and can make for attractive traditional debt and equity investments.Other opportunities remain nascent and may be best suited for venture capital portfolios as startups overcome their remaining challenges around cost,adoption and scal
154、e.There are six investment themes especially critical for investors as they consider the transforming agriculture and food production landscape.1.AgTech is driving smarter,more sustainable food production on small farmsImproving the agricultural efficiency,profitability and sustainability of small f
155、arms often involves technology like smart devices,sensors,data analysis and proprietary algorithms.For investors,the AgTech landscape is quite fragmented with many startups finding diverse ways to apply technology to farming,which may offer attractive venture capital opportunities.In emerging market
156、s,many farms remain small-scale.More than 80%of farms in India are on less than ten acres of land,for example.94 Finding ways to enhance productivity of farms at this scale is critical to meeting the future food demands of Indian consumers and achieving food self-sufficiency.An Indian startup called
157、 Gramophone is an example of intelligent agriculture that can help small-scale farmers.Accessed by mobile phone and used by more than 2 million farmers,Gramophone provides regionally customized analysis to guide farmers through the entire crop life cycle from selecting seeds to optimizing use of nut
158、rients to managing harvests and even selling crops.95 Water management is another area of opportunity for investors.Smarter irrigation systems are rapidly developing and becoming essential as water scarcity is impacting crops and poised to be even more widespread.Mobile irrigation systems are an exa
159、mple of optimizing water usage on small and mid-sized farms.US-based startup CODA Farm Technologies offers a mobile irrigation system to protect crops,reduce waste and minimize water usage.Similarly,Saturas,an Israeli AgTech startup,has developed an enhanced sensor-based system for precision irrigat
160、ion,embedding their sensors right into tree stems that enables continuous,precise,real-time readings through an app.2.Farmland debt and equity offer a unique exposure and an attractive investmentFarmland lending and investing offer a different and unique exposure to productivity gains across the glo
161、bal food system for long-term investors.As a maturing asset class with an established benchmark,institutional ownership of farmland is growing but is still at an early stage with only about 3%of US farmland owned by institutional capital.96 While the scarcity of arable land is well understood,farmla
162、nds combination of long-term income and capital appreciation is often overlooked and offers a range of risk-return propositions for both debt and equity investors.Direct farming operations and leases,for example,can supply a steady source of income for investors while productivity gains from use of
163、precision agriculture can drive capital appreciation of farmland.97 Farmland investing can be broadly divided into two categories row crops and permanent crops.Row crops like corn,soybeans,rice and cotton are mechanically planted and harvested annually and historically offer a lower risk profile wit
164、h a relatively steady income.In contrast,permanent crops like tree nuts and tree fruits are more difficult to switch in For cultivated meat or fish to compete against conventionally raised meat,it must be cost-competitive.This is an enormous challenge given the energy-intensity of current processes
165、and the vast difficulties in scaling production.20 FOOD FOR THOUGHT|PGIMresponse to market conditions and offer a different risk-reward profile which relies more on operating income.Investors seeking exposure to permanent crops should target one of the few areas with a Mediterranean-like climate mil
166、d,wet winters and hot and dry summers that offer an optimal environment for high-value permanent crops like grapes,citrus and nuts.California is one such region along with Chile,South Africa and parts of Southern Australia with this kind of climate.However,California presents especially attractive i
167、nvestment opportunities due to other features:its proximity to major commodity exchanges,a deep set of private and government-sponsored financial institutions supplying capital to the farm sector,and the advanced network of strategically located highways,railroads and ports.3.Crop science and feed a
168、dditives offer innovations that increase production and sustainabilityGlobal leaders in crop science like Bayer and BASF from Europe as well as Nutrien,FMC and Corteva in North America offer real-world,scalable solutions to boost sustainability and productivity.They have diversified global businesse
169、s,steady demand for their products and the scale and expertise to engage in customized crop science for different regions and conditions.In India,investors should consider local leaders like PI Industries and Dhanuka Agritech.They have local expertise and strong distribution networks throughout the
170、country.Enhancing livestock productivity and reducing the emission of greenhouse gases is critical for a more sustainable food system.Investors can find attractive opportunities in these realms as well.Animal health companies like Zoetis and Elanco in the US or Royal DSM in the Netherlands offer pro
171、ducts that enable farmers to achieve both objectives.Feed additives for cattle or pigs can better balance amino acids to make feed 15%more efficient and can boost livestock productivity.98,99 Other feed additives can reduce enteric methane emissions from dairy cows by 35%and by as much as 80%in beef
172、 cattle by suppressing the enzyme that triggers methane production.100 Both kinds of additives are already in production and likely to be in use for some time.The steady demand for these products and the scale of leading players can make for stable cash flows that debt investors may find attractive.
173、4.Precision agriculture improves efficiency of larger farmsWith its market size expected to increase fourfold by 2030,precision agriculture offers investors ample growth opportunities.101 It is is especially useful on large-scale industrial farms,and investors can find debt and equity opportunities
174、in this segment.This kind of automation can also ease concerns over farm labor supply.Todays farm machinery is almost unrecognizable from its predecessors even 20 years ago.These GPS-enabled machines can be nearly autonomous,adjust to specific field conditions and execute multiple tasks using a rang
175、e of sensors and machine learning.They also enable more precise application of fertilizer and other inputs,thereby reducing usage by as much as 60%and minimizing deleterious environmental impacts.102 For example,cameras and sprayers mounted on the tractor leverage AI to discern between weeds and cro
176、ps and supply herbicide only where it is needed.103A handful of global players Europes CNH,Kubota of Japan,and John Deere and AGCO of the US are supplying large farms with autonomous planters,sprayers and other machinery.As more of their new sales involve smart machinery,these manufacturers Farmland
177、s combination of long-term income and capital appreciation is often overlooked and offers a range of risk-return propositions.PGIM|FOOD FOR THOUGHT 21 are adding software update fees as a source of ongoing revenue to smooth out the cash flows of the commodity cycle.Currently,the US is a leading mark
178、et for autonomous machinery.However,with farms in Brazil and Argentina modernizing,Latin America has become an immense growth market as well.104 There is much room for technology penetration there as farms upgrade to keep up.Hydrosat is a startup that enhances moisture monitoring a critical input fo
179、r precision agriculture.Currently used on industrial-sized farms in North America and Latin America,Hydrosat provides highly granular infrared satellite images more frequently than what is publicly available.This higher frequency data can be used to identify moisture and water stress weeks in advanc
180、e of actual acute episodes.5.Fertilizers will remain essential to maintain and enhance crop yieldsGiven the environmental externalities,the fertilizer industry can be problematic from an ESG perspective.There is no question nitrogen-based fertilizers are overused in some regions and can degrade the
181、environment.However,ESG-minded investors should strongly consider engagement with this sector,as the unpleasant arithmetic of food supply and demand means that nitrogen-based fertilizers will not be easily replaced and will remain vital to food production for some time.105 Because of their underusag
182、e in parts of South Asia and sub-Saharan Africa,nitrogen-based fertilizers and crop protection could have an outsized impact on crop yields there.Indeed,greater adoption of fertilizer and crop protection could increase food security and self-sufficiency in these regions,even as their populations gro
183、w,and climate change adversely impacts yields.For debt investors in particular,the sector offers a variety of benefits.For one,the annual need for nitrogen fertilizers serves as a steady source of demand.The industry is also highly consolidated,as the economies of scale and high capital costs create
184、 barriers to entry and limit competition.Surges in input prices highlight the importance of dependably sourcing key inputs like nitrogen,natural gas or coal,phosphate and potash.Companies that have reliable access to key inputs,such as CF Industries and Nutrien in North America that can tap(comparat
185、ively)cheap natural gas or potash,or Moroccos OCP,which has access to the worlds largest reserves of phosphate,are especially well positioned during times of increased input costs.106 6.Cultivated meat:More sizzle than steak forinvestorsThough cultivated meat gets much media attention and has attrac
186、ted more than$1 billion in venture capital the industry remains at an awkward stage for investors.Few products are available outside of a lab Singapore is the only country to approve a cultivated chicken nugget product for retail sale.107 The market is very crowded and highly fragmented with more th
187、an a hundred startups and little visibility about which ones may emerge as winners.108 All firms face similar challenges to match the taste and cost of conventionally produced meat or fish and scale their production.The market is likely to see much consolidation in coming years as it will not be eco
188、nomical to continue funding all these startups.While the prospect of a cultivated rib-eye steak comparable in taste,texture and cost remains quite distant,VC investors should focus on more unsung aspects of cellular agriculture that are likely to be commercially viable sooner.Simpler forms of protei
189、n are closer to being efficiently mass produced and,while adoption by consumers remains unclear,adoption by food producing firms may come first.For investors,startups focused on simple proteins that have commercial use can be attractive.For example,Onego Enhancing livestock productivity and reducing
190、 the emission of greenhouse gases is critical for a more sustainable food system.22 FOOD FOR THOUGHT|PGIMBio and EVERY Company are startups focused on fermentation production of egg protein(egg whites),which is widely used as a binding agent in cakes and other baked goods.Israeli startup Remilk whic
191、h produces milk proteins whey and casein has a While the prospect of lab-grown steak remains distant,investors should focus on startups that produce simple protein that have commercial use.partnership with food giant General Mills to produce lactose-free,non-animal cream cheese.109 Chapters 1 and 2
192、analyzed the shifting dynamics in the demand and supply of the broad food system as well as the resulting opportunities and risks in individual asset classes.However,the evolving landscape of the food system also has implications across investment portfolios.Chapter 3 turns to these implications and
193、 proposes a portfolio-wide action plan for CIOs.PGIM|FOOD FOR THOUGHT 23 CHAPTER 3 PORTFOLIO-WIDE INVESTMENT IMPLICATIONS Food price inflation,sustainability and disruptions to the food supply chain all raise important macro implications.”“033112224 FOOD FOR THOUGHT|PGIMFood price inflation,sustaina
194、bility and disruptions to the food supply chain all raise important considerations beyond the specific asset class opportunities we discuss in previous chapters.Here we highlight three broader,cross-portfolio implications arising from the changing investment landscape in the global food system.1.Dis
195、ruptions in food distribution mayreveal geopolitical and macroeconomic vulnerabilitiesGiven the reliance of the global food system on international trade,interruptions in food supply chains can be highly disruptive especially given the export concentration of key agricultural crops and inputs(Exhibi
196、t 8).Beyond the humanitarian tragedy unfolding due to Russias invasion of Ukraine,the war serves as a stark reminder of the global dependence on a few regions for critical crops and resources.Russia and Ukraine together account for nearly 30%of global wheat exports,and disruptions to their regular s
197、hipments sent global wheat prices soaring.110 The conflict also impacted global distribution of corn and fertilizer,causing their prices to surge as well.111,112 Indeed,the war in Ukraine revealed several vulnerabilities across the food system.The disruptions that cascaded from a single region trigg
198、ered widespread food inflation that rippled across many regions and countries and led to further restrictions on food exports.113 Going forward,assessments of country risk will increasingly need to incorporate food security vulnerabilities from a food price inflation and import dependency standpoint
199、.Exhibit 8:Grain exports are highly concentratedShare of top 5 global exporters for select key crops(2020)CornTop 5(79%)SoybeanTop 5(94%)RiceTop 5(72%)Source:Food and Agriculture Organization of the United Nations.CHAPTER 3 PORTFOLIO-WIDE INVESTMENT IMPLICATIONSCHAPTER 3 PORTFOLIO-WIDE INVESTMENT IM
200、PLICATIONSPGIM|FOOD FOR THOUGHT 25 For investors,there are two key takeaways from this ongoing episode.First,interruptions to food supply and distribution will likely be more frequent and widespread going forward.Developed markets are not immune to food shortages or surges in prices.114 Viral outbre
201、aks in animal populations in the US,for example,led to a 70%surge in egg prices.115 Future turbulence around food distribution or supply can also arise from mounting geopolitical tensions,anti-globalization movements and deteriorating trade dynamics.116 In a world growing more polarized,the risk of
202、the“weaponization”of food exports is only growing.Second,it is critical investors acknowledge that food inflation can be particularly destabilizing from a social and political perspective especially in frontier and emerging markets.For example,soaring food prices from droughts played a significant r
203、ole in the Arab Spring movements of 2010 and 2011 that toppled regimes in multiple countries.117 Countries like Nigeria,Egypt,Kazakhstan and the Philippines where food accounts for a third or more of consumer spending may be most vulnerable in this regard.118 It is not clear current sovereign rating
204、 methodology takes food inflation and the ensuing political risks sufficiently into consideration,and investors may want to consider supplementing their assessments of country risk.2.The food system presents unique tensions and opportunities for ESG-minded investorsApplying an ESG lens to something
205、as sprawling and essential as the food system can be exceptionally challenging.Todays food system,in some ways,resembles the energy sector from a decade ago.It provides a vital good with inherent ESG tensions and opportunities in its production system but not much detailed data to make informed and
206、nuanced trade-offs.Nevertheless,food is becoming more prominent with ESG investors given the food systems interconnections with climate and biodiversity.For investors with commitments to decarbonization and sustainability,there is a growing recognition that the broad food system needs to play a vita
207、l role in achieving both objectives.And it provides opportunities for them to make measurable impact.ESG issues are,by their nature,complex.When looking at the current food system,several inconsistencies become apparent.One example is the use of synthetic fertilizers.Application of fertilizers in re
208、gions where they are underused like sub-Saharan Africa is one of the simplest and most cost-effective ways of increasing crop production from smaller farms and can go a long way towards eradicating hunger and malnourishment.Furthermore,there are no real replacements for nitrogen-based fertilizers to
209、day.However,the production of industrial ammonia for fertilizers can be damaging to the environment in multiple ways.The production process,for starters,is very energy intensive and emits more carbon dioxide than any other chemical-making reaction.119 Additionally,some of the applied fertilizer runs
210、 off into sources of drinking water and waterways.120 Fertilizers also account for a sizable portion of human-generated NO2 emissions.121 So,how should ESG investors think about these apparent contradictions?More importantly,what should they do?Engage with all sectors:ESG investors need to realize t
211、here are no perfect solutions when it comes to the food system.Instead,there are lots of imperfect options and alternatives.Given the criticality of meeting global food demand,excluding some segments of the food system based solely on carbon emissions,for example,seems ineffective.Rather,an emphasis
212、 on active research that focuses on the actions of the broader industry as well as individual companies to address their most material ESG issues can be more effective.For example,understanding what steps a fertilizer manufacturer is taking to reduce their carbon emissions and how this compares to t
213、heir In a world growing more polarized,the risk of the“weaponization”of food exports is only growing.26 FOOD FOR THOUGHT|PGIMpeers can be a good starting point.Furthermore,using active stewardship to connect companies with external experts and industry associations to encourage them to use best prac
214、tices can also be a constructive approach for investors.Seek out innovative incumbents:With seemingly perfect options a long way off(e.g.,biological fertilizers that are just as effective and cost-efficient as synthetic ones),investors need to have an approach that acknowledges current needs and lim
215、itations while also working to shorten the transition to a better,more sustainable option.This may mean,for example,identifying the most forward-thinking fertilizer manufacturers that are taking relevant measures to reduce their carbon footprint today and investing in startups working on biologicals
216、.Examining their corporate strategy and getting more detail around how their research dollars are spent is also an effective way to learn what aspects of their business they are leaning into.For companies that have set a carbon emissions target,examining how realistic their targets are,the state of
217、their progress and whether achieving these goals relies on current or future technology can be another way of discerning between forward-leaning and lagging incumbents.Work to narrow the data gap:Investors need access to quality information and data to make informed trade-offs and to identify the mo
218、st innovative incumbents.To achieve this,investors need to seek greater disclosures and information on a regular basis from companies in the food system.Greater transparency in data,however,is not costless and may be especially burdensome for small companies and farmers.Collective advocacy by invest
219、ors for greater disclosure has led to better data in other sectors and industries.122 The FAIRR Initiative,for example,is an investor network that has been effective in providing data on a range of ESG risks associated with food production.They publish research and offer tools and indices on the ani
220、mal protein industry,for example.123 Participating in initiatives like this may be a productive step for investors seeking more data disclosures.3.Farmland investing provides diversification and inflation protection for institutional portfoliosFarmland is still a maturing institutional asset class,a
221、nd some investors may be unfamiliar with incorporating it into portfolio and liquidity optimization frameworks.However,CIOs may want to consider an allocation to farmland within their portfolio,especially given two important and somewhat unique features.First,farmland returns are relatively uncorrel
222、ated with major asset classes.Over the last 20 years,US farmland returns have been negatively correlated with both stocks and bonds.124 Second,farmland has proven to be a reliable inflation hedge(Exhibit 9).As a real asset,US farmland has proven to be an effective store of wealth in periods of high
223、inflation and uncertainty as well.The challenges of the 21st Century remain significant and are propelling the global food system towards an inflection point.PGIM|FOOD FOR THOUGHT 27 Exhibit 9:Farmland can be an effective inflation hedgeUS farmland price compared to US CPI(year-over-year%change)-15%
224、-10%-5%0%5%10%15%20%25%0020102020FarmlandCPISource:USDA Economic Research Center and Federal Reserve.Conclusion The food system has evolved tremendously since the technological advances of the Green Revolution in the 1960s.Nevertheless,our food system remains fragile and the ch
225、allenges it faces are significant.Our future food system will need to be more productive as well as more sustainable to meet the shifting demands of a growing and more affluent population.Whether seeking opportunities or mitigating hidden risks,understanding the rapidly transforming global food syst
226、em will be essential for institutional investors around the world.28 FOOD FOR THOUGHT|PGIMINVESTMENT IMPLICATIONS ACROSS FOOD DEMAND1.Meat producers offer a contrarian investment opportunity More affluent populations and convergence of global diets create opportunity for meat producers ESG investors
227、 should consider engaging with conventional meat manufacturers2.Cold storage and transportation provide global opportunities Proximity to urban centers and transportation hubs are key Cold logistics providers and real estate in the US,SE Asia and Latin America can be attractive3.Packaging offers cas
228、h flows no matter the underlying food fad Irrespective of the trend,food innovation is reliant on new packaging and machinery Seek out leading packaging firms as well as equipment makers in the US and Europe4.Health and wellness options drive grocery and food innovation Consumers are seeking healthi
229、er food options and may be willing to pay up for it Look for companies that are closing the gap on price and taste rather than relying on changes to consumer tastes5.Convenience and food safety drives emerging market opportunities Concerns around food safety in EM has led to demand for recognized br
230、ands and packaged foods Regional bakers and bottlers offer opportunities in India and Latin AmericaINVESTMENT IMPLICATIONS ACROSS FOOD SUPPLY1.AgTech driving smarter,more sustainable food production on small farms Finding ways to enhance productivity of small-scale farms is critical to meeting futur
231、e food demands AgTech landscape is fragmented with many startups and can offer attractive VC investments2.Farmland debt and equity offer a unique exposure and attractive investment A range of risk-reward propositions for debt and equity investors California is especially attractive for investors bec
232、ause of its optimal climate and proximity to major exchanges,ports and highways3.Crop science and feed additives solutions to boost productivity and sustainability Leaders in Asia have local expertise and established distribution networks Leaders in Europe and North America offer real-world products
233、 and have diversified businesses and scale4.Precision agriculture improves efficiency of larger farms Opportunities in both large global agriculture equipment makers as well as tech startups Latin America provides growth opportunities as farmers in Brazil and Argentina modernize 5.Fertilizers will r
234、emain essential to maintain and enhance crop yields Annual need for some fertilizers provides steady source of demand that are not easily replaced ESG-minded investors should strongly consider engagement with this sector as they will be vital to food production for some time6.Cultivated meat:More si
235、zzle than steak for investors The market for cultivated meat is highly fragmented with serious challenges and much uncertainty Investors should instead focus on production of simple proteins(i.e.,whey or egg albumen)for commercial usePORTFOLIO-WIDE INVESTMENT IMPLICATIONS 1.Disruptions in food distr
236、ibution may reveal hidden risks and vulnerabilities across portfolios Disruptions may be more common and widespread in the future Food inflation can be destabilizing from a social and political perspective especially in emerging and frontier markets2.The food system presents unique tensions and oppo
237、rtunities for ESG-minded investors There are no perfect solutions for the inherent tensions of the food system An approach that engages with companies and emphasizes active research as well as collective advocacy may be most effective3.Farmland investing has some unique investment characteristics Of
238、fers negatively correlated returns with both stocks and bonds Farmland has proven to be a reliable inflation hedgePGIM|FOOD FOR THOUGHT 29 ACKNOWLEDGMENTSPGIM gratefully acknowledges the contributions of the following individuals:Prof.Christopher Barrett,Stephen B.and Janice G.Ashley Professor of Ap
239、pliedEconomics and Management,Cornell UniversityNoah Bishop,Vice President,Warburg PincusBrett Brohl,Managing Director,TechstarsAnthony Chow,Co-Founder,AgronomicsLisa Feria,Managing Partner&CEO,Stray Dog CapitalPieter Fossel,CEO&Co-Founder,HydrosatTim ORourke,Senior Managing Director,JLLMichael Pan,
240、Managing Director,Warburg PincusDr.Caterina Ruggeri Laderchi,Director,Food System Economics CommissionEthan Steinberg,CEO,PropagateRyan Wilson,CEO,Boardwalk Collective30 FOOD FOR THOUGHT|PGIMPGIM Contributors Anandhapadmanabhan Anjeneyan,PGIM India Henry Balbirer,PGIM Fixed Income Alyssa Braun,PGIM
241、Fixed Income Tony Coletta,PGIM Private Capital Armelle de Vienne,PGIM Fixed Income Nuvneet Dhillon,PGIM Fixed Income Lauren Dombrowski,PGIM Fixed Income Elizabeth Doppelt,PGIM Fixed Income Omari Douglas-Hall,PGIM Fixed Income William Engelking,PGIM Private Capital Sebastiano Ferrante,PGIM Real Estat
242、e Elitza Fleischman,PGIM Fixed Income Sean Goodier,PGIM Fixed Income Liz Halpin,PGIM Fixed Income Bruce Hamilton,PGIM Fixed Income Dr.Peter Hayes,PGIM Real Estate Alex Herbert,PGIM Fixed Income Nikola Ivanov,PGIM Fixed Income Eugenia Jackson,PGIM Jess Jarratt,PGIM Real Estate David Klausner,PGIM Fix
243、ed Income Richard Kus,PGIM Fixed Income Umar Manzoor,PGIM Fixed Income Anna McDonald,PGIM Bryan McDonnell,PGIM Real Estate Dr.Katharine Neiss,PGIM Fixed Income Benjamin Novick,PGIM Fixed Income Steven Oliveira,PGIM Real Estate Michael Pettit,PGIM Fixed Income Giancarlo Perasso,PGIM Fixed Income John
244、 Ploeg,PGIM Fixed Income David Quackenbush,PGIM Private Capital Srinivas Rao,PGIM India Vivek Sharma,PGIM India Jamie Shen,PGIM Real Estate Daleep Singh,PGIM Fixed Income John Smigelsky,PGIM Fixed Income Robin Snyder,PGIM Fixed Income Daniel Solinsky,PGIM Fixed Income Tatiana Spineanu,PGIM Fixed Inc
245、ome Scott Swanson,PGIM Fixed Income Reuben Teague,PGIM Real Estate Benett Theseira,PGIM Real Estate Dr.Noah Weisberger,PGIM IASPrincipal AuthorsShehriyar Antia,PGIM Thematic ResearchDr.Taimur Hyat,PGIMJakob Wilhelmus,PGIM Thematic ResearchPGIM|FOOD FOR THOUGHT 31 Endnotes1“New Nature Economy Report
246、Series,”World Economic Forum,July 2020.2“Agricultural Policy Monitoring and Evaluation,”OECD,June 2022.3“The State of Food Security and Nutrition in the World 2022,”Food and Agriculture Organization of the United Nations,June 2022.4 Ibid5“Obesity and Overweight,”World Health Organization,June 9,2021
247、.6“Statistical Pocketbook:World Food and Agriculture,”Food and Agriculture Organization of the United Nations,2022.7“The State of Food Security and Nutrition in the World 2021,”Food and Agriculture Organization of the United Nations.8 Foster,Andrew and Rosenzweig,Mark,“Are there too many farms in th
248、e world?Labor-market transaction costs,machine capacities and optimal farm size,”Working Paper Series,NBER,March 2021.9 Liu,Xingcai,et al,“Global Agricultural Water Scarcity Assessment Incorporating Blue and Green Water Availability Under Future Climate Change,”AGU,April 23,2022.10 Wing,Ian Sue,et a
249、l,“Global Vulnerability of Crop Yields to Climate Change,”Journal of Environmental Economics and Management,Volume 109,September 2021.11“Greenhouse Gas Reduction,”International Atomic Energy Agency.12“Driven to Waste:The Global Impact of Food Loss and Waste on Farms,”World Wildlife Fund,Aug.19,2021.
250、13“Water for Sustainable Food and Agriculture,”Food and Agriculture Organization of the United Nations,2017.14 Treisman,Rachel,“China Is Buying Up More US Farmland.Some Lawmakers Consider that a Security Threat,”NPR,March 1,2023.15 Chiba,Daishi,et al,“Chinese Companies Corralling Land Around World,”
251、Nikkei Asia,July 13,2021.16“Engels Law Is Still Good Food for Thought,”The FRED Blog,accessed March 21,2023.17 Fukase,Emiko,and Martin,Will,“Economic Growth,Convergence,and World Food Demand and Supply,”World Bank,November 2017.18“Feed-to-Meat Conversion Inefficiency Ratios,”A Well-Fed World,accesse
252、d March 21,2023.19 Food and Agriculture Organization of the United Sates,Statistical Database,accessed March 14,2023.20 Khoury,Colin K.,et al,“Increasing Homogeneity in Global Food Supplies and the Implications for Food Security,”PNAS,January 2014.21 Anand,Sonia S.,et al,“Food Consumption and Its Im
253、pact on Cardiovascular Disease:Importance of Solutions Focused on the Globalized Food System,”National Library of Medicine,April 6,2016.22“Health Effects of Dietary Risks in 195 Countries,1990-2017:A Systematic Analysis for the Global Burden of Disease Study 2017,”The Lancet,April 3,2019.23“Cracking
254、 the Code on Consumers Health-and-Wellness Preferences,”AlixPartners,June 2019.24“High-Fructose Corn Syrup Production and Prices,”USDA,accessed March 21,2023.32 FOOD FOR THOUGHT|PGIM25“Biden-Harris Administration National Strategy on Hunger,Nutrition,and Health,”The White House,September 2022.26 Ahu
255、ja,Kabir,et al,“Ordering In:The Rapid Evolution of Food Delivery,”McKinsey&Company,Sept.22,2021 27“The Wealth of Cities,”PGIM Thematic Research,2016.28“Prepared Meals Market to Reach USD 248.13 Billion by 2029|Exhibiting a CAGR of 6.8%by 2022-2029,”Fortune Business Insights,Nov.17,2022.29 Simmons,Vi
256、rginia,et al,“The Next S-Curve of Growth:Online Grocery to 2030,”McKinsey&Company,March 31,2022.30“Demand for Prepared Foods Drives Packaging Innovation,”Supermarket News,April 12,2021.31“Driven to Waste:The Global Impact of Food Loss and Waste on Farms,”World Wildlife Fund,Aug.19,2021.32“Global Ini
257、tiative on Food Loss and Waste Reduction,”FAO,2015.33 Rezaei,Maryam,and Liu,Bin,“Food Loss and Waste in the Food Supply Chain,”FAO,July 2017.34“Global Food Losses and Food Waste,”Food and Agriculture Organization of the United Nations,2011.35 Shanker,Deena,et al,“Fake Meat Was Supposed to Save the W
258、orld.It Became Just Another Fad,”Bloomberg Businessweek,Jan.19,2023.36 Bashi,Zafer,et al,“Alternative Proteins:The Race for Market Share Is On,”McKinsey&Company,Aug.16,2019.37“Meat,”FAO,OECD-FAO Agricultural Outlook 2021-2030.38 Maples,Josh,MSU,“The Cattle Cycle:It Can Be a Long 10 Years,”Beef Magaz
259、ine,Oct.5,2022.39“The Rush to Meet Asia Pacifics Growing Cold Storage Needs,”JLL Australia,July 2022.40 Qian,Mandy,“China Cold Storage Logistics,”Cushman&Wakefield,Sept.29,2022.41 Muramatsu,Yoehi,and Nita,Yuichi,“Japans Cold Chains Tap Southeast Asias Westernizing Tastes”Nikkei Asia,Aug.18,2018.42“F
260、rialsa Cold Storage:35 Million FT3 of C02LD and Counting,”M&M Refrigeration,Oct.11,2018.43 Feber,David,et al,“Sustainability in Packaging:Inside the Minds of US Consumers,”McKinsey&Company,Oct.21,2020.44 Dunphy,Siobhn,“Around 80 Percent of the Worlds Population Relies on Imported Food,”European Scie
261、ntist,April 28,2020.45 Das,Debadyuti,et al,“Impact of Covid-19 on Changing Consumer Behaviour:Lessons from an Emerging Economy,”Wiley Online Library,Feb.4,2022.46“Hy-Vee Partners with Simbe to Provide Enhanced Customer Experience,”Hy-Vee News&Press Releases,Sept.23,2021.47“Wegmans Joins Forces with
262、DoorDash to Power Wedmans Meals 2GO Delivery,Announces Plans to Roll Out to 40 Stores This Year,”Cision PR Newswire,April 29,2019.PGIM|FOOD FOR THOUGHT 33 48 Tandon,Suneera,“Consumer Goods Firms Step Up Packaged Foods Play as Demand Rises After Covid-19,”Mint,Jan.27,2023.49“Chinas FMCG Sector Contin
263、ues to Show Resilience Despite Ongoing Covid Challenges,”Bain&Company,Dec.8,2022.50 Roser,Max,Ritchie,Hannah,and Rosado,Pablo,2013,“Food Supply,”OurWorldInData.org.51“2017 The State of Food and Agriculture,”FAO,October 2016.52“Green Revolution,”International Encyclopedia of Human Geography,ScienceDi
264、rect,July 8,2009.53 Fawcett-Atkinson,Marc,“Better Is Always Possible,Canadas Agriculture Minister Says,But There Is No One Size Fits All Solution to Curbing Climate Pollution from Farms.”Canadas National Observer,Jan.6,2023.54 Holden,Nicholas M.,et al,“Review of the Sustainability of Food Systems an
265、d Transition Using the Internet of Food,”NPJ Science of Food,Oct.9,2018,Article No.18(2018).55 Viglione,Giuliana,“Q&A:What Does the Worlds Reliance on Fertilisers Mean for Climate Change?”CarbonBrief,Food and Farming,July 11,2022.56 Schiffman,Richard,“Why Its Time to Stop Punishing Our Soils with Fe
266、rtilizers,”Yale Environment,May 3,2017.57 Simpkins,Kelsey,“Soil Degradation Costs US Corn Farmers a Half-Billion Dollars Every Year,”CU Boulder Today,Jan.12,2021.58 Turner,Jacquelyn,“Grass-Fed Cows Wont Save the Climate,Report Finds,”Science.org,Oct.2,2017.59“Global Methane Assessment,”United Nation
267、s Environment Programme,2021.60 Reisinger,Andy,et al,“How Necessary and Feasible Are Reductions of Methane Emissions from Livestock to Support Stringent Temperature Goals?”The Royal Society,Sept.27,2021 61“Weathering Climate Change,”PGIM Megatrends,62 Parija,Pratik,“Heat to Scorch Indias Wheat Suppl
268、ies,Adding Food-Shortage Worries to World,”Bloomberg,May 1,2022.63 Khabarov,Nikolay,et al,“Global Climate Change Impacts on Crops Expected Within 10 Years,”IIASA,Nov.1,2021.64 Liu,Xingcai,et al,“Global Agricultural Water Scarcity Assessment Incorporating Blue and Green Water Availability Under Futur
269、e Climate Change,”AGU,April 23,2022.65 Corbet,Sylvie(AP)and Garriga,Nicolas(AP),“European Drought Dries Up Rivers,Kills Fish,Shrivels Crops,”Bloomberg,Aug.12,2022.66 Trompiz,Gus,“EU Maize Import Surge Seen Cushioning Impact of Drought-Hit Crop,”Reuters,Oct.20,2022.67 Sullivan,Justine,“The Intergover
270、nmental Panel on Climate Change:30 Years Informing Global Climate Action,”IPCC,March 13,2018.68 Ibid.69 Thornton,Philip,et al,“Impacts of Heat Stress on Global Cattle Production During the 21st Century:A Modelling Study,”The Lancet,Volume 6,Issue 3,E192-E201,March 2022.34 FOOD FOR THOUGHT|PGIM70 Mug
271、wanya,Muziri,et al,“Anthropogenic Temperature Fluctuations and Their Effect on Aquaculture:A Comprehensive Review,”Science Direct,Volume 7,Issue 3,May 2022,pp.223-243.71 Ibid.72 Free,Christopher M.,et al,“Impacts of Historical Warming on Marine Fisheries Production,”Science,Vol.363,No.6430,March 1,2
272、019.73 City of Chicago,“Climate Impacts on Agriculture and Food Supply,”USEPA.74 Skendi,Sandra,et al,“The Impact of Climate Change on Agricultural Insect Pests,”National NIH Library of Medicine,May 12,2021 doi:10.3390/insects12050440.75 City of Chicago,“Climate Impacts on Agriculture and Food Supply
273、,”USEPA 76“Defining,Analyzing and Characterizing Biostimulants,”AAPFCO,Feb.13,2019.77 Madeiras,Angela,et al,“What Are Biostimulants?,”University of Massachusetts Amherst,October 2019.78 Ryder,Nicole,“Growth of Sustainable Farming Practices Drives the Agricultural Biologicals Market,”Frost&Sullivan,S
274、ept.22,2022.79 Stobbart,Darren,“Crop Protection Industry Overview 2021,”S&P Global Commodity Insights,April 27,2022.80 Ferreira,Nelson,et al,“Global Farmer Insights 2022,”McKinsey&Company,2022.81 Nolet,Sarah,“The Challenges&Opportunities for Biologicals in Ag,”AgThentic Blog,July 21,2021.82 Davis,Gl
275、enn,et al,“Precision Agriculture:An Introduction,”Extension University of Missouri,November 1998.83 Rundell,Katherine,“5 Challenges for Precision Agriculture to Face,”Agritech Tomorrow,Sept.28,2020.84 Nolet,Sarah,“The Challenges&Opportunities for Biologicals in Ag,”AgThentic Blog,July 21,2021.85“Mea
276、t Worldwide,”Statista,accessed February 2022.86“Cultivated Meat,”Good Food Institute,87 Klein,Jessie,“Lab Meat Has 3 Big Problems.Is It Time for a Pivot?”GreenBiz,Feb.22,2022.88 Humbrid,David,“Scale-Up Economics for Cultured Meat,”Wiley Online Library,June 7,2021.89 Brennan,Tom,et al,“Making Cultiva
277、ted Meat a$25 Billion Global Industry by 2030 Presents Opportunities Within and Beyond Todays Food Industry”McKinsey&Co.,June 16,2021.90 Reiley,Laura,“Cutting-Edge Tech Made This Tiny Country a Major Exporter of Food,”The Washington Post,Nov.21,2022.91“Dutch Greenhouses Have Revolutionized Modern Fa
278、rming,”Civil Engineer.org,Feb.6,2018.92 Sterling,Toby,“Gas Crisis Hits Dutch Greenhouses,”Reuters,Sept.8,2022.93 Iroanya,Vivian,and Fernandez Cras,Pablo,“Energy Crisis Empties Greenhouses in Worlds Top Flower Producer,”Bloomberg,Sept.2,2022.PGIM|FOOD FOR THOUGHT 35 94“How Agritech Startup Gramophone
279、 Is Helping 2.5 Mn Indian Farmers Improve Crop Yield,Increase Profit,”Inc42 Brand Labs,Nov.29,2022.95 Ibid.96“2017 Census Full Report,”USDA,April 11,2019.97 Parikh,Harsh,“Investing in Agriculture Wedging the Yield Gap,”PGIM,Sept.16,2020.98 Curtis,Aerin,“Zoetis Supplements See FDA Approval for Combin
280、ed Use,”FeedNavigator,Sept.11,2015.99 Carlson,Paige,“The Golden Ticket to Cattle Feeding Efficiency?Its Been Found,FBN and Boveta Suggest,”Drovers,Feb.3,2023.100 Ostendorf,Madelyn,“Elanco and Royal DSM Partner to Reduce Cattle Methan Emissions,”A,April 27,2022.101“Precision Agriculture Market,”Strai
281、ts Research,2021.102 Reilly,Clare,and Fowler,Bree,“John Deere Robot Planter:The Future of Farming Looks Like Fewer Chemicals,”CNET,Jan.6,2023.103 Martin,Chuck,“John Deere Advances Automated Farming at CES 2023,”IOT World Today,Jan.5,2023.104 Ferreira,Nelson,et al,“Global Farmer Insights 2022,”McKins
282、ey&Company,2022.105 Jacquet,Florence,et al,“Pesticide-Free Agriculture as a New Paradigm for Research,”Springer Link,Jan.27,2022.106 Kasprak,Alex,“The Desert Rock That Feeds the World,”The Atlantic,Nov.29,2016.107 Lu,Donna,“All Sizzle,No Steak:How Singapore Became the Center of the Plant-Based Meat
283、Industry,”The Guardian,Nov.5,2022.108“State of the Industry Report:Cultivated Meat and Seafood,”Good Food Institute,109 Harvey,Simon,“General Mills G-Works Switches to Remilk Animal-Free Whey Protein as Perfect Day Contract Ends,”JustFood,Feb.2,2023.110 Green,Mark A.,“Forty Percent of the World Food
284、 Programs Wheat Supplies Come from Ukraine,”Wilson Center,June 2,2022.111 Welsh,Caitlin,Congressional Testimony,“The Impact of Russias Invasion of Ukraine in the Middle East and North Africa,”CSIS,May 18,2022.112 Jenkins,Suzanne,“How the Russia-Ukraine War Helped Fuel Record Fertilizer Prices,”Feder
285、al Reserve Bank of St.Louis,Oct.4,2022.113 Glauber,Joseph,et al,“From Bad to Worse:How Russia-Ukraine War-Related Export Restrictions Exacerbate Global Food Insecurity,”IFPRI,April 12,2022.114 Evans,Judith,“UK Salad Shortages to Last For Weeks Retailers Warn,”Financial Times,Feb.21,2023.115 Hirtzer,
286、Michael,“Egg Prices Jump 8.5%as Food Inflation Hits Consumers,”Bloomberg,Feb.14,2023.116 Georgieva,Kristalina,“Confronting Fragmentation Where It Matters Most:Trade,Debt and Climate Action,”International Monetary Fund,Jan.16,2023.36 FOOD FOR THOUGHT|PGIM117“Did Food Prices Spur the Arab Spring?”PBS
287、News Hour,Sept.7,2011.118 Perasso,Giancarlo,and Doppelt,Elizabeth,“No Country Thrives on an Empty Stomach,”Apr 17,2023.119 Krietsch,Leigh,et al,“Industrial Ammonia Production Emits More CO2 Than Any Other Chemical-Making Reaction,”C&EN American Chemical Society,June 15,2019.120 Manthiram,Kartish,and
288、 Gribkoff,Elizabeth,“Fertilizer and Climate Change,”MIT Climate Portal,July 15,2021.121 Tarino,Genevieve,“Fertilizer Use Driving Rapid Rise in Potent Nitrous Oxide Emissions,”Yale Environment 360,E360 Digest,Oct.14,2020.122 Harper,Jason,et al,“Investors and Regulators Turning Up the Heat on Climate-
289、Change Disclosures,”Harvard Law School,Oct.4,2021.123“Company Ranking,”FAIRR,Accessed March 17,2023.124“Low-Hanging Fruit:Why You Should Plant US Agriculture in Your Institutional Portfolio,”PGIM Real Estate,May 25,2022.PGIM|FOOD FOR THOUGHT 37 Important Information Professional Investor Use Only.Al
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