Invesco - Appetite for change: food, ESG and the nexus of nature

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Key takeaways

01.

The pandemic has particularly exposed the interconnectedness of numerous existential threats, all of which might be described as components of the “nexus of nature”.

02.

One of the most perilous yet underappreciated of these threats is the unsustainability of prevailing attitudes towards food production and consumption.

03.

From the use of resources in developing countries to policies and practices around factory farming in the industrialised world, this issue affects the entire value chain.

Maverick theoretical physicist Richard Feynman spent much of his life trying to unravel the mysteries of the subatomic realm. He enjoyed enormous success in this regard, earning a Nobel Prize for his work in the field of quantum mechanics, yet he suspected that many of the universe’s secrets would likely stay forever undiscovered. “Nature’s imagination,” he once remarked, “far surpasses our own.”

If he were still with us now, more than 30 years after his death from a rare cancer that defied cutting-edge medicine, he would surely discern the irony of a catastrophic pandemic striking in an age when humanity is so quick to celebrate its mastery of technological hyperconnectivity. For the problem, as Feynman was acutely aware, is that there has always existed another kind of hyperconnectivity – that which defines the natural world.

In this respect, as recent events have made clear, our understanding remains alarmingly inadequate. As the World Wildlife Fund states in its latest Living Planet Report: “Our relationship with nature is broken.”

Maybe nowhere is this uncomfortable truth more evident than in attempts to prevent another COVID-19-style disaster. Although much has been done to contain the virus’s spread from one human to another, it is vital to recognise the wider significance of what we might call the nexus of nature.

In particular, the pandemic has underscored that attitudes towards food production and consumption must be rethought. This is a delicate and controversial subject – one that can invite awkward questions around customs, cultures, preferences and habits – but mounting evidence indicates that the status quo is unsustainable.

In this paper, we explore food production and consumption’s position within the nexus of nature. We draw on expert insights from and interviews with representatives of Invesco and FAIRR, the foremost investor network in this space, to examine the issue through the prism of responsible investing.

We argue that incorporating material environmental, social and governance (ESG) considerations into investment decisions is essential to enhancing sustainability in this sphere. We also suggest that positive change is imperative and that investors, through the judicious allocation of capital and the power of active ownership, can play a critical role in bringing it about. Moreover, by supporting sustainable approaches to food production and consumption, investors can not only help transform this sector: they can also help tackle issues ranging from global warming to resource scarcity, from animal welfare to waste pollution, from the preservation of species to the safeguarding of human health. A key point is that the nexus of nature, if treated with respect, can deliver multiple opportunities and benefits – which is why we believe that interconnectedness is set to become one of the major investment themes of the years ahead.

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Important information 

All data in this document as at 31 July 2020 unless otherwise stated. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. www.invesco.co.uk