Sustainalytics scooped the impact research award for its flagship report providing a deep dive into the circular food economy.
The 10 for 2021: Investing in the Circular Food Economy report – its seventh instalment of the 10 for series – identified 10 solutions in the food value chain that it expects to gain momentum during 2021, including biological pesticides, precision farming and reducing food waste.
The report identifies several emerging circular economy solutions from publicly listed agrochemical, agriculture, aquaculture, packaged food, food retail and restaurant firms to intensifying environmental, social and governance (ESG) risks.
Sustainalytics thematic research manager Martin Vezér – a co-author of the report – said this year's edition has stepped beyond the traditional global equities focus of the series, however, by also analysing 10 thematic funds that champion circular economy principles.
One judge was particularly impressed by the "instructive and helpful" educational aspects of the thematic funds coverage which resulted in it outlining three model strategies that fund investors can utilise to build on to develop well-diversified circular food economy-focused funds.
Recognising the limited pool of circular economy assets, for example, a portfolio could be built around a 'core-satellite' model in which the majority of the fund is invested in a core passively managed non-ESG index with a significant minority of the portfolio in a 'satellite' actively managed circular economy strategy. Alternatively, a fund could be focused on engagement and active ownership to push companies towards circular economy models. Finally, funds could be focused on supporting lending to firms that supports circular economy solutions, such as through the rapidly growing green bond and loan market.
Vezér said the attention towards circular economy funds was because "many of the current problems and solutions in the food economy are market driven," despite governments and civil society groups having a vital role to play. Fortunately, as the report highlights, there was already growing interest in circular economy-themed investing – a trend Vezér hopes the report will contribute to developing further.
"We hope that 10 for 2021 will help investors appreciate the impacts of the food industry, mitigate systemic risks in the financial system and contribute to solutions that can lead to positive change," Vezér said.
Read Environmental Finance's write-up of the report here.