MEGATRENDS

FOOD FOR THOUGHT
Investment Opportunities Across a Changing Food System

SPRING/SUMMER 2023
For professional investors only.
All investments involve risk, including
possible loss of capital.
PGIM | FOOD FOR THOUGHT 1

About PGIM
PGIM is the asset management business of Prudential 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. Asa leading global asset manager,** with $1.2 trillion in assets under management, PGIM is built on afoundation 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 solutions with global depth and scale across public and private
asset classes, including fixed income, equities, real estate, private credit and other alternatives.

* 3 0 market cycles represent PFI’s asset management expertise through PGIM and its affiliates and its predecessors. For additional information related 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 published June 2022. This ranking represents institutional client assets under management by PFI as ofDecember 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 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.

INTRODUCTION
From farm to fork, our global food system is vast, complex, inefficient and increasingly unfit for 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
is important for asset owners for four primary reasons:

1. V	 ulnerabilities in the food supply chain drive
critical macroeconomic outcomes
Food can be a key driver of consumer priceinflation. This, in turn, impacts a whole arrayof critical macroeconomic outcomes. High foodinflation can influence central bank monetary
policy as well as government regulatory and fiscal
actions. And higher food prices from disruptions infood supply chains can have a dampening effect onoverall economic activity as discretionary consumer
spending may get crowded out – especially inemerging markets where food can account for up
to 40% of household spending. In addition, foodpolicy is a significant part of fiscal budgets, with

global support and subsidies for farmers totalingover $700 billion.2

2. F	 ood security is critical in evaluating
domestic political stability andgeopolitical risks
Food insecurity is a key driver of domestic politicalinstability, especially in emerging and frontiermarkets. Most recently, food shortages andinflation 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 politicalinfluence. From France to Peru and from India

Exhibit 1: Current tensions in the global food system
Unequal distributionof calories• 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 average eating
50% more calories than needed6

Food security
aspirations vs. reality• COVID and the war in Ukraine highlight the vital role of foodsecurity for national security• The need to meet caloric needs and preferences of a
growing and more affluent population in emerging
and frontier markets• Increasing reliance on food imports and long supply chainsas diets converge• 2.5 billion tons of food lost or wasted each year throughout
the food value chain 7

Farming methods fromdifferent eras coexist• 21st century precision agriculture in the Americas andEurope using AI and advanced analytics• Large-scale mechanized farming in Argentina, Brazil
and China• 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 Africa

The interaction between
climate and agriculture• 40% of global cropland has already been exposed to water
scarcity9• Climate change will cause a 12% decline in crop yields andup to a 35% decline in fishery production10• Agriculture accounts for:• 30% of global greenhouse gas emissions11• 80% of deforestation12• 70% of freshwater consumption13

PGIM | FOOD FOR THOUGHT 1

to China, this power manifests itself in electoral
outcomes, vast subsidies, regulatory changes andtrade barriers.
Food security is also re-shaping geo-politics.
Given the recent impact from COVID-19 andthe fallout from the Ukraine War, food security is
increasingly seen as national security. The growing
bi-partisan political pressure in the US to curtail
Chinese-linked ownership of agricultural landis an example of growing tension around accessto food.14 Similarly, the focus on acquiring or
leasing agricultural land as part of the Chinese
government’s Belt and Road Initiative has raised
significant concern across multiple countries in
Latin American, Asia and Africa.15

many elements of “AgTech” to typically underallocated sectors such as farmland debt and equity.
Equally, there are real investment risks aroundover-hyped trends such as alternative meats andvertical farming.

4. 	Investing in the food system provides
opportunities for investors to further ESG
goals and have measurable impact
In some ways, today’s food system, resembles theenergy sector from a decade ago. It provides avital good for human survival – but does so withsome important negative externalities. This createsboth tensions and opportunities for ESG-driven
investors. Given the complex interlinkages andfeedback loops between climate change and foodproduction, there are significant opportunities
for investors to make a tangible difference as they
invest behind a more inclusive, sustainable andnutritious food system.

3.	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 ofopportunities and risks. The evolving investable
opportunity set ranges from cold storage and

For investors, it is especially critical to identify thepowerful supply and demand forces re-shaping theentire global food value chain (Exhibit 2).

Exhibit 2: Overview of the food value chain

DEMAND DRIVERS• Growing affluence in emerging markets• Shifting consumer preferences• Rising population in sub-Saharan Africa and South Asia

• Convergence of global diets

Farmland Inputs& Crops

Food
Processing

Food
Manufacturing• Impact of climate change

Distribution& Storage• Technology and innovation

SUPPLY DRIVERS
Source: PGIM Thematic Research.

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Packaging& Branding

Food Service& Retailers

To understand the emerging investment opportunities
and hidden risks from this ongoing transformationof the food system we have drawn on the insights ofover 40 investment professionals across PGIM’s fixedincome, equity, real estate and private alternatives
managers – as well as leading policymakers, academics,
entrepreneurs, private equity and VC investors.

Given the recent impact fromCOVID-19 and the fallout fromthe Ukraine War, food security is
increasingly seen as national security.

We unpack the critical drivers and resulting
investment implications of the new global foodsystem in the rest of this report. Starting withthe demand side, Chapter 1 evaluates investment
opportunities and risks emerging from rising incomes(and populations) as well as changing consumer foodpreferences. Shifting to the supply side, Chapter
2 focuses on investment themes linked to climatechange and an array of innovation across the entire
food supply chain, from AgTech through lab-grownmeat. Finally, Chapter 3 examines the menu of crossportfolio options for CIOs to consider when they
consider the opportunities and risks embedded in the
global food system.

PGIM | FOOD FOR THOUGHT 3

TABLE OF CONTENTS

R ISING AFFLUENCE &SHIFTING PREFERENCES ARERESHAPING FOOD DEMAND

FOOD SUPPLY: CLIMATEAND INNOVATION ARE
TRANSFORMING PRODUCTION

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CHAPTER 1

RISING AFFLUENCE AND
SHIFTING PREFERENCES ARERESHAPING FOOD DEMAND“

Rising incomes, convergenceof global diets and a shift toconvenience and healthier options
are critical in shaping demand.”

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2

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PGIM | FOOD FOR THOUGHT 5CHAPTER 1

RISING AFFLUENCE AND SHIFTING PREFERENCES ARERESHAPING FOOD DEMAND
Understanding the drivers of global food demand is key 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 production. 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 demandOver the past 60 years, the world’s growing population
has been the main driver of food demand. Looking
ahead, global population is poised to increase 25% toalmost ten billion by 2050 with more than 80% of
this growth coming from South Asia and sub-SaharanAfrica. Population growth so narrowly concentrated in
one or two regions is a deviation from the past where
growth was more widely dispersed.

That population growth will be highly concentrated
in lower-income countries has direct implications forfood demand. As countries grow in affluence, theirfood consumption patterns change drastically. There
are multiple stages to this evolution – also known
as Engel’s law.16 For lower-income countries, foodconsumption increases sharply as income rises before
leveling off as they approach middle-income status.
This income effect will be a key driver of future fooddemand (Exhibit 3). In fact, some research suggests
this income effect could be substantially larger over

Exhibit 3: Rising income is becoming an increasingly important driver of food demand
Share of incremental food demand driven by income growth
90%

High Estimate

70%

50%

Low Estimate
30%

10%1980-1991

2001-20092021-2030(Forecast)

2041-2050(Forecast)

Source: PGIM Thematic Research analysis, International Institute for Applied Systems Analysis, World Bank and International Food Policy Research Institute.
Note: Low and high estimates based on the Shared Socioeconomic Pathways (SSP).

6 FOOD FOR THOUGHT | PGIM

the next 30 years than in the past and may very wellaccount for most of the increase in food demand overthat time.17
In addition, higher income causes diets to shift towards
more resource-intensive foods – such as meat, fish andprocessed foods. To understand the implications, it is
crucial to consider the energy needed to produce foodcompared to the calories they provide. For example,
every calorie of beef consumed requires about 25
calories of energy in production. That is, it takes 25
calories of energy to produce every edible calorie ofbeef – a 25 to 1 ratio. Other meats are rather energy
inefficient as well – pork has a ratio of 9 to 1 andpoultry 5 to 1.18 One consequence of the shift towards
more animal-based proteins is greater demand forHigher incomes cause diets toshift towards more resourceintensive foods – such as meat,fish and processed foods.

feed grain like corn and soy. It is no coincidence thatas China’s pork consumption grew between 2010
and 2020, its soybean imports almost doubled to 102
million tons. 19
Consequently, as consumers become more affluent andshift their diets, the energy required to meet their daily
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 globally
Income growth not only leads to more resourceintensive diets, but it has also led to a convergence ofdiets 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
but 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).20

Exhibit 4: Meat consumption increases with affluence
Sub-Saharan nations versus rest of world
Meat consumption
100

Kg per capita, annually

80

60

Sub-Saharan nations
40

20

0
$0

$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000

GDP per capita, PPP

Source: World Bank and Food and Agriculture Organization of the United Nations.
Note: GDP per capita in PPP, constant 2017 $US.

PGIM | FOOD FOR THOUGHT 7

Exhibit 5: Global diets are converging
Share of total daily calories from a “western diet”
1960

70%

2020

60%
50%
40%
30%
20%
10%
0%

South Korea

China

BrazilSource: United Nations, Food and Agriculture Organization.
Note: In this chart, “western diet” refers to animal proteins, dairy products, wheat, vegetable oils and sugars.

The convergence of global diets has three key
implications. First, the distance food needs to travelfrom 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 transport needs while
simultaneously increasing the risk around disruptionsof supply and its impact on food security. Third, themerging of global diets means we are increasingly
dependent on fewer crops, making our food systemless resilient to crop-specific disease or pests.

3. Global consumer preferences are
evolving in different ways
The 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 criticalto understand.

Developed-market consumers seeking out
healthier food options
As diets have moved from legumes and vegetables
towards meat and processed foods high in sugars
and sodium, there has been a measurable increase in
hypertension, diabetes, obesity and cardiovasculardisease. In 2017, over 20% of all deaths worldwide
were related to diets.21, 22
8 FOOD FOR THOUGHT | PGIM

Both consumers and the food industry are increasingly
aware 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 healthand wellness influences their product choices, from
ingredient sourcing to food processing.23 Food
manufacturers and processors are adapting to theseshifts 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

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.
This change in preferences is being further supported
by policy shifts in developed markets. In both the US
and EU, government initiatives are aiming to increasetransparency around nutrition claims as well as
funding medically tailored food – meals designed andapproved by nutritionists to address specific chronic
conditions or diseases – as part of health insurance.25

Convenience becomes paramount for
global consumers
The trend towards greater convenience in dining at
home was accelerated 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 athome, consumption of packaged foods and delivered
food has increase manifold, especially in emerging
markets.27 Today, the food-for-delivery segment spans

far beyond restaurant deliveries and includes ghost
kitchens as well as subscription services for ready-tocook meals. Global demand for prepared foods andmeals is set to grow by 60% to $250 billion by 2029.28
Increasingly, grocery stores are also changing
distribution models to facilitate online orders andadapt 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 toan expansion of grab-and-go offerings by supermarkets
that offer healthier options to traditional 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 – goesuneaten around the world each year.31 In fact, consumers in developed countries waste almost as muchfood as the total food production of sub-Saharan Africa. This has a significant 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 world’s
third-largest emitter after China and the United States.32, 33
Food loss happens 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 theretail and consumer stage. By comparison, in developing regions, post-harvest losses during processing
amount to roughly 40% of total food loss there.34
For investors and policymakers, this means the opportunities to minimize food loss and bolster foodsecurity will vary by region. For example, investments in cold storage in emerging markets improve theinfrastructure of the food supply chain outside the farm gate and 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 UN’s Food and Agriculture 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 thedecrease in quantity or quality of food from the retail level until end- consumers.

PGIM | FOOD FOR THOUGHT 9Investment Implications
Three demand drivers – population and income
growth, converging diets, and shifting consumer
preferences – will transform food demand over the
coming decades. They represent deviations from thepast and have significant investment implications.
There are five themes that will be paramount forinvestors to consider as they evaluate opportunities
and risks:

1. Meat producers offer a contrarian opportunity,
while plant-based meat has peaked
Plant-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 few years ago – as fastfood 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, thealternative meat market remains a tiny sliver – lessthan 0.2% – of the $1.7 trillion global 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 intheir diet as income grows. Global meat producers
are poised to benefit from this growing demand –especially among the rising middle class in emerging
markets. Livestock is a commodity-based businessdominated by economies of scale. There are a handfulof players operating at the global level – Tyson Foodand OSI from the US or JBS from Brazil – thatare diversified across both meat products as well as
regions. These characteristics enable leading producers
to better manage cyclical supply factors and make forstable cash flows.38
From an ESG perspective, the carbon emissions
and environmental impact of conventional meatproduction can be problematic. But investors should
consider the opportunities to make measurable impact
by actively engaging with (rather than excluding) a
range of firms in the food system. This is discussed
further in Chapter 3.

10 FOOD FOR THOUGHT | PGIM

2. Cold storage and transportation provide
global growth opportunities
As consumers demand more fresh foods, online
grocery and food delivery, expanding the stockof refrigerated warehouses becomes essential. For
investors with an ESG lens, investments in the coldtransport chain also represent an opportunity to reducefood loss at various stages of the supply chain.
In the US, cold storage real estate is particularlycompelling. The US is the largest single market forcold storage, and its consumers are most accustomed
to year-round variety and food delivery. New directto-consumer businesses (such as Imperfect Food andMisfits Market) also provide real estate investors withcustomers for existing cold storage facilities as well as
new ones with proximity to urban population centers.
Investors can find cold storage opportunities in Asiaand Latin America as well. A growing middle class inthese 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 warehouses but is also driving abooming cold storage market from China to Vietnam
to India and Mexico with expected growth rates well
above 20% in the next decade.39, 40

Investors can find cold storage
opportunities in Asia and Latin
America, where a growing
middle class is adopting
e-commerce and demanding
higher-quality food options.
Logistics providers in Southeast Asia and Latin
America, such as Nichirei and Frialsa, respectively,
also benefit from the increasing convergence of dietsand 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

US-based Echo Global Logistics, may be especiallyattractive as they provide both warehouses and longhaul transport and benefit from demand for bothcold transport as well as storage. For example, many
vegetables and processed foods need temperaturecontrolled hauling and are susceptible to damage suchas freezing, breakage or spilling.

Established food-packaging players
are a way of taking advantage ofthe growing market for preparedfoods without depending onvolatile consumer behavior.
3. Packaging offers steady cash flows, no matterthe underlying food fads
Changing consumer preferences have a direct impact
on packaged food. Prepared meals necessarily involve
packaging but also create a need for conveniencesuch as resealable pouches and innovations to addressconcerns around excessive packaging.43 But theincreased demand for packaging goes beyond the risein ready-to-eat meals. 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 demand 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 leadersin their market segment – such as Novolex or Berry
Global in 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 andenergy drinks makes US companies such as Ardagh
Metal Packaging and Crown Holdings potentiallyattractive investments.

The specialized machinery and equipment required
for food packaging also offers potentially interesting
opportunities for investors. For example, the now
ubiquitous plastic pouches with resealable spoutscommonly used for apple sauce or baby food require
specialized machinery for packaging. Large players
in the space – like Duravant in the US or Germany’s
Krones – have strong cash flows to fund new
innovations, are relatively resilient to recessions andhave a sticky customer base.

4. Health and wellness options drive grocery andfood innovation
Consumers are increasingly conscious about healthierfood options.45 While still early in their development,
startups that present healthier and sustainableproducts may offer attractive venture opportunities
for investors. In the US, companies like Voyage Foods
focus on producing alternatives to ingredients withhealth, environmental or social challenges. Theirline of products includes nut-free peanut butter (forthose with allergies) and cocoa-free chocolate andcoffee (both cocoa production and coffee trade canbe unethical). Another example is the growing listof personalized meal services – such as Hello Fresh
and Dinnerly in Europe and the US – targeted at thehealth and wellness segment by supplying 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 thoserelying on compelling consumers to change their
behavior or preferences.
The health trend has also created opportunity infood retail. Regionally dominant grocery stores, likeprivately owned Wegmans and Hy-Vee in the USor 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 theiroffering 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

PGIM | FOOD FOR THOUGHT 11

Concerns around food safety andunpacked products have led toa marked uptick in demand forrecognized brands, ready-to-eat
snacks and packaged foods inrapidly urbanizing countries.
5. Convenience and food safety drive emerging
market opportunities
Concerns around food safety and unpacked products
have led to a marked uptick in demand for recognizedbrands, ready-to-eat snacks and packaged foods inrapidly urbanizing countries such as India, Brazil andChina.48, 49 Investors should seek companies that offer
exposure to food and beverage staples, with strong
brand names and local logistic expertise.
For example, Asia offers investors opportunities inpublicly traded companies such as India’s Britannia(producer of baked goods) or Varun Beverages(PepsiCo and Tropicana beverages).

12 FOOD FOR THOUGHT | PGIM

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 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 asvast local distribution networks. These are examples
of companies in Latin America and Asia that willcontinue to see growth from the shift to convenienceand converging diets.

Chapter 1 examined the dynamics altering
the food system from the demand side. The
next chapter will review the major forces
driving change from the supply side. Namely,
how climate and technology are reshaping
agriculture and food production.

CHAPTER 2

FOOD SUPPLY: CLIMATEAND INNOVATION ARE
TRANSFORMING PRODUCTION“

The global food system,
despite all its imperfections,provides over 20 trillion
calories every day.”

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PGIM | FOOD FOR THOUGHT 13

CHAPTER 2

FOOD SUPPLY: CLIMATE AND INNOVATION ARE
TRANSFORMING PRODUCTION
The 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.50 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 pushof technology and innovation into every corner of food production.

1. The feedback loop between theenvironment and agriculture

Food production impacts the environmentand climate change

While there is much discussion around climatechange and the food system, what is frequently
overlooked is the complex two-way causality (Exhibit
6). While the adverse effects of climate change onfood production are well-reported, less attention ispaid to the large imprint the food system leaves on
the environment. In fact, global food production
accounts for 70% of freshwater consumption and
30% of greenhouse gas emissions.51

Even today, these methods remain dominant inmost parts of the world. However, as we view
food production through a 21st-century lens ofThe basis of today’s global agriculture – especially in
key crops like corn, wheat and rice – can be traced
to the 1960s Green 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.

Exhibit 6: Agriculture and the environment impact each other• 30% of global GHG emission• 70% of freshwater consumption• 80% of deforestation

IMPACT

AGRICULTURE
IMPACT• 12% crop yield decline• Up to 35% decline in fishery production• 17% decline in milk production
Source: PGIM Thematic Research.

14 FOOD FOR THOUGHT | PGIM

CLIMATE AND
ENVIRONMENT

sustainability, it is clear this template for agricultural
production needs upgrading.53, 54
Synthetic fertilizers can impair water sources andmarine life
While fertilizers are a simple and effective way toboost crop yields, the persistent use of nitrogen-based
fertilizers contributes to environmental degradation inseveral ways.55 Current methods of farming that havefew 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 estimated that onethird 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.57

40% of global croplands havealready experienced water
scarcity and the upper end
of future estimates are nearly
twice that figure.
Methane emissions from livestock production
Livestock production has damaging effects on theenvironment – including deforestation 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 produce methane intheir stomachs as they digest hard fibers from grass.
Most of this enteric methane from livestock digestionis expelled into the atmosphere and accounts forroughly a third of all methane emissions globally.59
With greater demand for animal-based food products,
livestock methane emissions are projected to grow
30% by 2050 under current policies and practices.60

Climate change directly impacts agriculture in
multiple ways
Aside from remote polar regions, the direct impact ofclimate change – namely, extreme heat, water stress andrainfall variability – on crop yields is detrimental.61 For
example, in 2022 India experienced its hottest Marchin over a century. The blistering heat reduced wheatyields 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 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 twice that figure.64
For example, Europe is emerging from a drought that
may be its worst in 500 years, and yield forecasts forcorn, wheat and other staple crops are being slashed by
25% or more.65, 66
Livestock are less productive with heat stress
Heat stress – the combination of high ambient
temperatures, humidity and solar radiation – has anegative impact on animal welfare and reduces the
productivity of livestock. Animals respond to heat stressby 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 affects
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% ofmilk production by the end of the century.68, 69
The effects of rising sea temperatures areoften overlooked
Global warming impacts not only temperatures onland but also ocean and sea temperatures. Evidence
is mounting that rising sea temperatures are already
reducing seafood production in some parts of theworld.70 Fish and other marine life have limited ability

PGIM | FOOD FOR THOUGHT 15

to regulate their body temperature and even subtle
changes in their aquatic surroundings can have asubstantial impact on their health.71 In fact, ocean
warming has already led to material declines in fisheryproduction between 15% and 35%.72

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, AgTechand “alternative agriculture” that transform foodproduction (Exhibit 7).

Forward-thinking investors will
want to focus on several key areas
including crop science, AgTechand “alternative agriculture”
that transform food production.

Crop science can boost climate resilience andcrop yields

Indirect effects of climate change are numerous
and costly as well
Climate change has a range of indirect effects on
agriculture, from spreading weeds and pests to thedeclining nutritional value of crops. Going forward,
climate change and its impact on food production will
add substantial pressure on the food system to meetgrowing demand.73
Many weeds, pests and fungi thrive under warmer
temperatures and increased CO2 levels. In fact,increasingly milder winters can trigger an expansionof the geographic range and reduced effectivenessof 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 plantfungi and diseases.74 And these changes can be costly aswell – US farmers already spend more than $11 billion
annually just to fight weeds.75

2. Technology and innovation are
critical to increase food sustainability
and productivity
To meet the challenges of the future, technology andinnovation will need to play a crucial role in finding
new ways of growing and producing food. Innovation
and adoption of modern technology are already taking
place throughout the food value chain. It is important

16 FOOD FOR THOUGHT | PGIM

Crop science often refers to the development of newvarieties of seeds or plant breeding as well as new
fertilizers. Farmers have been breeding their own plants
for centuries, and advances in seed varieties – likecross-bred or hybrid seeds – were a key element of
the Green Revolution. Today, crop science continues
to be a driver of innovation and adaptation acrossthe agricultural landscape. Seed varieties optimized
for local soil, water and climate conditions canenhance yields materially. Furthermore, seeds bredwith resistance to new pests, diseases and fungi arean effective way to mitigate indirect effects of climatechange as well. Specifically, breeding varieties withshorter (or longer) growing cycles to adjust to a shorter(or longer) growing season can enhance crop yields.
Additionally, modifications of seed pathways can leadto faster-growing, more nutrient-rich crops or greater
photosynthetic efficiency – all of which are ways to
extract greater food production from a system that haslargely maxed out on arable land and water.
New crop varieties can also propel a more resilient
food system. For example, short-stacked corn ismore resistant to high winds and extreme weather
events than its predecessors. And breeding plants tohave deeper and longer root networks can enhance
resistance to drought and heat.
Biologicals offer minimal environmental impact but
face adoption challenges
Synthetic fertilizers and crop protection come withenvironmental consequences. However, a whole new
set of compounds are emerging that use nature’s own
biology to safeguard plants against pests, prevent
disease and improve yields. The segment is split
roughly between biostimulants – which improve
nutrient availability, uptake or efficiency to enhance
growth – and biopesticides, which provide plantExhibit 7: Key areas of innovation in food production
INNOVATION IN FOOD PRODUCTION
Crop Science

AgTech• New Crop & Seed Varieties• Precision Agriculture• Smart Apps & Sensors• Autonomous Machinery• Biologicals• Biostimulants• Biopesticides

Alternative Agriculture• Cellular Agriculture• Indoor Farming

Source: PGIM Thematic Research.

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 agricultural
biologicals is still small – about one-sixth the sizeof 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 andAsia.80 One challenge the industry faces is difficulty
in clearly demonstrating that subtle changes to plant
processes can lead to enhanced crop yields. With
traditional herbicides, for example, the destructionof a weed is a clear demonstration of efficacy. With
biologicals, the changes in internal organic processes
may act over time and not be as obvious, making
validation of efficacy more ambiguous.81

From tech to table: AgTech boosts productivity
and sustainability
The basic inputs for agriculture are simple and littlechanged over time: seed, sun, water, fertilizer, pesticideand labor. AgTech often refers to leveraging technology
to create 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 someenvironmental 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 realtime data serves as an input for predictive 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 likenitrogen or chemical run-off.82

New crop varieties can also propela more resilient food system bycreating plants that are moreresistant than its predecessors.
However, as a nascent technology, precision
agriculture faces challenges including a fragmented
landscape for different components that may not bestandardized. This can make it difficult for sensors
to work seamlessly with software as well as water andnutrient delivery systems because they do not share acommon tech platform. Furthermore, in some fields,internet or mobile connectivity can be inconsistentor weak.83 Last, the sensors, software and delivery
systems needed to engage in precision agriculture
require a significant investment as well as ongoing
PGIM | FOOD FOR THOUGHT 17

infrastructure and maintenance. The operationalcosts for this may be prohibitive for smaller farms
and the payback period too long.

Cellular agriculture involves
growing agricultural products
directly from cell cultures using
fermentation and biotechnology
processes to stimulate cell growth.
Alternative agriculture offers innovative foodproduction methods
Cellular agriculture and cultivated meat
Global demand 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 theprimal human desire for it.85 Cellular agriculture
involves growing agricultural products directly fromcell cultures using fermentation and biotechnology
processes to stimulate cell growth. This raises theprospect 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 nutrientsand grown at high volume and density in enormous
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 fromlivestock as well as carbon emissions from long-haultransport of meat, as production can easily be moved
closer to end consumers.
However, the industry is at a very early stage and faces
significant challenges. First, consumer acceptanceremains unclear. If the short-lived growth periodof plant-based proteins is any indication, it is notcertain consumers will easily adopt any alternative
to conventionally raised meat. There also may be the18 FOOD FOR THOUGHT | PGIM

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 costcompetitive. This is an enormous challenge given
the energy-intensity of current processes and the vastdifficulties in scaling production.87 Analysis of theeconomies of scale that could be achieved estimate
a production cost of roughly $11 per pound ofcultivated ground beef – compared to the markedup grocery store price of under $5 per pound forconventionally 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 morethan a decade.89
Indoor farming
Plants have been raised in greenhouses for hundreds ofyears, 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 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 havemastered the efficiencies 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 evenmore energy and is difficult to operate at the kind ofscale 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 anunwelcome source of volatility in both the price andavailability of food.93

Investment Implications
The evolving landscape of agriculture andfood production creates a range of investment
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 scale. There are
six investment themes especially critical for investors
as they consider the transforming agriculture and foodproduction landscape.

1. AgTech is driving smarter, more sustainable
food production on small farms
Improving the agricultural efficiency, profitability andsustainability of small farms often involves technology –like smart devices, sensors, data analysis and proprietaryalgorithms. For investors, the AgTech landscape is quite
fragmented with many startups finding diverse ways toapply technology to farming, which may offer attractive
venture capital opportunities.
In emerging markets, 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 meetingthe future food demands of Indian consumers andachieving food self-sufficiency. An Indian startup called
Gramophone is an example of intelligent agriculturethat 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 nutrients tomanaging 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 morewidespread. Mobile irrigation systems are an example
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 anenhanced sensor-based system for precision irrigation,embedding their sensors right into tree stems thatenables continuous, precise, real-time readings throughan app.

For cultivated meat or fish tocompete against conventionallyraised meat, it must be costcompetitive. This is an enormous
challenge given the energy-intensityof current processes and the vastdifficulties in scaling production.

2. Farmland debt and equity offer a uniqueexposure and an attractive investment
Farmland lending and investing offer a different andunique exposure to productivity gains across the global
food system for long-term investors. As a maturingasset class with an established benchmark, institutional
ownership of farmland is growing but is still at an earlystage with only about 3% of US farmland owned byinstitutional capital.96
While the scarcity of arable land is well understood,
farmland’s combination of long-term income andcapital appreciation is often overlooked and offers a
range of risk-return propositions for both debt andequity investors. Direct farming operations and leases,
for example, can supply a steady source of income forinvestors while productivity gains from use of precision
agriculture can drive capital appreciation of farmland.97
Farmland investing can be broadly divided into two
categories – row crops and permanent crops. Rowcrops – like corn, soybeans, rice and cotton – aremechanically planted and harvested annually andhistorically offer a lower risk profile with a relatively
steady income. In contrast, permanent crops like treenuts and tree fruits are more difficult to switch in

PGIM | FOOD FOR THOUGHT 19

response to market conditions and offer a different riskreward profile which relies more on operating income.
Investors seeking exposure to permanent crops should
target one of the few areas with a Mediterraneanlike climate – mild, wet winters and hot and drysummers – that offer an optimal environment for
high-value permanent crops like grapes, citrus andnuts. California is one such region – along with Chile,
South Africa and parts of Southern Australia – withthis kind of climate. However, California presents
especially attractive investment opportunities due
to other features: its proximity to major commodity
exchanges, a deep set of private and governmentsponsored financial institutions supplying capitalto the farm sector, and the advanced network ofstrategically located highways, railroads and ports.

Farmland’s combinationof long-term income andcapital appreciation is often
overlooked and offers a rangeof risk-return propositions.
3. Crop science and feed additives offer
innovations that increase production andsustainability
Global 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 havediversified global businesses, steady demand for theirproducts and the scale and expertise to engage incustomized crop science for different regions andconditions. In India, investors should consider local
leaders like PI Industries and Dhanuka Agritech. They
have local expertise and strong distribution networks
throughout the country.

20 FOOD FOR THOUGHT | PGIM

Enhancing livestock productivity and reducing theemission of greenhouse gases is critical for a moresustainable food system. Investors can find attractive
opportunities in these realms as well. Animal healthcompanies like Zoetis and Elanco in the US or RoyalDSM in the Netherlands offer products that enable
farmers to achieve both objectives. Feed additives
for cattle or pigs can better balance amino acids tomake feed 15% more efficient and can boost livestock
productivity.98, 99 Other feed additives can reduce entericmethane emissions from dairy cows by 35% and by asmuch as 80% in beef cattle by suppressing the enzymethat triggers methane production.100 Both kinds ofadditives are already in production and likely to be
in use for some time. The steady demand for theseproducts and the scale of leading players can make forstable cash flows that debt investors may find attractive.

4. Precision agriculture improves efficiencyof larger farms
With its market size expected to increase fourfold
by 2030, precision agriculture offers investors ample
growth opportunities.101 It is is especially useful onlarge-scale industrial farms, and investors can finddebt and equity opportunities in this segment. Thiskind of automation can also ease concerns over farmlabor supply.
Today’s farm machinery is almost unrecognizable fromits predecessors even 20 years ago. These GPS-enabledmachines can be nearly autonomous, adjust to specificfield conditions and execute multiple tasks using a
range of sensors and machine learning. They alsoenable more precise application of fertilizer and other
inputs, thereby reducing usage by as much as 60% andminimizing deleterious environmental impacts.102 For
example, cameras and sprayers mounted on the tractor
leverage AI to discern between weeds and crops andsupply herbicide only where it is needed.103
A handful of global players – Europe’s CNH, Kubota
of Japan, and John Deere and AGCO of the US – aresupplying large farms with autonomous planters,
sprayers and other machinery. As more of their newsales involve smart machinery, these manufacturers

are adding software update fees as a source ofongoing revenue to smooth out the cash flows of
the commodity cycle. Currently, the US is a leading
market for autonomous machinery. However, withfarms in Brazil and Argentina modernizing, Latin
America has become an immense growth market aswell.104 There is much room for technology penetration
there as farms upgrade to keep up.
Hydrosat is a startup that enhances moisturemonitoring – a critical input for precision agriculture.
Currently used on industrial-sized farms in North
America and Latin America, Hydrosat provides highly
granular infrared satellite images more frequently thanwhat is publicly available. This higher frequency data
can be used to identify moisture and water stress weeks
in advance of actual acute episodes.

Enhancing livestock productivity
and reducing the emission ofgreenhouse gases is critical for amore sustainable food system.
5. Fertilizers will remain essential to maintainand enhance crop yields
Given 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 theenvironment. However, ESG-minded investors should
strongly consider engagement with this sector, as theunpleasant arithmetic of food supply and demandmeans that nitrogen-based fertilizers will not be easily
replaced and will remain vital to food production forsome time.105
Because of their underusage in parts of South Asiaand sub-Saharan Africa, nitrogen-based fertilizers andcrop protection could have an outsized impact on crop
yields there. Indeed, greater adoption of fertilizer andcrop protection could increase food security and self-

sufficiency in these regions, even as their populations
grow, and climate change adversely impacts yields.
For debt investors in particular, the sector offersa variety of benefits. For one, the annual need fornitrogen fertilizers serves as a steady source of demand.
The industry is also highly consolidated, as the
economies of scale and high capital costs create 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 (comparatively) cheap natural gas
or potash, or Morocco’s OCP, which has access to theworld’s largest reserves of phosphate, are especially well
positioned during times of increased input costs.106

6. Cultivated meat: More sizzle than steak
for investors
Though cultivated meat gets much media attention– and has attracted more than $1 billion in venture
capital – the industry remains at an awkward stage forinvestors. Few products are available outside of a lab –Singapore is the only country to approve a cultivatedchicken nugget product for retail sale.107 The market isvery crowded and highly fragmented with more than ahundred 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 andscale their production. The market is likely to see
much consolidation in coming years as it will not be
economical to continue funding all these startups.
While the prospect of a cultivated rib-eye steakcomparable in taste, texture and cost remains quite
distant, VC investors should focus on more unsung
aspects of cellular agriculture that are likely to becommercially viable sooner. Simpler forms of protein
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 havecommercial use can be attractive. For example, Onego

PGIM | FOOD FOR THOUGHT 21

Bio and EVERY Company are startups focused on
fermentation production of egg protein (egg whites),
which is widely used as a binding agent in cakes andother baked goods. Israeli startup Remilk – which
produces milk proteins whey and casein – has a

While the prospect of lab-grownsteak remains distant, investors
should focus on startups that
produce simple protein that havecommercial use.

22 FOOD FOR THOUGHT | PGIM

partnership with food giant General Mills to produce
lactose-free, non-animal cream cheese.109

Chapters 1 and 2 analyzed the shifting
dynamics in the demand and supply of thebroad food system as well as the resulting
opportunities and risks in individual asset
classes. However, the evolving landscape ofthe food system also has implications acrossinvestment portfolios. Chapter 3 turns tothese implications and proposes a portfoliowide action plan for CIOs.

CHAPTER 3

PORTFOLIO-WIDEINVESTMENT IMPLICATIONS“Food price inflation, sustainability
and disruptions to the foodsupply chain all raise important
macro implications.”

1

2

3
PGIM | FOOD FOR THOUGHT 23

CHAPTER 3

PORTFOLIO-WIDE INVESTMENT IMPLICATIONSFood price inflation, sustainability 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, crossportfolio implications arising from the changing investment landscape in the global food system.

1. Disruptions in food distribution
may reveal geopolitical andmacroeconomic vulnerabilities

together account for nearly 30% of global wheat
exports, and disruptions to their regular shipments
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

Given the reliance of the global food system oninternational trade, interruptions in food supply chains
can be highly disruptive – especially given the export
concentration of key agricultural crops and inputs(Exhibit 8).

Indeed, the war in Ukraine revealed several
vulnerabilities across the food system. The
disruptions that cascaded from a single region
triggered 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 toincorporate food security vulnerabilities from a foodprice inflation and import dependency standpoint.

Beyond the humanitarian tragedy unfolding due to
Russia’s 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

Exhibit 8: Grain exports are highly concentrated
Share of top 5 global exporters for select key crops (2020)
Corn

SoybeanRice

Top 5 (79%)

Top 5 (94%)

Top 5 (72%)

Source: Food and Agriculture Organization of the United Nations.

24 FOOD FOR THOUGHT | PGIM

For investors, there are two key takeaways from thisongoing episode. First, interruptions to food supply
and distribution will likely be more frequent andwidespread going forward. Developed markets are notimmune to food shortages or surges in prices.114 Viraloutbreaks 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 frommounting geopolitical tensions, anti-globalization
movements and deteriorating trade dynamics.116
In a world growing more polarized, the risk of the“weaponization” of food exports is only growing.
Second, it is critical investors acknowledge that foodinflation can be particularly destabilizing from a socialand political perspective – especially in frontier andemerging markets. For example, soaring food prices
from droughts played a significant role in the ArabSpring movements of 2010 and 2011 that toppled
regimes in multiple countries.117 Countries like Nigeria,
Egypt, Kazakhstan and the Philippines where foodaccounts for a third or more of consumer spending
may be most vulnerable in this regard.118 It is notclear current sovereign rating methodology takes foodinflation and the ensuing political risks sufficiently
into consideration, and investors may want to consider
supplementing their assessments of country risk.

In a world growing morepolarized, the risk of the“weaponization” of foodexports is only growing.

2. The food system presents uniquetensions and opportunities for ESGminded investors
Applying an ESG lens to something as sprawlingand essential as the food system can be exceptionallychallenging. Today’s food system, in some ways,
resembles the energy sector from a decade ago. It
provides a vital good with inherent ESG tensions andopportunities in its production system – but not muchdetailed data to make informed and nuanced trade-offs.
Nevertheless, food is becoming more prominent with
ESG investors given the food system’s interconnections
with climate and biodiversity. For investors withcommitments to decarbonization and sustainability,
there is a growing recognition that the broad foodsystem needs to play a vital role in achieving bothobjectives. And it provides opportunities for them tomake measurable impact.
ESG issues are, by their nature, complex. Whenlooking at the current food system, several
inconsistencies become apparent. One example is theuse of synthetic fertilizers. Application of fertilizers inregions where they are underused – like sub-SaharanAfrica – 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 today.
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 off
into sources of drinking water and waterways.120
Fertilizers also account for a sizable portion of humangenerated NO2 emissions.121
So, how should ESG investors think about theseapparent contradictions? More importantly, whatshould they do?
Engage with all sectors: ESG investors need torealize there are no perfect solutions when it comes tothe food system. Instead, there are lots of imperfectoptions and alternatives. Given the criticality ofmeeting global food demand, excluding somesegments of the food system based solely on carbon
emissions, for example, seems ineffective. Rather,an emphasis on active research that focuses on theactions of the broader industry as well as individualcompanies 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 their

PGIM | FOOD FOR THOUGHT 25

peers can be a good starting point. Furthermore, using
active stewardship to connect companies with external
experts and industry associations to encourage them touse best practices can also be a constructive approach
for investors.
Seek out innovative incumbents: With seemingly
perfect options a long way off (e.g., biologicalfertilizers that are just as effective and cost-efficient as
synthetic ones), investors need to have an approachthat acknowledges current needs and limitations 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 toreduce their carbon footprint today and investingin startups working on biologicals. Examining theircorporate strategy and getting more detail around how
their research dollars are spent is also an effective way tolearn 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 their progress and whether achieving thesegoals relies on current or future technology can be
another way of discerning between forward-leaning andlagging incumbents.
Work to narrow the data gap: Investors need accessto quality information and data to make informed
trade-offs and to identify the most innovative
incumbents. To achieve this, investors need to seek
greater disclosures and information on a regularbasis from companies in the food system. Greatertransparency in data, however, is not costless and may
be especially burdensome for small companies andfarmers. Collective advocacy by investors for greater
disclosure has led to better data in other sectors and

26 FOOD FOR THOUGHT | PGIM

industries.122 The FAIRR Initiative, for example, is aninvestor network that has been effective in providing
data on a range of ESG risks associated with foodproduction. They publish research and offer tools andindices on the animal protein industry, for example.123
Participating in initiatives like this may be a productive
step for investors seeking more data disclosures.

The challenges of the 21st Century
remain significant and arepropelling the global food system
towards an inflection point.

3. Farmland investing provides
diversification and inflation protection
for institutional portfolios
Farmland is still a maturing institutional asset
class, and 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 – andsomewhat unique – features.
First, farmland returns are relatively uncorrelated withmajor 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 areliable inflation hedge (Exhibit 9). As a real asset, US
farmland has proven to be an effective store of wealth inperiods of high inflation and uncertainty as well.

Exhibit 9: Farmland can be an effective inflation hedge
US farmland price compared to US CPI (year-over-year % change)
CPI

25%

Farmland

20%
15%
10%
5%
0%
-5%
-10%
-15%
1950

1960

1970

1980

1990

2000

2010

2020

Source: 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 challenges 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 system will be essential for institutional
investors around the world.

PGIM | FOOD FOR THOUGHT 27

INVESTMENT IMPLICATIONS ACROSS FOOD DEMAND
1. Meat producers offer acontrarian investment
opportunity• More affluent populations and convergence of global diets create opportunity for meat producers• ESG investors should consider engaging with conventional meat manufacturers

2. 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 attractive

3. Packaging offers cash flows nomatter 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 Europe

4. Health and wellness options
drive grocery and foodinnovation• Consumers are seeking healthier 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 tastes

5. Convenience and food safety
drives emerging market
opportunities• Concerns around food safety in EM has led to demand for recognized brands and packaged foods• Regional bakers and bottlers offer opportunities in India and Latin America

INVESTMENT IMPLICATIONS ACROSS FOOD SUPPLY
1. AgTech driving smarter, moresustainable food production on
small farms• Finding ways to enhance productivity of small-scale farms is critical to meeting future food demands• AgTech landscape is fragmented with many startups and can offer attractive VC investments

2. Farmland debt and equity offer aunique exposure and attractive
investment• A range of risk-reward propositions for debt and equity investors• California is especially attractive for investors because of its optimal climate and proximity to major exchanges,
ports and highways

3. 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 and have diversified businesses and scale

4. 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 remain essential tomaintain 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 time

6. Cultivated meat: More sizzle
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 use

PORTFOLIO-WIDE INVESTMENT IMPLICATIONS1. Disruptions in food distribution
may reveal hidden risks andvulnerabilities 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 markets

2. The food system presents uniquetensions and opportunities 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 effective

3. Farmland investing has
some unique investment
characteristics• Offers negatively correlated returns with both stocks and bonds• Farmland has proven to be a reliable inflation hedge

28 FOOD FOR THOUGHT | PGIMACKNOWLEDGMENTS
PGIM gratefully acknowledges the contributions of the following individuals:
Prof. Christopher Barrett, Stephen B. and Janice G. Ashley Professor ofApplied Economics and Management, Cornell University
Noah Bishop, Vice President, Warburg Pincus
Brett Brohl, Managing Director, Techstars
Anthony Chow, Co-Founder, Agronomics
Lisa Feria, Managing Partner & CEO, Stray Dog Capital
Pieter Fossel, CEO & Co-Founder, Hydrosat
Tim O’Rourke, Senior Managing Director, JLL
Michael Pan, Managing Director, Warburg Pincus
Dr. Caterina Ruggeri Laderchi, Director, Food System Economics Commission
Ethan Steinberg, CEO, Propagate
Ryan Wilson, CEO, Boardwalk Collective

PGIM | FOOD FOR THOUGHT 29

PGIM Contributors• Anandhapadmanabhan Anjeneyan, PGIM India• Umar Manzoor, PGIM Fixed Income• Henry Balbirer, PGIM Fixed Income• Anna McDonald, PGIM

• Alyssa Braun, PGIM Fixed Income• Bryan McDonnell, PGIM Real Estate• Tony Coletta, PGIM Private Capital• Dr. Katharine Neiss, PGIM Fixed Income• Armelle de Vienne, PGIM Fixed Income• Benjamin Novick, PGIM Fixed Income• Nuvneet Dhillon, PGIM Fixed Income• Steven Oliveira, PGIM Real Estate• Lauren Dombrowski, PGIM Fixed Income• Michael Pettit, PGIM Fixed Income• Omari Douglas-Hall, PGIM Fixed Income• John Ploeg, PGIM Fixed Income• William Engelking, PGIM Private Capital• David Quackenbush, PGIM Private Capital• Sebastiano Ferrante, PGIM Real Estate• Srinivas Rao, PGIM India• Elitza Fleischman, PGIM Fixed Income• Vivek Sharma, PGIM India• Sean Goodier, PGIM Fixed Income• Jamie Shen, PGIM Real Estate• Liz Halpin, PGIM Fixed Income• Daleep Singh, PGIM Fixed Income• Bruce Hamilton, PGIM Fixed Income• John Smigelsky, PGIM Fixed Income• Dr. Peter Hayes, PGIM Real Estate• Robin Snyder, PGIM Fixed Income• Alex Herbert, PGIM Fixed Income• Daniel Solinsky, PGIM Fixed Income• Nikola Ivanov, PGIM Fixed Income• Tatiana Spineanu, PGIM Fixed Income• Eugenia Jackson, PGIM

• Scott Swanson, PGIM Fixed Income• Jess Jarratt, PGIM Real Estate• Reuben Teague, PGIM Real Estate• David Klausner, PGIM Fixed Income• Benett Theseira, PGIM Real Estate• Richard Kus, PGIM Fixed Income• Dr. Noah Weisberger, PGIM IAS•

Principal Authors
Shehriyar Antia, PGIM Thematic Research
Dr. Taimur Hyat, PGIM
Jakob Wilhelmus, PGIM Thematic Research

30 FOOD FOR THOUGHT | PGIM

Endnotes
1“New Nature Economy Report Series,” World Economic Forum, July 2020. < https://www.weforum.org/reports/new-nature-economy-report-series >2“Agricultural Policy Monitoring and Evaluation,” OECD, June 2022. < https://doi.org/10.1787/7f4542bf-en >3“The State of Food Security and Nutrition in the World 2022,” Food and Agriculture Organization of the United Nations, June 2022.
< https://www.fao.org/3/cc0639en/cc0639en.pdf >

4

Ibid

5

“Obesity and Overweight,” World Health Organization, June 9, 2021. < https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight >6“Statistical Pocketbook: World Food and Agriculture,” Food and Agriculture Organization of the United Nations, 2022. < https://doi.
org/10.4060/cc2212en >7“The State of Food Security and Nutrition in the World 2021,” Food and Agriculture Organization of the United Nations. < https://www.fao.org/state-of-food-security-nutrition/2021/en/ >8

Foster, Andrew and Rosenzweig, Mark, “Are there too many farms in the world? Labor-market transaction costs, machine capacities
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14 Treisman, Rachel, “China Is Buying Up More US Farmland. Some Lawmakers Consider that a Security Threat,” NPR, March 1, 2023.
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26 Ahuja, Kabir, et al, “Ordering In: The Rapid Evolution of Food Delivery,” McKinsey & Company, Sept. 22, 2021 < https://www.
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30 “Demand for Prepared Foods Drives Packaging Innovation,” Supermarket News, April 12, 2021. < https://www.supermarketnews.com/
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33 Rezaei, Maryam, and Liu, Bin, “Food Loss and Waste in the Food Supply Chain,” FAO, July 2017. <https://www.fao.org/3/bt300e/
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34 “Global Food Losses and Food Waste,” Food and Agriculture Organization of the United Nations, 2011. < https://www.fao.org/3/
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mckinsey.com/industries/agriculture/our-insights/alternative-proteins-the-race-for-market-share-is-on >37 “Meat,” FAO, OECD-FAO Agricultural Outlook 2021-2030. < https://www.fao.org/3/cb5332en/Meat.pdf >38 Maples, Josh, MSU, “The Cattle Cycle: It Can Be a Long 10 Years,” Beef Magazine, Oct. 5, 2022. < https://www.beefmagazine.com/
beef/cattle-cycle-it-can-be-long-10-years >39 “The Rush to Meet Asia Pacific’s Growing Cold Storage Needs,” JLL Australia, July 2022. < https://www.jll.com.au/en/trends-and-insights/research/the-rush-to-meet-asia-pacifics-growing-cold-storage-needs >40 Qian, Mandy, “China Cold Storage Logistics,” Cushman & Wakefield, Sept. 29, 2022. < https://www.cushmanwakefield.com/en/
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< https://www.mckinsey.com/industries/paper-forest-products-and-packaging/our-insights/sustainability-in-packaging-inside-the-minds-of-us-consumers >44 Dunphy, Siobhán, “Around 80 Percent of the World’s Population Relies on Imported Food,” European Scientist, April 28, 2020. <https://www.europeanscientist.com/en/agriculture/majority-of-the-worlds-population-depends-on-imported-food/ >45 Das, Debadyuti, et al, “Impact of Covid-19 on Changing Consumer Behaviour: Lessons from an Emerging Economy,” Wiley Online
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49 “China’s FMCG Sector Continues to Show Resilience Despite Ongoing Covid Challenges,” Bain & Company, Dec. 8, 2022. < https://www.bain.com/about/media-center/press-releases/2022/chinas-fmcg-sector-continues-to-show-resilience-despite-ongoing-covid-challenges/#:~:text=Packaged%20food%20alone%20averaged%207.4,and%200.6%25%20increase%20in%20ASP >50 Roser, Max, Ritchie, Hannah, and Rosado, Pablo, 2013, “Food Supply,” OurWorldInData.org. < https://ourworldindata.org/
food-supply >51 “2017 The State of Food and Agriculture,” FAO, October 2016. < https://www.fao.org/3/i6030e/i6030e.pdf>
52 “Green Revolution,” International Encyclopedia of Human Geography, ScienceDirect, July 8, 2009. < https://www.sciencedirect.com/
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53 Fawcett-Atkinson, Marc, “‘Better Is Always Possible,’ Canada’s Agriculture Minister Says, But There Is No ‘One Size Fits All’
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54 Holden, Nicholas M., et al, “Review of the Sustainability of Food Systems and Transition Using the Internet of Food,” NPJ Scienceof Food, Oct. 9, 2018, Article No. 18 (2018). < https://www.nature.com/articles/s41538-018-0027-3#:~:text=Many%20current%20
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59 “Global Methane Assessment,” United Nations Environment Programme, 2021. < https://wedocs.unep.org/bitstream/handle/20.500.11822/35917/GMA_ES.pdf >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 < https://doi.org/10.1098/rsta.2020.0452>
61 “Weathering Climate Change,” PGIM Megatrends, < https://www.pgim.com/megatrends/climate-change >62 Parija, Pratik, “Heat to Scorch India’s Wheat Supplies, Adding Food-Shortage Worries to World,” Bloomberg, May 1, 2022. < https://www.bloomberg.com/news/articles/2022-05-02/scorching-heat-in-india-to-deal-new-blow-to-global-wheat-supply >63 Khabarov, Nikolay, et al, “Global Climate Change Impacts on Crops Expected Within 10 Years,” IIASA, Nov. 1, 2021. < https://www.
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64 Liu, Xingcai, et al, “Global Agricultural Water Scarcity Assessment Incorporating Blue and Green Water Availability Under Future
Climate Change,” AGU, April 23, 2022. < https://agupubs.onlinelibrary.wiley.com/doi/epdf/10.1029/2021EF002567 >65 Corbet, Sylvie (AP) and Garriga, Nicolas (AP), “European Drought Dries Up Rivers, Kills Fish, Shrivels Crops,” Bloomberg, Aug. 12,2022. < https://www.bloomberg.com/news/articles/2022-08-12/european-drought-dries-up-rivers-kills-fish-shrivels-crops >66 Trompiz, Gus, “EU Maize Import Surge Seen Cushioning Impact of Drought-Hit Crop,” Reuters, Oct. 20, 2022. < https://www.
reuters.com/world/europe/eu-maize-import-surge-seen-cushioning-impact-drought-hit-crop-2022-10-20/ >67 Sullivan, Justine, “The Intergovernmental Panel on Climate Change: 30 Years Informing Global Climate Action,” IPCC, March 13,
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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. < https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(22)00002-X/
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PGIM | FOOD FOR THOUGHT 33

72 Free, Christopher M., et al, “Impacts of Historical Warming on Marine Fisheries Production,” Science, Vol. 363, No. 6430, March 1,
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73 City of Chicago, “Climate Impacts on Agriculture and Food Supply,” USEPA. < https://climatechange.chicago.gov/climate-impacts/
climate-impacts-agriculture-and-food-supply >74 Skendžič, Sandra, et al, “The Impact of Climate Change on Agricultural Insect Pests,” National NIH Library of Medicine, May 12,2021 doi: 10.3390/insects12050440. < https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8150874/>
75 City of Chicago, “Climate Impacts on Agriculture and Food Supply,” USEPA < https://climatechange.chicago.gov/climate-impacts/
climate-impacts-agriculture-and-food-supply >76 “Defining, Analyzing and Characterizing Biostimulants,” AAPFCO, Feb. 13, 2019. < https://www.aapfco.org/presentations/2019/biostimulants_TStone_KPitts.pdf >77 Madeiras, Angela, et al, “What Are Biostimulants?,” University of Massachusetts Amherst, October 2019. < https://ag.umass.edu/greenhouse-floriculture/fact-sheets/what-are-biostimulants >78 Ryder, Nicole, “Growth of Sustainable Farming Practices Drives the Agricultural Biologicals Market,” Frost & Sullivan, Sept. 22, 2022.
< https://www.frost.com/news/press-releases/growth-of-sustainable-farming-practices-drives-the-agricultural-biologicals-market/ >79 Stobbart, Darren, “Crop Protection Industry Overview 2021,” S&P Global Commodity Insights, April 27, 2022. < https://www.
spglobal.com/commodityinsights/en/ci/research-analysis/crop-protection-industry-overview-2021-market.html >80 Ferreira, Nelson, et al, “Global Farmer Insights 2022,” McKinsey & Company, 2022. < https://globalfarmerinsights2022.mckinsey.
com/#d05 >81 Nolet, Sarah, “The Challenges & Opportunities for Biologicals in Ag,” AgThentic Blog, July 21, 2021. < https://blog.agthentic.com/
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missouri.edu/publications/wq450 >83 Rundell, Katherine, “5 Challenges for Precision Agriculture to Face,” Agritech Tomorrow, Sept. 28, 2020. < https://www.agritechtomorrow.com/story/2020/09/5-challenges-for-precision-agriculture-to-face-/12399/ >84 Nolet, Sarah, “The Challenges & Opportunities for Biologicals in Ag,” AgThentic Blog, July 21, 2021. < https://blog.agthentic.com/
the-challenges-opportunities-for-biologicals-in-ag-7f15359766eb >85 “Meat – Worldwide,” Statista, accessed February 2022. < https://www.statista.com/outlook/cmo/food/meat/worldwide >86 “Cultivated Meat,” Good Food Institute, < https://gfi.org/cultivated/ >87 Klein, Jessie, “Lab Meat Has 3 Big Problems. Is It Time for a Pivot?” GreenBiz, Feb. 22, 2022. < https://www.greenbiz.com/article/labmeat-has-3-big-problems-it-time-pivot >88 Humbrid, David, “Scale-Up Economics for Cultured Meat,” Wiley Online Library, June 7, 2021. < https://onlinelibrary.wiley.com/
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Today’s Food Industry” McKinsey & Co., June 16, 2021. <https://www.mckinsey.com/industries/agriculture/our-insights/cultivatedmeat-out-of-the-lab-into-the-frying-pan >90 Reiley, Laura, “Cutting-Edge Tech Made This Tiny Country a Major Exporter of Food,” The Washington Post, Nov. 21, 2022. < https://www.washingtonpost.com/business/interactive/2022/netherlands-agriculture-technology/?tid=usw_passupdatepg >91 “Dutch Greenhouses Have Revolutionized Modern Farming,” Civil Engineer.org, Feb. 6, 2018. < https://www.thecivilengineer.org/
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2, 2022. < https://www.bloomberg.com/news/articles/2022-09-02/energy-crisis-empties-greenhouses-in-world-s-top-flower-producer >94 “How Agritech Startup Gramophone Is Helping 2.5 Mn Indian Farmers Improve Crop Yield, Increase Profit,” Inc42 Brand Labs, Nov.
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95 Ibid.
96 “2017 Census Full Report,” USDA, April 11, 2019. < https://www.nass.usda.gov/Publications/AgCensus/2017/#full_report >97 Parikh, Harsh, “Investing in Agriculture – Wedging the Yield Gap,” PGIM, Sept. 16, 2020. < https://www.pgim.com/blog/investing-agriculture-wedging-yield-gap >98 Curtis, Aerin, “Zoetis Supplements See FDA Approval for Combined Use,” FeedNavigator, Sept. 11, 2015. < https://www.feednavigator.com/Article/2015/09/11/Zoetis-supplements-see-FDA-approval-for-combined-use >99 Carlson, Paige, “The ‘Golden Ticket’ to Cattle Feeding Efficiency? It’s Been Found, FBN and Boveta Suggest,” Drovers, Feb. 3, 2023. <https://www.drovers.com/news/beef-production/golden-ticket-cattle-feeding-efficiency-its-been-found-fbn-and-boveta-suggest >100 Ostendorf, Madelyn, “Elanco and Royal DSM Partner to Reduce Cattle Methan Emissions,” Agriculture.com, April 27, 2022. <https://www.agriculture.com/livestock/cattle/elanco-and-royal-dsm-partner-to-reduce-cattle-methane-emissions >101 “Precision Agriculture Market,” Straits Research, 2021. < https://straitsresearch.com/report/precision-agriculture-market >102 Reilly, Clare, and Fowler, Bree, “John Deere Robot Planter: The Future of Farming Looks Like Fewer Chemicals,” CNET, Jan. 6, 2023.
< https://www.cnet.com/tech/john-deere-robot-planter-the-future-of-farming-looks-like-fewer-chemicals/ >103 Martin, Chuck, “John Deere Advances Automated Farming at CES 2023,” IOT World Today, Jan. 5, 2023. < https://www.iotworldtoday.com/robotics/john-deere-advances-automated-farming-at-ces-2023 >104 Ferreira, Nelson, et al, “Global Farmer Insights 2022,” McKinsey & Company, 2022. < https://globalfarmerinsights2022.mckinsey.
com/#d05 >105 Jacquet, Florence, et al, “Pesticide-Free Agriculture as a New Paradigm for Research,” Springer Link, Jan. 27, 2022. < https://link.
springer.com/article/10.1007/s13593-021-00742-8 >106 Kasprak, Alex, “The Desert Rock That Feeds the World,” The Atlantic, Nov. 29, 2016. < https://www.theatlantic.com/science/archive/2016/11/the-desert-rock-that-feeds-the-world/508853/ >107 Lu, Donna, “All Sizzle, No Steak: How Singapore Became the Center of the Plant-Based Meat Industry,” The Guardian, Nov. 5, 2022.
< https://www.theguardian.com/environment/2022/nov/06/all-sizzle-no-steak-how-singapore-became-the-centre-of-the-plant-basedmeat-industry >108 “State of the Industry Report: Cultivated Meat and Seafood,” Good Food Institute, < https://gfi.org/resource/cultivated-meat-eggs-anddairy-state-of-the-industry-report/ >109 Harvey, Simon, “General Mills’ G-Works Switches to Remilk Animal-Free Whey Protein as Perfect Day Contract Ends,” JustFood, Feb.
2, 2023. < https://www.just-food.com/news/general-mills-g-works-switches-to-remilk-animal-free-whey-protein-as-perfect-day-contract-ends/ >110 Green, Mark A., “Forty Percent of the World Food Program’s Wheat Supplies Come from Ukraine,” Wilson Center, June 2, 2022. <https://www.wilsoncenter.org/blog-post/forty-percent-world-food-programs-wheat-supplies-come-ukraine >111 Welsh, Caitlin, Congressional Testimony, “The Impact of Russia’s Invasion of Ukraine in the Middle East and North Africa,” CSIS,
May 18, 2022. < https://www.csis.org/analysis/impact-russias-invasion-ukraine-middle-east-and-north-africa >112 Jenkins, Suzanne, “How the Russia-Ukraine War Helped Fuel Record Fertilizer Prices,” Federal Reserve Bank of St. Louis, Oct. 4,2022. < https://www.stlouisfed.org/publications/regional-economist/2022/oct/russia-ukraine-war-record-fertilizer-prices >113 Glauber, Joseph, et al, “From Bad to Worse: How Russia-Ukraine War-Related Export Restrictions Exacerbate Global Food Insecurity,”
IFPRI, April 12, 2022. < https://www.ifpri.org/blog/bad-worse-how-export-restrictions-exacerbate-global-food-security >114 Evans, Judith, “UK Salad Shortages to Last ‘For Weeks’ Retailers Warn,” Financial Times, Feb. 21, 2023. < https://www.ft.com/content/5787aac3-a2bd-4168-a37a-d9a9cb53872e >115 Hirtzer, Michael, “Egg Prices Jump 8.5% as Food Inflation Hits Consumers,” Bloomberg, Feb. 14, 2023. < https://www.bloomberg.
com/news/articles/2023-02-14/eggs-jump-8-5-as-worsening-us-food-inflation-socks-consumers >116 Georgieva, Kristalina, “Confronting Fragmentation Where It Matters Most: Trade, Debt and Climate Action,” International Monetary
Fund, Jan. 16, 2023. < https://www.imf.org/en/Blogs/Articles/2023/01/16/Confronting-fragmentation-where-it-matters-most-tradedebt-and-climate-action >117 “Did Food Prices Spur the Arab Spring?” PBS News Hour, Sept. 7, 2011. < https://www.pbs.org/newshour/world/world-july-dec11food_09-07 >PGIM | FOOD FOR THOUGHT 35

118 Perasso, Giancarlo, and Doppelt, Elizabeth, “No Country Thrives on an Empty Stomach,” Apr 17, 2023. <https://www.pgim.com/
fixed-income/blog/no-country-thrives-empty-stomach >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. < https://cen.acs.org/environment/green-chemistry/Industrial-ammonia-production-emits-CO2/97/i24 >120 Manthiram, Kartish, and Gribkoff, Elizabeth, “Fertilizer and Climate Change,” MIT Climate Portal, July 15, 2021. < https://climate.
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2021. < https://corpgov.law.harvard.edu/2021/10/04/investors-and-regulators-turning-up-the-heat-on-climate-change-disclosures/ >123 “Company Ranking,” FAIRR, Accessed March 17, 2023. < https://www.fairr.org/index/company-ranking/ >124 “Low-Hanging Fruit: Why You Should Plant US Agriculture in Your Institutional Portfolio,” PGIM Real Estate, May 25, 2022.
< https://www.pgim.com/real-estate/report/low-hanging-fruit-why-you-should-plant-us-agriculture-your-institutional-portfolio >36 FOOD FOR THOUGHT | PGIM

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PGIM | FOOD FOR THOUGHT 37

PGIM’S MEGATREND SERIESHow today’s shifting global landscape will affect the investments of tomorrow

The New Dynamics of Private Markets
MEGATRENDS

THE NEW DYNAMICS
OF PRIVATE MARKETSInvestment Risks and Opportunities

Private markets have provided entrepreneurs, corporate tycoons and property developers withaccess to capital for centuries. But the current scale, growth and complexity of private capital istruly unprecedented – and is radically altering the investment opportunities and challenges facing
institutional investors.
Learn more at pgim.com/private-markets

FALL/WINTER 2022
For professional investors only.
All investments involve risk,
including possible loss of capital.
PGIM | THE NEW DYNAMICS OF PRIVATE MARKETS 1

Cryptocurrency Investing
MEGATRENDS

Exploring why direct investments in bitcoin and its peers are currently unattractive for an
institutional portfolio – underscored by recent gyrations in the crypto market. Still, thetechnologies that cryptocurrencies helped spawn present new opportunities for savvy
long-term investors.

CRYPTOCURRENCYINVESTING
Powerful Diversifier or Portfolio Kryptonite?

Learn more at pgim.com/crypto

SUMMER 2022
For professional investors only.
All investments involve risk,
including possible loss of capital.
PGIM | CRYPTOCURRENCY INVESTING I

Reshaping Services
Technological disruption has finally reached the shores of the service economy. It’s a developmentthat will represent a major shift for investors and the global economy as services represent morethan two-thirds of global GDP, three-quarters of the workforce in developed markets, and nearly
half of the workforce in advanced emerging markets.
Learn more at pgim.com/reshaping

Weathering Climate Change
Climate change is no longer a hypothetical risk. It is already transforming the global economy,
reshaping markets and altering the investment landscape. In this paper, we propose an actionableclimate change agenda that addresses both hidden portfolio vulnerabilities and potential
opportunities in the transition to a lower-carbon world.
Learn more at pgim.com/climate

38 FOOD FOR THOUGHT | PGIM

After the Great Lockdown
The pandemic has forced businesses to adapt in ways that will lead to lasting changes in consumer
behavior and corporate business models. Now is the time to focus on the massive disruption thatlies ahead so we’re best positioned for when the Great Lockdown has passed.
Learn more at pgim.com/lockdown

The Future Means Business
Disruptive forces have led to the emergence of three new business models that are radicallychanging the investment calculus for institutional investors. Here we explore the investment
implications of these transformative new corporate models.
Learn more at pgim.com/futurefirm

The Technology Frontier
We are living in an era of unprecedented technological change. At PGIM, we believe theimplications for investors will be profound, radically transforming investment opportunities acrossasset classes and geographies.
Learn more at pgim.com/tech

The End of Sovereignty?
Never before in history have people, information and capital moved across borders at the speed,frequency and volume we see today. In this white paper, we take a closer look at the escalating tussle
between globalization and nationalism, the implications this could have for global financial markets,and how long-term investors may best position themselves to navigate these uncertain times.

Emerging Markets at the Crossroads
A radical shift in the forces shaping emerging market growth will require investors to take adifferent investment approach from what may have worked in the past. Increasingly, discovering
investment opportunities will be rooted in the ability to capture alpha from the new growth drivers,
rather than in chasing the beta of the broad universe.

PGIM | FOOD FOR THOUGHT 39

A Silver Lining
The unprecedented aging of the global population creates increased opportunities in senior
housing, multifamily condos, biotech, and the emerging silvertech industry. Institutional
investors should consider how this megatrend could affect their portfolios, given the trend’s
evolving impact on consumer spending and far-reaching effects on emerging nations, home to
two-thirds of the world’s elderly.

Longevity and Liabilities
The rise in global life expectancy has implications for pension plan liabilities that are not fully
appreciated. As new mortality tables demonstrate, longevity risk to pension liabilities could
increase dramatically over the next two to three decades. This report examines the challenge andthe available risk mitigation strategies.

The Wealth of Cities
Never in history has the pace of urbanization been so rapid: 60 to 70 million people moving
to cities every year for the next few decades. To help institutional investors benefit from this“prime time” of urbanization, we identified a range of specific investment ideas across the major
investable themes of this opportune megatrend.

40 FOOD FOR THOUGHT | PGIM

PGIM | FOOD FOR THOUGHT 41

THE PURSUIT OF OUTPERFORMANCE

42 FOOD FOR THOUGHT | PGIMཻқࣆߴͤ ຌࣁྋͺธࠅ 6(& ͹ౌ࿧౦ࣁ‫ޒ‬໲ճऀͲ͍Ζ 3*,0 ΢ϱέ͗ࡠ੔ͪ͢΍͹Ͳͤɽͤ ຌࣁྋͺ৚ๅ఑‫ڛ‬Ν໪దͳͪ͢΍͹Ͳ͍Εɼಝఈ͹ۜ༧ঐ඾͹‫ש‬༢຤ͺ൤ജΝ໪దͳͪ͢΍͹Ͳͺ͍ΕΉͦΞɽΉͪɼຌࣁྋͶ‫͠ࡎى‬Η಼ͪ༲౵Ͷͯ͏ͱͺࠕ‫ޛ‬รߍ͠ΗΖ͞ͳ΍͍ΕΉͤɽͤ ‫͠ࡎى‬Ηͱ͏Ζࢤ৖ಊ޴౵ͺ‫Ͳ఼࣎ݳ‬͹‫ݡ‬մͲ͍Εɼ͞ΗΔͺࠕ‫ޛ‬รߍͤΖ͞ͳ΍͍ΕΉͤɽΉͪɼͨ͹݃Վ͹ࣰ֮੓Νන໎ͤΖ΍͹Ͳͺ͵͚ɼগཔ͹ࢤ৖‫ڧ؂‬͹รಊ౵ΝฯৄͤΖ΍͹Ͳ΍͍ΕΉͦΞɽͤ ຌࣁྋͶ‫͠ࡎى‬Ηͱ͏Ζࢤ৖‫ؖ‬࿊υʖν‫;ٶ‬৚ๅ౵ͺ৶བͲ͘Ζͳ൓இ֦ͪ͢झ৚ๅ‫͖ݱ‬Δ೘घͪ͢΍͹Ͳͤ͗ɼͨ͹৚ๅ͹ਜ਼֮੓ɼࣰ֮੓Ͷͯ͏ͱ౲ऀ͗ฯৄͤΖ΍͹Ͳͺ͍ΕΉͦΞɽͤ գ‫ڊ‬͹ӣ༽ࣰ੹ͺචͥ͢΍গཔ͹ӣ༽੔Վ౵ΝฯৄͤΖ΍͹Ͳͺ͍ΕΉͦΞɽͤ ຌࣁྋͺ๑ແɼճ‫ܯ‬ɼ੭ແ৏͹Πχώ΢η͍Ζ͏ͺ౦ࣁਬও౵Νߨ͑ͪΌͶࡠ੔͠Ηͪ΍͹Ͳͺ͍ΕΉͦΞɽͤ ౲ऀͶΓΖࣆ઴টଡ଼͵͢Ͷɼຌࣁྋ͹Ҳ෨Ήͪͺસ෨Ν෵੣ͤΖ͞ͳͺ‫͕͚ݐ‬இΕ஗͢Ήͤɽ※ 本資料内で取り上げられた資産クラス、個別セクター等はあくまで例示目的であり、推奨ならびにこれらにかかる将来性を明示・暗示的に示唆するものではありません。
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