An Investing Megatrend: How Climate Change and Resource Scarcity are Shaping the Future - Visual Capitalist
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An Investing Megatrend: How Climate Change and Resource Scarcity are Shaping the Future

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If you’ve ever played with dominos, you’re familiar with their cascading effects. Gently nudge one piece, and the force will ripple throughout the rest.

This process of cause and effect works much the same way in society and business: as global forces take hold, their effects are deeply intertwined with the financial markets.

The Climate Megatrend

Today’s infographic comes from BlackRock, and it explains how one such megatrend, climate change and resource scarcity, will be a long-term opportunity for investors.

Climate Change and Resource Scarcity

Earth in the Hot Seat

In 2018, global CO2 emissions rose 1.7% to the highest level since 2013. These rising emissions have intensified the effects of climate change, with 2015-2018 being the four hottest years ever recorded. Society and the economy are starting to feel its negative consequences:

  • Extreme weather events have become more frequent. In particular, floods and other hydrological events have quadrupled since 1980.
  • In hotter, wetter conditions, infectious diseases spread more easily—between 2004-2017, total tick-borne illnesses increased by 163%.
  • The global insured losses from natural catastrophes was $79 billion in 2018.
  • Extreme weather effects, and the health impact of burning fossil fuels, cost the U.S. economy at least $240 billion in 2018.

It’s clear that climate change is having an immediate, serious impact on the world.

Many see climate change as a long-dated future risk, however, our research findings show that compared to the 1980’s, there are measurable GDP impacts in the market today

-Brian Deese, Global Head of Sustainable Investing at BlackRock

In addition to these issues, climate change is contributing to another problem: it’s becoming harder to feed the global population.

Over 7 Billion Mouths to Feed

Climate change significantly threatens global food security. As glaciers melt, the world’s freshwater supply—including what’s available for food production—melts with it. This is a significant problem, considering that between 2,000-5,000 liters of fresh water are needed to produce one person’s daily food intake.

As an added hurdle to food production, supply and demand are pulling in opposite directions.

The share of total employment in agriculture has dropped significantly over time. Even worse, among the food that is able to be harvested, roughly 30% is lost or wasted globally.

On top of limited resources, the world will have to contend with forces driving up food demand.

  • Population growth: By 2050, the global population will grow by about two billion.
  • More calorie-rich diets: As emerging economies grow their wealth, their populations seek richer foods like meat and dairy products.

How can society combat these pressing issues?

A Greener, More Plentiful Future

As society works to slow climate change and produce more with less, a myriad of investment opportunities will emerge.

  • Renewable energies are becoming increasingly competitive.
  • Electric & fuel cell vehicles are growing in market share.
  • Products made from recycled materials are appealing to environmentally-conscious consumers.
  • Agricultural machinery counters the declining workforce and increases productivity.
  • Precision agriculture leverages real-time environmental data to help farmers make decisions.

Climate change and resource scarcity will be a driving force behind the actions of consumers, companies, and governments for years to come.

By staying attuned to this megatrend, investors will be able to spot long-term opportunities.

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Agriculture

What’s Behind The Rise Of Food Prices?

Many variables contribute to the rising cost of global food. Let’s take a look at two major factors influencing food prices in recent years.

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The following content is sponsored by Brazil Potash


The Rise Of Food Prices

The World Food Price Index reached an all-time high in March 2022 before gradually falling for nine months to December 2022. But what caused this surge?

There are many variables contributing to the rising cost of global food, but supply chain disruptions and climate change are two major drivers for the spike in prices over the most recent years.

The above graphic from Brazil Potash explores how these two factors are contributing to the most recent rise in food prices.

1. Supply Chain Disruptions

The COVID-19 pandemic and Russia’s invasion of Ukraine have caused major disruptions to global food systems, altering trade patterns, production, and consumption of commodities.

The pandemic placed unprecedented stress on global food systems through a variety of factors, including a change in consumer food consumption, workforce restrictions, and trade pattern disruptions, causing food prices to rise.

Then, on February 24, 2022, Russia invaded Ukraine, blocking vital exports of commodities for international food systems, and causing a sharp spike in food prices.

Ukraine was the fourth largest global exporter of cereals before the invasion. Combined, Russia and Ukraine export around 28% of the world’s wheat and 15% of its maize.

Simultaneously the fertilizer industry has also felt the strain, with the trade of essential fertilizers for crop production impacted by both the COVID-19 pandemic and the war in Ukraine.

2. Climate Change

As global temperatures rise and weather patterns become more unpredictable, we are seeing an increase in extreme weather events that are having a devastating effect on crops around the world.

India’s rice crop fell by around 8% in 2022 due to a lack of rainfall, while drought conditions in the EU have resulted in grain yields that are approximately 16% below the five-year average.

According to NASA, if greenhouse gas emissions continue to rise at the current rate, maize yields are projected to decline by 24% by 2030, in contrast, wheat may rise by around 17%.

The below video details NASA predictions for maize yields.

Weather conditions have a direct impact on crop production, which in turn affect food prices.

The Role of Fertilizer

Rising food prices are a concern as they directly impact food security. When prices rise, it becomes more difficult for people to afford enough food to meet their needs. This can lead to hunger, malnutrition, and social and political instability.

There are steps that can be taken to mitigate the effects of rising food prices, such as increasing and diversifying the global fertilizer supply. Diversifying the fertilizer supply can alleviate pressure caused by supply chain disruptions.

Additionally, using fertilizers that improve plant resistance to environmental stress factors such as drought and can help to increase crop yields.

Brazil Potash will produce a vital crop nutrient that improves plant resistance to environmental stress factors such as drought, enabling greater yields to feed a growing population.

Click here to learn more about fertilizer and food production in Brazil.

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