A US-based asset manager has announced the launch of a global fund to channel investments towards sustainable food, planning to reach 80% of companies in the portfolio committed to improving biodiversity.
Principal Asset Management kickstarted the Global Sustainable Food and Biodiversity Fund on Wednesday in a bid to provide investment opportunities that meet the growing demand for sustainable food and biodiversity protection, though it didn’t disclose the amount of capital it plans to raise.
Principal AM is the investment arm of Principal Financial Group, with approximately $554.4 billion in total assets under management as of March 2024.
To be classified as an Article 9 fund under the EU’s Sustainable Finance Disclosure Regulation, specifically designed for sustainable investments, the fund will target various sectors, particularly businesses focused on nutrition and agriculture.
The portfolio will only include companies aligned with some Sustainable Development Goals (SDG) targets, such as clean water and sanitation, zero hunger, good health and well-being, and responsible consumption and production.
In addition, about 80% of the fund’s portfolio will consist of companies that aim to address biodiversity impacts through the development of solutions or business policies.
To identify them, Principal AM will follow a four-step process, including the use of the proprietary SDG alignment tool.
“We believe sustainable food production is the most credible path to improving biodiversity,” Martin Slipsager Frandsen, global equity portfolio manager, said in a statement.
“With agriculture remaining the most biodiversity-exposed sector, it holds the greatest potential for impact, and we believe current demand for biodiversity will lead to great investment opportunities.”
As the UN Environmental Programme (UNEP) underlined, the global food system is the primary driver of biodiversity loss, with agriculture alone being “the identified threat” of more than 85% of the 28,000 species at risk of extinction.
Tools to address the issue are increasingly under investigation, with a global farmer alliance announcing in April the development of the “first evidence-based” tool aimed at better assessing the industry’s impacts on biodiversity.
“With the world’s population set to reach 10 bln by 2050, approximately 56% more food will be required to sustain the growth,” Principal AM said in a statement, referencing UNEP’s estimates.
“As such, the demand for sustainable food and biodiversity is growing, with a proliferation of technology within agriculture leading to an acceleration of investment potential while lowering the environmental impact of our food system.”
Biodiversity has climbed the agenda of investment management companies worldwide, with several global funds launched in 2024, including the Privium Fund Management’s Danum Ecosystem Fund and the Lester Asset Management’s Lynx Global Biodiversity Fund, the first biodiversity-focused fund in Canada.
Last year, biodiversity-specific funds surpassed $1.5 bln, according to analysis carried out by Carbon Pulse. Eight fund launches between June and November contributed to the 2023 sum, reflecting investor interest in the theme, with 24 strategies active at year end.
By Giada Ferraglioni – giada@carbon-pulse.com
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