The UN’s Francesco Tubiello, a senior statistician and climate change specialist at its Food and Agriculture Organisation (FAO), reported that the food industry was responsible for 34 percent of global greenhouse gas emissions. This is down from 44 percent recorded in 1990 but is still essentially a third.
Add to this that over a billion people are obese, 800 million malnourished, then the rationale behind Rob Appleby (pictured) and Alastair Cooper (pictured), partner and head of venture capital at private equity firm ADM Capital respectively, setting up funds to address these issues becomes clear.
ADM Capital advises on two funds, the Cibus Fund is a growth and buyout strategy focusing on mid-market companies in the food value chain. The Cibus Enterprise fund is concentrated on late-stage venture investing in disruptive companies in the AgriTech sector.
Rob Appleby
However, while they are two separate funds, Mr Appleby says that there is quite a bit of cross over between the two as he says that AgriTech is one of the fastest growing sectors in venture capital (albeit from a low base) so it makes sense that today’s disruptive companies will soon become larger, more established firms.
One of the companies Cibus has invested in is Burro (the Spanish word for donkey), this is a robotics company that revolutionises the fruit picking part of the food chain, helping to negate problems with hiring seasonal workers and so on.
Given that the Cibus Fund owns the Summer Berry Company, the largest strawberry business in the UK, this robotic technology has improved efficiency across other parts of the portfolio. The company now has 52 robots meaning that the potential impact of Brexit on migrant workers, who may well have taken a fruit picking job, has been negated.
ADM Capital is not the only private equity firm to be involved with sustainable investing, as Fundtruffle found after speaking to Earth Capital’s Gordon Power. However, while Mr Power seemed to see his firm competing with the established players in the space such as KKR and Bain Capital, for ADM these behemoths seem more like a good exit strategy.
Attractiveness
“There's enormous weight of ESG sustainable impact money looking for a home and there's then a lot of people that want to invest in this story,” says Mr Cooper.
Some in the private equity space suggest that IPOs aren’t the preferred exit route from investments in unquoted companies anymore, with trade deals and sales to other private equity houses being more popular. While this may be a theme in the asset class overall, it doesn’t seem to hold true for AgriTech.
Alastair Cooper
Mr Cooper points to listed firms such as Swedish diary alternatives Oatley and US-based meat substitute company Beyond Meat as evidence of the desire for investors to get involved in the food revolution. Furthermore, these companies are trading on high valuation multiples.
The search for alternative forms of protein aside from meat is one of the key challenges to help the environment and also feed the world. While the Western palate may not be ready to eat insects with the same enthusiasm as those in certain parts of Asia, using insects for protein can still aid the food value chain.
Take one of Cibus Fund’s investments, Enterra. This business uses the black soldier fly larvae as opposed to the 20 million tonnes of fishmeal we’re using today for livestock feed which is much more sustainable. In 20 days, the larvae grows in size by 10,000-times so is providing the nutrients needed for livestock without the environmental impact the original foodstuff caused.
Origins and going forward
The Cibus funds were seeded with $527 million back in 2017 from institutional investors including two pension funds, one insurance company as well as a global bank. The majority went into the Cibus Fund with around 20 percent going to the enterprise fund. In a world of rising inflation and the long duration of these assets, the draw to institutional investors is clear. But other ideas and investments by Cibus should have the wider investor community excited as well.
The Netherlands is the world’s second largest exporter of fruit and vegetables in the world. How? Using greenhouses or indoor farming. This is an area of interest for ADM Capital and given the approx. 30 percent IRR on the enterprise fund and 20 percent on the Cibus fund (both net) it may well prove useful to follow these trend setters in their bid to aid the world’s food issues.
