The biggest investors are piling into the 'future food' megatrend — Here's how to ride the boom

Published Sun, Jan 10 20219:20 AM EST

(This story is for CNBC Pro subscribers only.) Climate change, population growth and health risks are driving a transformation of the global food system, and a handful of public players are poised to benefit from the industry shift. A wave of new technologies are powering important changes toward indoor vertical farming, plant-based meat production as well as nutrition innovation. The future food solution market is worth $200 billion today and will grow to $300 billion by 2025, Bank of America estimated. Here's how to invest in this booming megatrend. The biggest investors are already increasing their exposure to the future food megatrend. Bank of America looked at fund holdings of over 13,000 institutions and 30,000 mutual fund portfolios, and the bank found that the 50 largest thematic investors have hiked their exposure to future food-related investments by 20% from September to December last year. "We are entering an exciting decade of Future Food technologies helping us to tackle the challenges facing the world and to feed our growing population sustainably," Felix Tran, Bank of America's equity strategist, said in a note. Vertical farming The global population is expected to grow to 10 billion by 2025, which means the world needs to produce more food in the next 40 years than we have harvested in the past 8,000 years, Bank of America said. One way to increase food production sustainably is through indoor vertical farming, or growing plants on shelves. "While providing the optionality to efficiently utilize underused spaces in urban areas and thereby limiting the distance travelled for produce, vertical farming requires much more energy than conventional farming in order to light the crops," Tran said. Indoor vertical farms can produce up to 350 times more yield than conventional outdoor farms, the bank said. It can also help reduce water and land use while limiting extreme weather and pest impact, the analyst said. A slew of agricultural food equipment companies as well as fertilizer producers were highlighted by Bank of America, including Deere & Co , CNH Industrial , Nutrien and CF Industries . These companies are playing an important role in advancing the technology in vertical farming. Genetic seed editing company Corteva and agribusiness firm Adecoagro are also key players in the space, the bank said. Plant-based meat Another disruptive trend in the space is the growing popularity of plant-based or lab-grown meat. Alternative proteins could be beneficial to fighting climate change as it uses 90% less water, land and emissions than conventional livestock farming, the bank said. "We believe 'peak meat' consumption growth in developed countries can be driven by the demographic shift to more plant-based diets," Tran said. Beyond Meat is by far the leader in the plant-based meat space. The stock surged 65% in 2020 as the panic buying and freezer stockpiling during the pandemic drove demand. The space has more room to go as a third of the $3 trillion protein market could be served by alternative protein sources by 2050, according to Bank of America.

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(This story is for CNBC Pro subscribers only.)

Climate change, population growth and health risks are driving a transformation of the global food system, and a handful of public players are poised to benefit from the industry shift.

A wave of new technologies are powering important changes toward indoor vertical farming, plant-based meat production as well as nutrition innovation. The future food solution market is worth $200 billion today and will grow to $300 billion by 2025, Bank of America estimated. Here's how to invest in this booming megatrend.