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Investor appetite grows for vertical farming

© Shutterstock / Lano LanPost Thumbnail

Gresham House has increased investment targets tenfold to £500 million in vertical farming, while several other asset managers are also eyeing the sector.

  • Gresham House has revised its investment target for vertical farming, marking a tenfold increase to £500 million over the next five years.
  • Vertical farms have been limited to small-scale deployment due to a lack of investment.
  • With other asset managers reportedly looking to vertical farms, they could soon become a major trend in agricultural investment.

The visible effects of climate change, compounded by bottlenecks within global food supply chains, are spurring investment in vertical farming.

Gresham House has increased its target to £500 million, representing a tenfold increase, while a slew of other asset managers are reportedly eyeing investments in the sector.

Vertical farms have remained small enterprises until recently, confined to a minimal share of the agricultural market.

In March of this year, however, Norfolk-based Fischer Farms in Norfolk received £25 million in funding from Gresham House, a specialist alternative asset manager. This funding enabled it to produce 1,000 acres worth of food, in terms of conventional agricultural land, at a facility spanning just 4 acres.

Following on Fischer Farms’ heels, Grow Up Farms in Sandwich, Kent, received £100 million from US investment firm Generate Capital.

These sizeable investments demonstrate increasing demand for the potential of vertical farms to provide a sustainable alternative to traditional food production.

Vertical farms will diminish the need for imports

This new influx of capital being allocated to vertical farms is catapulting it a new level, making it a more stable and scalable agricultural goods supply source.

In addition to Gresham House’s earmarking of between £300 – £500 million over the next five years, BNP Paribas Asset Management and CPR Asset Management are reportedly looking to invest in the sector.

Currently, the UK imports the vast majority of its fruit, salad and vegetables. Approximately 80% of spinach, for example, is supplied by imports. Such salad crops, alongside herbs and other small plants, are specialities of the vertical farming sector.

The technology uses just a fraction of the water and energy consumed by conventional land farming. Stacked tiers are established in indoor units, with inputs including LED light and hydroponics – liquefied nutrients fed into a soil medium.

Producers such as Grow Up and Jones Foods claim that their systems use up to 95% less water than traditional crop farming, while road and air miles can be eliminated by the systems capacity to be set up in close proximity to its end consumer.

Particularly critical as severe weather conditions are on the rise, the indoor nature of vertical farms allows crops to be protected from drought, extreme heat or intense flooding. This significantly lowers risks to productivity, a factor sure to be considered by investors.

Soils across the globe are increasingly at risk of exhaustion, with the problem increasingly exacerbated by the effects of climate change.

This problem is made all the more urgent by growing concerns around food security, with the Food and Agricultural Organisation (FAO) finding that food production will need to increase exponentially in order to meet global demand.

Projections suggest that by 2050, the world will need around 60% more food than was needed in 2005-07. There are also more immediate concerns, with food supplies having been squeezed by the conflict in Ukraine as well as ongoing inflationary pressures.

Given these unsettling predictions, it is to be expected that investors are increasingly interested in alternative agricultural techniques such as vertical farming. We can expect to see this demand continue to grow, with investment in vertical farming likely to become a dominant trend within the sector.

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