This month Associate Director Ty Lee discusses the challenge of food insecurity and the need for a fundamental shift towards more sustainable agricultural practices. As impact investors, we support sustainable solutions that can make a real difference. By investing in innovative technologies like precision farming and advanced seed treatments, we can reduce pesticide reliance while ensuring long-term food security.

Global equities, represented by the MSCI World Index, fell -4.7% in March, dragged down by poor performance of the US market. Fears around trade policy grew and added to concern over the repercussions of some of the new administration’s dramatic early moves. With significant and long-established policies apparently in doubt, investor confidence in a variety of assets drained away. All sustainable investment themes detracted from performance, dominated by Resource Efficiency and Health.

Top Holdings (alphabetically)

AstraZeneca PLC

United Kingdom

Health Care

AstraZeneca is a high-quality pharma company with a strong portfolio of commercial products that lead to better overall health outcomes for patients, who are often suffering from life-threatening or debilitating illnesses. The company's products treat issues of high unmet need, particularly in the oncology and rare disease portfolios.

Autodesk, Inc.

United States

Information Technology

Autodesk is a global leader in 3D design and engineering software and services. Its products are used by architects, engineers and designers to design, develop and manufacture and operate a vast range of products, buildings and services. Autodesk tools are a critical component in the design and operation of more resource efficient products and buildings. The product brands include Autodesk 360 cloud services, AutoCAD civil 3D and LT, 3Ds Max, Maya, and Revit.

Bureau Veritas SA

France

Industrials

Bureau Veritas is a world leader in testing, inspection and certification (TIC). Its services and solutions help ensure clients meet standards and regulations covering quality, health and safety, environmental protection and social responsibility. It covers a very wide range of sectors including: Marine & Offshore, Agri-Food & Commodities, Industry, Buildings & Infrastructure, Consumer Products and Certification.

Ecolab Inc.

United States

Materials

Ecolab sells cleaning products and services to restaurants, hotels, hospitals, food and beverage producers and other businesses. The company has a particular focus on energy and water efficiency. Ecolab has developed a range of products and services that help to reduce, and in some cases even eliminate, the use of water in a wide range of industrial applications. In turn, this helps to lower costs through a reduction of energy and water impacts.

Keyence Corporation

Japan

Information Technology

The company's products include machine visions systems such as sensors and measuring instruments that are primarily used in the automation of factories. These components help customers achieve higher levels of efficiency, energy-savings, improved material utilisation and reduced wastage and quality management.

Linde plc

United States

Materials

Linde plc produces and distributes industrial gases. The company operates globally supplying oxygen, hydrogen and other gases to a very wide range of downstream markets including into manufacturing industries, petrochemical and electronics industries. The gases are used in a variety of applications including in making manufacturing processes more efficient and in reducing harmful emissions. The company is establishing a strong presence in the green hydrogen market and also sells oxygen and other gases into the healthcare sector.

TE Connectivity plc

United States

Information Technology

TE Connectivity is a US-based manufacturer of electronic components and wireless systems. The company's main market is the automotive industry where its products are used to improve safety and fuel efficiency through increased levels of automation and electrification. The company does also sell products into industrial and telecommunications markets where they are often used in applications to help improve energy efficiency and safety and other types of electrical infrastructure.

Thermo Fisher Scientific Inc.

United States

Health Care

Thermo Fisher Scientific is one of the largest suppliers of analytical instrument, equipment, consumables and software for healthcare and environmental research, analysis, discovery and diagnostics. The company offers a very wide range of products and services including the equipment needed to analyse samples as well as the variety of containers and other consumables needed to handle them.

Trimble Inc.

United States

Information Technology

Trimble is the leading provider of location-based solutions which contribute to efficiency and productivity improvements. It operates predominantly in the construction, transport, and agriculture end-markets, where we expect the company to benefit from increasing demand for efficiency improvements. The company is listed in the US but derives around 50% of its sales from countries outside the US.

Xylem Inc.

United States

Industrials

Xylem manufactures a wide range of products and provides services to the water industry. The company's water infrastructure business provides a range of pumps, filtration and testing and treatment equipment to water utilities. The company also supplies commercial, residential markets with water and wastewater systems, and provides measurement and control solutions. Xylem's strategy is characterised by the application of intelligent technology to improve water efficiency, in products such as smart meters and intelligent monitoring equipment.

Market Review

Global equities, represented by the MSCI World Index, fell -4.7% in March, dragged down by poor performance of the US market. Fears around trade policy grew and added to concern over the repercussions of some of the new administration’s dramatic early moves. With significant and long-established policies apparently in doubt, investor confidence in a variety of assets drained away.

Meanwhile, despite persistent growth worries in Europe and the UK, the region’s stocks continued to outperform their US counterparts over the month.

In the global market, Technology was the hardest hit sector, followed by the Consumer Discretionary and Communication Services sectors. In Europe, Utilities and Energy were the only sectors to post a positive return.

Fund Review

The Fund delivered a negative return of -6.7%.

American Water Works (Water Management) and STERIS (Safety) were a couple of positive performers. American Water Works is a US water utility company, which outperformed due to its perceived defensive characteristics amid a volatile market environment.

STERIS, in our Safety theme, also has defensive characteristics. The stock benefited as STERIS announced it had reached a settlement agreement for ethylene oxide emissions claims made against a company it had previously acquired. Investors saw this as a positive outcome and a resolution to ongoing litigation concerns. We have engaged STERIS extensively on this topic and support their approach.

Novo Nordisk (Health) was the weakest performer in the period as clinical trial data from its obesity drug, CagriSema, failed to meet investor expectations. Also, the Trump administration dropped Biden’s proposal of Medicare coverage of weight-loss drugs.

Silicon Labs and Power Integrations, both in the Resource Efficiency theme, were also weak due to concerns of tariff-led economic slowdown.

All sustainable investment themes detracted from performance over the month, dominated by Resource Efficiency and Health.

Outlook

Financial markets thrive on stability. Global markets have gyrated wildly as market participants have struggled to process recent news flow and understand its geopolitical and macro-economic impacts.

Our impact investing universe had already been heavily hit by dramatic changes in policy, primarily in the US, including changes to healthcare, environmental protections, clean energy, and sustainable transport, amongst others. The moves in March have broadened the uncertainty, impacting the whole economy and adding a further layer of unpredictability for all investors.

It may seem surprising then that our confidence in the prospects for the strategy have, if anything increased. However, current valuations for our holdings are extremely depressed, with many stocks now starting to price in a general recession, in addition to severe challenges to sustainability industries. Such discounted valuations will inevitably attract the attention of investors from across the investment spectrum, regardless of sustainability investment preferences.

In addition, the science behind our thematic drivers is well understood and settled. The capabilities of the technologies our companies produce are well-proven, and the need for them is increasingly apparent. As we have long known, political support alone cannot deliver sustainable changes to the economy. But by the same token, artificially constructed attempts to resist change will not succeed either.

While the coming months are likely to see ongoing volatility as the policy moves play out, we believe the rewards for sustainability investing will be clear with our patient approach.

Growing smarter: How innovation helps grow food sustainably

By Ty Lee

The growing crisis of food insecurity

At our firm’s book club, we are reading Ravenous – a fascinating deep dive into the complexities of food production and its impact on society. The book explores how modern agriculture has achieved incredible productivity while also highlighting the fragility of our food systems, which are increasingly vulnerable to climate change, supply chain disruptions, and unsustainable farming practices.

Food insecurity is one of the most pressing global challenges today. One in eleven people worldwide goes to bed hungry every night,¹ and a staggering 29% of the global population experienced moderate or severe food insecurity in 2023.²

There is no single cause of food insecurity. Rather, it stems from a web of interconnected factors, including conflict, climate change, poverty, the loss of farmland, food waste, and the lingering economic effects of the COVID-19 pandemic. As a result, the world is significantly behind in achieving Sustainable Development Goal 2 – Zero Hunger by 2030, making it imperative to find more sustainable solutions.

The relationship between pesticide use and food security

As the global population grows, the need to increase crop yields has led to a significant reliance on pesticides. Historically, pesticides have played a crucial role in protecting crops from pests and diseases, contributing to higher agricultural productivity. From 1990 to 2022, global pesticide use doubled in response to rising food demand.³

Global pesticides use by category⁴

However, excessive pesticide use has led to diminishing returns. Studies show that over-reliance on chemical pesticides contributes to soil depletion and degradation, water contamination, pest resistance, and biodiversity loss, ultimately threatening long-term yields.^{5, 6} Synthetic nitrogen fertilisers also contribute to global warming by releasing nitrous oxide, a lesser-known greenhouse gas that traps 273 times more heat than carbon dioxide.⁷ The supply chain for these fertilisers is responsible for more than 10% of global emissions from agriculture.⁸

According to the Food and Agriculture Organisation, integrated pest management offers a more sustainable approach, combining biological pest control, precision application techniques, and other strategies to minimise pesticide dependency while maintaining high crop yields.⁹ A thriving ecosystem is essential for resilient food systems, as biodiversity helps buffer against external shocks like climate change. It is clear that pesticides have a role to play, but they must be used more strategically alongside sustainable farming practices.

Strengthening regulations

Recognising the risks associated with pesticides, policymakers are stepping up efforts to curb their use. The European Green Deal aims to reduce both the use and risk of chemical pesticides by 50% by 2030.¹⁰ Similarly, the Kunming–Montreal Global Biodiversity Framework, adopted in December 2022 under the UN Convention on Biological Diversity, sets a target to cut the overall risk from pesticides and hazardous chemicals by at least half.¹¹

Some estimates suggest that adopting the European Green Deal targets globally could lead to a 12% reduction in agricultural yields.¹² However, this doesn’t tell the whole story. Other policies under the European Green Deal such as reducing food waste, shifting towards plant-based diets, and increasing organic farming can help offset short-term yield reductions while improving long-term food security and ecosystem health.¹³

Sustainable solutions for agriculture

To mitigate the drawbacks of excessive pesticide use, we must invest in more sustainable agricultural technologies. Precision farming is one such solution, optimising resource use and improving crop yields through advanced tools like GPS guidance and data-driven decision-making.

One of our portfolio companies, Trimble, specialises in precision agriculture technologies, spanning seeding, fertiliser application, crop protection, and water management. For example, its weed protection system precisely applies herbicide only when a weed is detected by a sensor, potentially reducing herbicide usage by up to 90%.¹⁴

Another key innovator in sustainable farming is Croda, which develops solutions that reduce pesticide dependency while maintaining agricultural productivity. Croda’s agricultural adjuvants improve pesticide efficiency by enhancing droplet coverage on plant leaves and minimising spray drift, ensuring that the product reaches its intended target. Additionally, Croda’s advanced seed coating technologies protect seeds from pests and diseases while enhancing germination rates. By applying treatments directly to seeds, farmers can significantly reduce early-stage pesticide use by as much as 95% while maintaining crop health and yield.¹⁵

With growing awareness of the risks associated with excessive pesticide use and increasingly stringent environmental regulations, demand for sustainable farming solutions is accelerating. More importantly, economic benefits are driving adoption, as farmers increasingly recognise yield improvements and lower production costs as key incentives.¹⁶ This presents a compelling opportunity for our portfolio companies, whose innovative and effective alternatives to traditional pesticides position them well to benefit from this structural shift in agriculture. In addition, the next 12-month P/E multiples of both companies are trading below their five-year averages – with Croda near its five-year low¹⁷– presenting, in our view, compelling investment opportunities given the strong long-term demand for their products and services.

Securing the future of food

Food insecurity isn’t just an abstract global issue. It’s a challenge that affects millions of people every day, which demands a fundamental shift towards more sustainable agricultural practices. As impact investors, we support sustainable solutions that can make a real difference. By investing in innovative technologies like precision farming and advanced seed treatments, we can reduce pesticide reliance while ensuring long-term food security.

¹ https://www.actionagainsthunger.org.uk/why-hunger/world-hunger-facts
² https://openknowledge.fao.org/server/api/core/bitstreams/d5be2ffc-f191-411c-9fee-bb737411576d/content
³ https://openknowledge.fao.org/server/api/core/bitstreams/a8a8c2c8-ee36-42e8-a619-7e73c8daf8a6/content
⁴ Food and Agriculture Organisation of the United Nations. 2024. FAOSTAT: Pesticides Use.
⁵ https://pmc.ncbi.nlm.nih.gov/articles/PMC9428564/
⁶ https://www.ceh.ac.uk/press/comprehensive-global-study-shows-pesticides-are-major-contributor-biodiversity-crisis
⁷ https://eia-international.org/climate/nitrous-oxide/
⁸ https://phys.org/news/2022-09-fertilizers-global-emissions.html
⁹ https://www.fao.org/pest-and-pesticide-management/ipm/integrated-pest-management/en/
¹⁰ https://ec.europa.eu/eip/agriculture/en/news/green-deal-halving-pesticide-use-2030.html
¹¹ https://www.cbd.int/gbf/targets/7
¹² Beckman, J., Ivanic, M., Jelliffe, J. L., Baquedano, F. G. & Scott, S. Economic and Food Security Impacts of Agricultural Input Reduction under the European Union Green Deal’s Farm to Fork and Biodiversity Strategies (USDA ERS, 2020).
¹³ https://www.eea.europa.eu/publications/how-pesticides-impact-human-health
¹⁴ https://ptxtrimble.com/en/products/hardware/flow-application-control/weedseeker-2-spot-spray-system
¹⁵ https://www.crodaagriculture.com/en-gb/about-us/market-areas/seed-treatment
¹⁶ https://www.mckinsey.com/industries/agriculture/our-insights/global-farmer-insights-2024
¹⁷ FactSet data as of 1st April 2025