Seeking Positive Impact for Planet and People: Rice and the Changing Climate
Rice has been a key staple food in human history and is the third most cultivated crop in the world after sugarcane and maize, feeding 4 billion people, and grown by over 140 million farming families globally. Although rice is common in different cuisines, it is predominantly cultivated and consumed in Asia. Nine out of the top ten production and consumption markets are in Asia.
This critical crop is deeply interconnected with climate and sustainability challenges, both creating impact on the environment and being impacted by climate change. Climate change increases temperature, and higher temperatures can cause declining yields from heatwaves and the potential increase of pests and plant diseases. In addition, global warming leads to more periods of extreme precipitation, floods, droughts, intense storms and soil erosion, causing economic loss and affecting billions of people’s livelihoods.
The rice sector also greatly impacts the environment: rice production contributes to GHG emissions, about 12% of global methane annually, from anaerobic decomposition caused by flooding rice fields. Rice consumes about 34-43% of the total global water used for irrigation and contributes to water pollution from discharging chemicals and sediment to downstream water. Intensive farming also creates soil deterioration from drainage/ flooding, fertilization overapplication, and biodiversity loss from deforestation and expansion into natural ecosystems such as wetlands. It is also important, however, to understand these environmental challenges in a localized and specific context and to evaluate them in a systematic manner. For example, some regions plant rice, despite methane and high-water consumption, to mitigate flooding risks and create economic opportunities.
To address climate and sustainability challenges, improvements and innovations could be found across the value chain, for example in the areas suggested below:
While there is a plethora of agricultural solutions in the market applicable to the rice sector, most of these innovations are technological solutions that either enable scale, improve efficiencies or increase yields. Moving forward, we believe that there will be an increasing number of solutions trying to address the environmental impact of rice given the large climate mitigation potential. However, given that rice is a key crop that smallholder farmers in Asia rely on for livelihoods, it will be crucial for these solutions to be inclusive and holistic whereby both environmental and socioeconomic challenges are taken into consideration. In the Asian region, we find Ibis Rice, Agri8, Perfect Earth Foods and Koltiva to be good examples of companies that have supporting farming communities and improving environmental practices as core objectives of their business. How to catalyze the growth of these types of companies, particularly in the rice sector, is a key question to ponder given the crop’s cultural, social and economic importance. We believe that impact investors have a particular role to play given the complexity of addressing both environmental and social challenges connected to rice and the requirement for patient and catalytic capital to solve these challenges.
A market snapshot of relevant businesses in the rice sector: