Indoor agriculture's ESG credentials have become a topic of discussion in the vertical farming industry.  Environmental, social and governance (ESG) issues have become a focus for investment, consumer and tech firms alike.  They already inform the allocation of capital and we expect this trend to accelerate.

In this briefing paper, we outline indoor agriculture’s ESG credentials and examine its shortcomings.

Indoor farming allows anyone to become a farmer, even if they don’t have access to land or substantial financial resources.  It uses less water and fewer pesticides than outdoor farming.  It allows farms to be sited in food deserts or underprivileged areas.  It enhances the built environment.  Its major drawback is its high energy usage and farm profitability.

The industry continues to improve its energy efficiency, access to farming and plant biology, each of which add to indoor agriculture's ESG credentials.

Environmental Benefits

Indoor agriculture’s environment benefits are sometimes exaggerated by industry players, but its most commonly cited environmental advantages compared to outdoor farming are less water, land and pesticide usage, fewer food miles and less food waste.

Food Security

Food security has traditionally been the concern of developing nations and of those that import most of their food.  A combination of war in Ukraine, a large grain exporter, and rapid food inflation has rendered food security an issue across the world.

Built Environment

The migration out of cities that new work from home practices have facilitated have in turn led to greater opportunities for urban farms.

Though plant biology has made great progress in the past few years, its use remains in its infancy in vertical farming.  It has the potential to revolutionize the economics and reach of indoor agriculture.

Environmental Challenges

Indoor agriculture’s greatest environmental challenge is energy usage in vertical farms, where the reliance on LED lighting to stimulate plant growth means a bigger carbon footprint.

Around a third of operating costs for a vertical farms are energy-related, mostly for lights and HVAC.  Energy usage is the greatest downside of vertical farms, as numerous industry critics have noted.  Its importance has been highlighted by the increase of oil prices to well over $100/barrel.

Some indoor farmers are assuaging the issue by powering their farms with renewables, but these rely on there being sufficient land or roof space to house solar panels.  Others choose to partner with utility firms that supply renewables-based energy.

Less directly, better optimization of farms through AI-based tech like plant light recipes in turn leads to less energy usage.

Download the full briefing paper on Contain Insights.