With climate change creating a mounting urgency for innovative ways to produce food in increasingly arid areas, water management and agricultural technology – much of it founded on unique data and artificial intelligence – are an opportunity for investors, the author says.

The way that drylands – deserts – are growing has implications for those who are interested in agriculture and protecting habitats. Food security, among other issues, came into sharp relief during the pandemic and as a result of Russia’s invasion of Ukraine – a major food producer. Climate change, whatever one thinks about the extent of human responsibility for it, also comes into the equation. As we have seen with the rise of ESG investing and a focus on sustainability in certain quarters, the state of agriculture and the planet more generally are important topics. To address “desertification” is Yariv Erez (pictured). He leads AgroClimate at Arieli Group and serves as CEO of Frontier Agro Climate Israel. (More on the author below.) To respond, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

The future of agriculture is shifting toward arid regions, as climate change continues to expand desertification worldwide. Drylands cover 46.2 per cent of the global land area, as aridity has increased significantly over the past 30 years. At the same time, the number of people living in drylands has doubled in the past three decades, with models suggesting that as many as five billion people could inhabit drylands by 2100.

Though challenging, desertification is fueling real-time innovation and increased investment opportunities in agriculture, water management and related sectors, with all climate zones set to benefit from such progress as the planet gets warmer and food demand continues rising. The world's agricultural technology market, which is growing more than 16 per cent a year, is poised to exceed $79 billion by 2030. The global water and wastewater treatment market, worth $369.6 billion, is set to grow nearly 75 per cent to $652.30 billion by 2034.

This makes the water and agricultural technology sector a lucrative yet proven opportunity for any investor, including family offices, which have long sought impact investments and are increasingly seeking to prioritize sustainability. The key for family offices and other investors is to highlight areas with the most potential, choose technology that delivers both practically (for its users) and financially (for its investors), and work with partners such as R&D centers and universities.

Tech sectors with high potential: Water management, new farming models and data
Water management technology is one of the areas with the largest potential on returns, partly because in much of the world, this industry is at the beginning of its innovation journey. Technologies such as wastewater recycling, desalination and advanced agricultural irrigation management can be used to help the four billion people around the world exposed to water stress conditions, as global water demand is projected to increase up to 30 per cent by 2050. 

Another area ripe for growth is innovative farming methods in desert regions, where traditional agriculture is increasingly limited. Agricultural experts are pioneering cultivation methods that leverage the desert’s natural advantages, such as abundant sunlight and high temperatures, to enhance photosynthesis and boost crop yields. These systems enable sustainable, year-round farming with reduced need for fertilizer and pesticides, offering a resilient solution for food production in arid climates with limited arable land.

One valuable solution being implemented in desert regions around the world is Recycled Deep Water Cultivation, a more sustainable method of hydroponic farming, where crops are grown in nutrient-rich oxidized water that is constantly being circulated and reused throughout the system. Innovative methods like this offer further improvement on older models of indoor desert farming, such as vertical farms, where the roots of plants hang in the air rather than grow in soil, or traditional hydroponic farms, both of which are often resource and energy-intensive.

Like many other agricultural technology companies, that farm using robotics, which – along with drones and artificial intelligence – is increasingly being used to equip farmers with the tools to adapt to climate change. At one Israeli kibbutz, for example, the use of artificial avocado tree pollination based on algorithms developed by startup BloomX to predict optimal pollination time, has raised yields 40 per cent. The company’s artificial pollination “is an attempt to deal with many of the problems we have today, which we expect to get worse in the future,” said BloomX founder and CEO Thai Sade. Those problems include the global decrease of pollinating insects, and the discovery that honeybees are not that effective at pollinating certain types of crops.

Many of these technologies incorporate the collection of data, often from sensors that can measure everything from soil moisture to animal health. It is crucial that investors evaluate the quality and uniqueness of the data and not just the tech itself; as larger data sets or proprietary data helps ensure that a company can differentiate itself.   

Multidisciplinary investments that deliver on the tech and the financials
While investors are evaluating the data and technology of the companies that they are considering investing in, they must, of course, also be evaluating the potential for a return on investment. The two are intertwined, with more unique tech that makes a bigger impact on agriculture is also more likely to make a bigger business impact.

One way to foster a broader impact is to ensure that solutions are practical and deliver real value and results for farmers who may use them. After all, sustaining food production and achieving agronomic success requires growth and adaptation. Investors need to think in a multidisciplinary manner, considering the overall infrastructure, economy and culture of each market. 

For example, sensor-based irrigation systems that rely on cloud computing cannot help farmers in areas without reliable high-speed internet access. And farmers without the resources to pay upfront need incremental payment plans. Investors should prioritize companies and solutions that consider not just tech innovation, but agronomy, economics, logistics, environmental science and cultural studies.

The value of partnerships for family offices
Just as it is critical to consider multiple factors when evaluating potential impact, it’s also important for family offices to seek out collaborations with other institutions. Partnering with research facilities or universities can help family offices better understand the needs of local markets, identify opportunities early – while the technology is still in the research phase – and ultimately increase their return on investment. 

In addition, companies building their technology at research facilities and universities often receive the expert guidance and testing grounds they require from those institutions and are able to develop and iterate their solutions according to real-world needs. 

With climate change creating a mounting urgency for innovative ways to produce food in increasingly arid areas, water management and agricultural technology – much of it founded on unique data and artificial intelligence – are an opportunity for investors to do well by doing good. Investing in the many Israeli companies spearheading agricultural and water usage technology is an incredible way to achieve financial returns while making a positive impact.

About the author

Yariv Erez mentors entrepreneurs across the entire project lifecycle – from business planning to market research and implementation.

His technical expertise includes crop cultivation, agricultural program coordination, and monitoring evolving market dynamics to guide strategic decisions. Yariv previously held executive roles as head of North American Operations at Saturas, CEO of Kidskit, and CEO of Azrom USA LTD.