Agriculture contributes to climate change and is also damaged by it. Innovation backed by institutional investors is helping change that.
Building a sustainable economy is incredibly complex. Countless industries and companies are entangled with the problem of a warming planet. To take just one example, food production must support a growing population, global and local: Canada’s population ballooned by over a million in 2023. This isn’t a new challenge and innovation helped triple U.S. farm output between 1948 and 2019, even as total U.S. farmland shrunk in the same period by more than 140 million acres.1 Unfortunately, more intensive farming is one reason the global food system produces one-third of greenhouse gas emissions today.2 A significant part of those emissions are generated by “food miles”, the long distances traveled by trucks or planes between where food is produced and where it’s consumed. Canada’s geographical location and short growing season is why we’re the fourth largest importer of fresh vegetables globally, with 62% coming from the US and 23% from Mexico.3
Building a more sustainable food chain is particularly pressing because agriculture both contributes to climate change and is increasingly damaged by it. In 2021 the “heat dome” and floods in BC killed 1.3 million farm animals.4 Fire and related smoke taint hit the province’s wine industry hard in 2023. In February 2024, after record losses in 2023, Alberta declared an early start to the wildfire season due to unusually warm and dry conditions.5 In the US, 20% of the “lower 48” states, many with major agricultural output, were in serious drought conditions at the end of February 2024.6
But there’s a silver lining: the soaring costs of climate change are driving intense efforts to find solutions. The combination of innovation and entrepreneurial capital that has sparked many advances in history is seeding new ideas and technology to meet this critical challenge. In non-animal agriculture, this includes taking it inside. Which is where GoodLeaf Farms comes in. It operates indoor vertical farms, part of the technology driven controlled environment agriculture (CEA) industry. The company grows numerous varieties of leafy greens (think salads) on large vertical trellises or floor to ceiling racks.
Ninety per cent of leafy greens consumed in Canada are trucked thousands of miles from Arizona and California.7 But GoodLeaf, founded in 2015 in Bible Hill, Nova Scotia, is starting to make quite a dent in those food miles and help develop a more sustainable food chain. Its closely monitored and largely automated environments use a fraction of the water outdoor farms do. Unpredictable sunlight – and nighttime – are replaced by banks of LED lights. Cameras, sensors and data analysis help optimize the density and distribution of seeds, the depth and consistency of the growing medium, germination, temperature, humidity, nutrient loads, light intensity and spectrum and air flow in the grow room. Crops are pesticide free and the 12-month growing season yields far more crop cycles than conventional production.
GoodLeaf started commercial production in 2019 from a 50,000 square foot indoor farm in Guelph, Ontario, 45 minutes from Toronto. New locations completed in 2023 near Calgary and Montreal quadrupled its production capacity to 250,000 square feet. The company is currently on track to produce over four million pounds of leafy greens in 2024, all less than an hour’s drive of 35% of Canada’s population. The products are sold in more than 600 grocery stores and restaurants.8
Privately held GoodLeaf has attracted major Canadian institutional investors. Frozen food giant McCain Foods Ltd. initially wrote a cheque in 2018 and by 2021 was the largest single shareholder with a $65 million stake. In December 2022 GoodLeaf announced it had raised $150 million following additional investment from McCain and new money from Power Sustainable Lios, an agri-food-focused private equity firm controlled by Montreal’s Power Corp.9
GoodLeaf looks promising, but many new, disruptive businesses follow a roller coaster trajectory, and indoor vertical farming is certainly one. The huge U.S. market already has winners and losers after some early CEA leaders who went public flamed out. In addition to the standard entrepreneurial challenges of growth, management expertise and capital, the energy input for indoor vertical farming is big, both in quantity and cost. But the necessity of developing a more sustainable food chain is creating opportunities that long-term investors like McCain and Power Corp. are willingly to back.
Nicole M. Deters, Senior Investment Advisor, Gilman Deters Private Wealth
Sources:
2 https://www.nature.com/articles/s43016-021-00225-9
5 https://globalnews.ca/news/10306287/alberta-early-wildfire-season-100-firefighters/
7 https://www.goodleaffarms.com/news/ontario-year-round-greens
8 https://www.goodleaffarms.com/news/ontario-year-round-greens
9 https://calgaryherald.com/business/local-business/goodleaf-farms-vertical-farming-southeast-calgary
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