We are now living in an age of new challenges that require innovative thinking. This week’s mayhem in global markets, sparked by the Chinese Yuan’s devaluation on August 11th, has seen Shanghai’s Composite Index drop by 7.6%, Germany’s Dax and London’s FTSE drop 4.7% and the S&P 500 drop 3.8% – all in a matter of days. Although global stocks are now rebounding, investors have been reminded of how equity and bond market volatility can flip into dangerous territory with very little or no warning.
One of these new challenges is mankind’s increasing rate of consumption, whether equity related (US stocks saw their highest trading volume in four years on Monday) or our population’s growing need for sustenance. There are only so many natural resources the earth can supply and on August 13th 2015 we breached our annual limit. ‘Earth Overshoot Day’ is the day when resource use outstrips our capacity for production, and is the point in the year when we have used as much land, trees and food that the planet’s ecosystem can regenerate. Any consumption from now on represents an unsustainable burden on our planet’s resources. According the National Geographic, the first time this occurred was on December 29th, 1970. Since then, humanity’s carbon footprint has more than doubled causing Earth Overshoot Day to occur sooner with each passing year.
Not all countries are contributing to a deficit. A select few have a bio-capacity reserve, meaning they produce materials and consume resources far below the levels that tax nature’s abilities. These are mostly developing countries in Africa, South America, and the Middle East, along with developing countries with huge resources, such as Brazil.
How Many Earth’s Does it Take to Support Humanity?
Passing the capacity benchmark increases the rate of carbon dioxide levels in the atmosphere, soil erosion and deforestation, further compounding the issue of an ecosystem under constant duress. Food is another major cause for concern, as we will have to produce more to feed a rising population– all without expanding production beyond the land and water already pressed into service on our behalf. The only solution is through sustainable practices that keep our ecological footprint within our planets resource budget. We must also invest our time and resources into ensuring that this budget is maintained.
A 30% reduction in carbon emissions by 2030 is a viable first step, one that would see Earth Overshoot Day pushed back to September 16th. Another is to diversify our investments to alternative assets that hold fundamental value. While turmoil in the stock markets this week has both investors and central bankers wary of the future, farmland values around the world are showing higher year-on-year growth with lower levels of volatility.
The growing demand-supply balance for the food and resources essential for human life ensures sustained growth in alternative markets at a time of lower and more volatile returns from mainstream assets. We live in an environment beset with new challenges requiring innovative thinking. This has a particular resonance for the planet as it transitions to a more volatile period, both climatically and across investment markets. Rapid population growth, resource depletion and commodity price volatility are set to endure, and the demand for farmland and agriculture products will rise.