The sky’s the limit – how vertical and indoor farming can supplement the food supply chain

Land preservation and regenerative organic agriculture practices are critical to solving food insecurity and combating climate change. The problem is, we only have so much land, says John Church, co-head of Food & Beverage for HSBC USA. That’s why innovators in the field have been developing new technologies like indoor and vertical farms designed to supplement outdoor farming.

Indoor farming allows for certain foods to be grown hydroponically in a closed-loop environment year-round. “These systems often recirculate water, which can be more efficient than how water is used for other types of crops," John explains. "Light and temperature can also be controlled, and since there is no exposure to pests – no chemistry is needed.”

Perhaps one of the most significant benefits of these types of farms, however, is that they can be built anywhere. That means food such as leafy greens can be grown closer to population centers. Since it travels fewer miles to the plate, the taste and texture of the output from indoor farms is often better to conventionally grown produce, says John.

While indoor and vertical farming will not feed the world, John believes it can supplement the supply chain. One leader in indoor farming, for instance, recently began construction of a research center in Abu Dhabi, UAE. “This is the perfect spot for a vertical indoor farm,” he explains. Due to its arid environment, the conditions are not suitable for outdoor growing, so the country has historically imported its produce. Recently the UAE’s government publicly stated it wants to become more sustainable – and this solution will go a long way in helping them achieve that. “Bringing fresh food to people who might not otherwise have access to it in this way is good for the country and good for consumers,” says John

There are environmental and social benefits to indoor farming as well. “In addition to potentially reducing carbon impact because food has to travel fewer miles to get the consumer, indoor farms can minimize the risk of supply chain disruptions like we saw during the COVID-19 pandemic,” says John. They can also bring jobs to people who have limited opportunities. This was the case when a start-up built a 2.76 million square foot facility in Kentucky, creating jobs in an area hard hit by the coal industry's collapse.

At present, the technology behind indoor and vertical farming is an expensive proposition – making it difficult to predict how scalable it is in the near term. However, as the cost of that technology comes down, the business model will become more profitable over time. “I liken it to the GPS systems that are in all commercial farming equipment today,” says John. "At the onset, it was costly to outfit tractors and combines with GPS, but it built the foundation for new, more cost-effective technology. I think we'll see the same will happen here.”

Still, interest in these types of alternative growing techniques is increasing among consumers as well. “That’s partly driven the environment, but again – also by having access to fresher food that may be considered better tasting,” says John. As a result, people may be willing to pay more at the grocery store and in restaurants for indoor-grown food. Other consumer trends are also driving food and agriculture innovations, says John, particularly those geared toward providing potentially healthier options to animal protein.

HSBC is committed to supporting those businesses – from the farm to the boardroom – who are taking an active part in being smarter, stronger corporate citizens by focusing on reducing carbon emissions. That's why we are dedicating up to $1 trillion of finance in investment between now and 2030 to help our customers transition to more sustainable business models. We are also innovating with new financing solutions, including our sustainability-linked loans, which are designed to provide reduced cost of capital as key ESG performance indicators are met.

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