Crop protection products face stringent regulations in the EU and even more so in the near future. For instance, the EU implemented the “Green Deal” regulation, which comprises the “farm-to-fork” and biodiversity strategies that are meant to take action to reduce the use of chemical pesticides by 50% by 2030 (European Parliament, October 2023). However, in November 2023, the parliament rejected the proposal and extended the use of pesticides for another 10 years (AP News, November 2023).

Investor-led interest has been significant, with ~48% of identified European assets being backed by financial sponsors as of January 2024. The specialist segment witnesses the highest interest from investors on the back of rising demand for biological products due to regulations and environmentally conscious consumers (~71% of identified assets being backed by financial sponsors). The main detractors include the rise of precision agriculture technology, thereby reducing the need for crop protection products as well as pest and insect tolerance against biological products.

ESG topics in the European crop protection market primarily relate to environmental and social issues. Herein, the most pressing environmental and social topic is the negative impact of crop protection products (“CPPs”) on biodiversity and human health. For example, CPPs are known to directly contribute to the decline of certain biological groups (e.g. birds, amphibians) as well as indirectly reduce food resources and habitat areas. At the same time, chemical pesticides are linked to chronic illnesses such as cancer and heart, respiratory and neurological diseases. To mitigate the detrimental effects of CPPs on the environment and society, identified European players invest in biologicals and digital agriculture practice. For example, BASF invests in a new fermentation plan for biological and biotechnology-based CPPs.