In an era of climate change, pressures on water resources and a burgeoning global population reaching 10 billion, indoor vertical farming is emerging to overcome the challenges and address growing food demand.

Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), is joining peers in the bid to improve the resilience of the food supply with the launch of a new company in Riyadh that will build and operate indoor vertical farms in Saudi Arabia and the wider Middle East and North Africa region.

Although Saudi Arabia’s largely arid landscape does not conjure up images of green fields, the Kingdom has developed fields of crops covering an area roughly the size of the Netherlands using pivot irrigation. Yet, the Kingdom’s supply of “fossil water” aquifers are not replenished, due to lack of rainfall, prompting the government to look to other solutions.

The new company is a partnership between PIF and AeroFarms, a US-based leader in vertical farming. The project aligns with the fund’s strategy to develop food and agriculture, which will contribute to reducing import dependence, localizing technologies, and supporting economic diversification.

The first farm in Saudi Arabia is expected to be the largest indoor vertical farm of its kind in the Middle East with annual production capacity of 1,100 tonnes of crops. Indoor vertical farming will lead to higher yields and a 95% water use saving compared to conventional farming. The venture plans more vertical farms across the MENA region over the next few years.

Majed AlAssaf, the Head of Consumer Goods and Retail for MENA at PIF, said, "The agreement with AeroFarms will lead to the establishment of indoor vertical farms in Saudi Arabia and the wider MENA region, increasing regional reliance on locally produced, high-quality crops grown in a sustainable way using the latest technologies. PIF is enabling the growth of the food and agriculture sector and localizing technology that can benefit private sector industry participants," he stated.

PIF is not the first SWF to enter the vertical farming space. Abu Dhabi’s ADQ has also sought to address domestic food production in a country with a highly arid environment with limited potential for cropping. Last year, ADQ’s venture capital platform DisruptAD participated in the US$2.8 million seed funding round for Right Farm, which seeks to address gaps in the fresh produce value chain in the UAE and the wider region through the development of technology that optimises the sourcing and procurement of fresh produce for businesses.

ADQ has also launched plans for the UAE’s first fresh produce AgTech Park  - in Al Ain Industrial City (AAIC) under Abu Dhabi Ports’ Industrial Cities & Free Zone Cluster - to accelerate sustainable innovation-centric food production and distribution. The purpose is to enable the UAE to become the region’s leading fresh produce farming hub, reducing the nation’s reliance on premium food imports. Once operational, ADQ expects the 200-hectare AgTech Park to have an annual fresh fruits and vegetables production capacity of 39,000 tonnes. The development of the AgTech Park is aligned with ADQ’s strategy to grow a thriving food and agriculture ecosystem for the UAE.

Mansour AlMulla, Group Chief Investment Officer at ADQ, commented: "Efficient AgTech solutions for fresh produce can help the UAE achieve higher production levels and lower water usage, unlocking the economic and environmental benefits of having shorter supply chains.”

Abu Dhabi’s Mubadala and the Oman Investment Authority (OIA) have also participated in agtech investment. Last year, OIA participated in a U$85 million Series E fundraising for MycoTechnology, which is developing the capacities of its mushroom fermentation platform, with sights on expanding across key markets in Europe, Asia and the Middle East. In the Middle East, a MycoTechnology spokesperson highlighted the need for regional food security in line with the OIA’s goals: “In the Middle East, we believe interest in food security will drive a rise in plant-based products, and we hope to power that movement with our current and future ingredients.”

At the same time, Mubadala subsidiary Sanad Abu Dhabi backed US$80 million in a Series C funding by Beewise Technologies, an Israeli climatech precision robotics company. Beewise claims it has created a solution to combat the disappearance of bee colonies. It is an artificial-intelligence-based platform that can monitor bees 24/7 and claims to significantly increase pollination capacity and honey production. The Beehome seamlessly detects threats to a honeybee colony such as pesticides and the presence of pests and immediately defends against them.

Also, in 2022 the Qatar Investment Authority (QIA) raised its exposure to agtech, participating in a US$250 million Series D funding round for France-based InnovaFeed, a vertical insect farm operator that is rearing insects for animal and plant nutrition in vertical farms. InnovaFeed is one of several biotech companies to emerge with a focus specifically on harnessing insects and transforming them into nutrients for animals.

Foodtech and agtech appear to be challenging biotech in venture capital market investments by sovereign funds, indicating that long-term investors – particularly in countries with limited land and water resources – are looking to food security as both a strategic investment opportunity and a potential source of investment yield.

Related funds ADQ Mubadala OIA PIF QIA