There is plenty of scope for the money
to be usefully invested. According to the UN’s Food and Agriculture
Organisation, “it is estimated that net investments of $83bn a year must
be made in the agriculture sector of developing countries if there is
to be enough food to feed the world population of 9.1bn in 2050”.
Although investing in farming may be necessary to help feed the world, there are many critics of the practice, concerned the industrialisation of farming will lead to environmental and social damage as intensive, fertiliser-dependent practices will degrade soil and push small farmers into poverty.
Bryan Agbabian, manager of the Allianz Global
Agricultural Trends Fund, is doubtful: “While an argument can be made
that current methods of agricultural production are not sustainable, it
is also true that the world cannot sustain its current population
without them.”
For this reason, he feels “the focus should be
first and foremost on growing production today to help feed today’s
hungry”, which is hard to argue with. However, he agrees that “much can
be done to ensure fertilisers, genetically modified seeds and crop
protection technologies are used in a more sustainable manner”.
The Robeco subsidiary Sustainable Asset
Management recently released a paper on the topic suggesting “food and
agribusiness offers fundamentals that enable responsible investors to
combine attractive long- term returns with investments in solutions that
can help secure a stable food supply well into the future”.
SAM
is also thinking in terms of solutions for the long-term problem, as
well as profiting directly from increasing food prices. “We think the
challenge is so big that we need all kinds of solutions,” says Gabriela
Grab Hartmann, deputy head of research at SAM and co-author of the
paper. She refuses to rule out any particular solution, including
genetically modified seeds. “With all new technologies comes risk, and
we want companies to be aware of the risk and manage the risk.”
Environmental impact is perhaps the most
obvious way in which agriculture can fail to be sustainable, but social
impact can also be a huge problem. Both forestry and farmland in
developing countries have a reputation for improper land appropriation
and even violent ejection of local populations.
“We screen for
risky behaviour, such as hiring people to kick out those living in an
area [where the company wants to create a farm or plantation],” says
Jürgen Siemer, another co-author and senior analyst in the agribusiness
team. This behaviour does occur but more and more rarely, he says. “My
general feeling is that a lot of things have really improved,” he adds,
citing the slowdown in rainforest destruction in South East Asia among
other things. “Industry collaborations with non-governmental organisations have definitely helped,” says Ms Grab Hartmann.
sustainable agricultural investment
Interest
in sustainable agricultural investment is coming from some surprising
quarters. Mike Young of Sustainable Capital is adviser to the newly
launched Sustainable Resources Fund, a Luxembourg domiciled vehicle
aimed at Middle Eastern investors.
“This fund was a function
of demand from our clients in the Middle East,” he explains. Until the
financial crisis in 2008, he says, investors in the region “thought
anything sustainable or green was irrelevant”, but following 2008,
investors are looking for something different and are more aware of the
importance of the long-term impact of their investments.
Another
driver of demand for agricultural providers is national concerns over
food security. In the Gulf region, Saudi Arabia has given up ill-fated
attempts to become a food producer itself and has turned its attention
to buying or leasing agricultural land elsewhere to ensure its food
supplies.
This Mr Young sees as both an algricultural investment and a
marketing opportunity. “Strategically, if you do business in Saudi,
you’re probably one of 150 people with similar propositions. But if you
can say you will be investing in a company supplying food to Saudi and
you can offer the potential investor access to the produce, you’re
starting the conversation with an advantage.”
Although there has been a sustained
campaign by NGOs in the US and in Europe to impose limits on “gambling
on hunger”, as they describe speculation in food commodity futures
markets, the UN Food and Agriculture Organisation says there is an
urgent need for significant and long-term agricultural investment in farming
technology and the infrastructure to support reliable food supplies.
Sustainable agriculture funds are there to supply that need.
source: Financial Times
GGAgriculture is an agricultural investment company solely investing in agriculture and farmland in emerging markets such as the Ukraine and Ghana. By producing wheat, chia and other crops in a low cost environment and selling them on the world-wide market, we aim to provide our investors sustainable returns for distribution as annual dividends.
