Impact investing is coming of age in agriculture

We are pleased to see that impact investing is being transformed from a soft, fuzzy platitude to its rightful place as a respected core principle of global financial best practices.

When we founded Bonnefield ten years ago, we purposely set out to devise a business model that would create value for our investors by creating value for farmers. We believed then, and believe even more strongly now, that creating value for farmers naturally translates into value creation for our investors whose farmland portfolios we manage; a win-win for both investors and farmers.  Value creation for farmers manifests itself in various ways: in financial flexibility, enhanced profitability, improved sustainability, and in contributions to local farm communities across Canada.

We codified our approach in a responsible investing policy (available here) and we actively monitor and track the environmental and social aspects of our investing activities on a property-by-property basis in our annual reports to investors.  We have also tried to lead a broader discussion in the Canadian agricultural community on the benefits of responsible investing through public events such as local community town hall meetings, educational conferences, public speaking events, farm tours, documentary sponsorships and by participating in policy discussions with government officials and academics.  In 2014, Bonnefield was the first Canadian farmland manager to become a signatory to the UN’s Principles for Responsible Investing.

Given this background, it has been gratifying for us to see evidence of other investors taking a sustainable approach to the agricultural sector.  Over the past quarter alone, we have witnessed high-profile momentum in the sustainable agricultural investment space. There appears to be promising action being taken by investors to address some of the long-term sustainability issues facing the world’s food production systems, and we are hopeful that this emerging trend will become a broad movement.  Some examples:

  • A group of influential investors including Bill Gates, Jeff Bezos, Ray Dalio, Richard Branson and Michael Bloomberg collaborated to form an investment fund named Breakthrough Energy Ventures (BEV). The firm offers patient capital to companies with high-impact potential and that aim to solve major, global issues. Last month BEV led an investment round in Pivot Bio, an agricultural company working on nitrogen-fixing microbes aimed at reducing fertilizer use and, thereby, environmental impacts and  operating costs for farmers.
  • Jeremy Grantham’s Environmental Trust also led an investment round in the agricultural space. In October the trust invested in Land Life Company, a technology firm with the aim of reducing global soil degradation. They will continue to work on projects which meet their aims by offering technologies such as autonomous planting, remote sensing and blockchain verification. Grantham, co-founder of the $70 billion investment firm GMO Capital (and who I have frequently quoted in my blog posts), has adamantly expressed the importance of investing in sustainable agriculture as climate change, land scarcity and changing diets in the developing world are projected to threaten our global food system.

These stories are evidence of a growing trend: investors are giving greater consideration to environmental, social and governance (ESG) outcomes of their agriculture investments. According to the latest trends report from the Responsible Investment (RI) Association, more than half of the Canada’s investment industry considers ESG factors in their investment decisions, representing over $2 trillion in assets under management.

Impact investing takes the ESG mandate a step further by promoting investment-specific outcomes within a responsible investing framework. The Responsible Investment Association notes that impact investing in Canada has grown by over 60% (as measured by assets under management) over the past two years alone. Investors visibly aim to make a positive contribution to society while also generating attractive returns. Investors are aligning their portfolios with their values and allocating assets towards social and environmental progress as well as profit.

We are pleased to see that impact investing is being transformed from a soft, fuzzy platitude to its rightful place as a respected core principle of global financial best practices.

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