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24 The Responsible Investor’s Guide to Commoditiesshould direct them to be environmental stewardsof the land and contributing members ofthe local society.This report aims to help institutionalinvestors understand and navigate the challengesof farmland investments. Appendix 4also presents the Principles for ResponsibleInvestment in Farmland, a voluntary set ofguidelines developed by a group of institutionalfarmland investors with supportprovided by our project.In addition to the Section 6 recommendationsthat apply to all real assets, ourresearch and engagement with farmlandexperts and investors lead to the followingrecommended best-practices that specificallyapply to farmland investments:■■Ask investment managers or operatorsto assess the expected impact of aninvestment on the livelihoods of localcommunities and smallholder farmers,whenever relevant. Managers and operatorsshould support measures aimedat improving their livelihoods.■■Avoid investments in crops that areunsuited to local conditions■■Avoid investments in land conversionplays (e.g. forestland turned to pastureor fields).IMPACT INVESTING INFARMLANDImpact investing targets measurablesocial returns on an investment whilerelaxing expectations for risk-adjustedfinancial returns. Farming has emergedas an important area for impact investorsto supply productive capital thatcan improve the lives of the very poor.Many farmers in the developing worldhave no access to capital. Providingworking capital to smallholder farmers,financing trade contracts for co-operativesor investing in the equity of a localagribusiness company can allow thesebusinesses to operate in a more stableand entrepreneurial manner.The Global Impact Investing Network(GIIN), for example, has established aworking group called Project Terragua,which is dedicated to improving investorengagement with smallholders in sub-Saharan Africa. Working collaborativelyamong its investor members, the grouplooks to provide guidance on improvingthe ESG performance of agriculturalimpact investments. Funds that are activein the area include the SEAF IndiaAgribusiness Fund and the SNS AfricanAgriculture Fund.“Private capital has the potential to positively changethe face of agriculture provided that it is not drivenby short-term returns […] Investment must besteered towards improving operational efficiency ofexisting farms as opposed to “transformation plays”where native cover is cleared for the establishmentof monocrops”—Renatto Barbieri, Galtere, Annual World Bank Conferenceon Land and Poverty, April 2011
25“There is no inherent ethical dilemma ininvesting in the food and agri space, providedthese are investments in the true sense of theterm – such as investments in companiesthat make products and/or services that createvalue for customers and society as a whole”—Christophe Churet, analyst responsible forthe SAM Smart Materials Fund at Swiss-based SAM (from IPE, May 2011)8.4 Debt and equity investments inthe agriculture and food sectorParticularly in commodity-related businesses,ESG factors have a financial impact on investmentresults (as discussed in Section 7). Inthe agriculture and food sector, investors gaincommodities exposure by holding the equityand debt of agri-chemical and seed producers,agricultural technology companies,farm equipment manufacturers, agriculturalproducers, and food companies.Our research and engagement with investorssuggests that most investment managersdo not yet systematically integrate ESG analysisinto their investment decision making.There is also a lack of understanding of thecumulative effects of various ESG issues (e.g.the interaction of different environmentaland social issues, and resulting political reactions),whose interrelation will be particularlyimportant for food systems. Most investmentmanagers can speak generally about ESG issuesin agriculture, but do not think of theseissues as impacting a company’s ability tosource raw materials, attract fresh talent, orpreserve brand value.Speaking in the language of “sourcing, talentand brands” also gives company engagementsa better chance of success. Initiativessuch as the Unilever Sustainable AgricultureCode show that agriculture and food companieshave begun to grasp the financial stakesof ESG issues. Investors can play a role inemphasizing the importance of these issuesto companies.In addition to the recommendations inSection 7, we suggest that agricultural debtand equity investors:■■Educate themselves about the uniqueenvironmental and social dynamicsof the agricultural sector with a viewtoward systematically incorporating ESGconsiderations in investment decisions■■Engage with companies in a strategicmanner, focusing on financial materialityand—given the complexity of theagricultural supply chain—targeting keyintervention points to maximize impact.8.5 Areas for further research andcollaborationThe investment community has only justbegun to think about how it can contribute toimproving the global agricultural system. Initiativessuch as the World Economic Forum’sNew Vision for Agriculture, the Global ImpactInvesting Network’s Terragua Project, or thisvery research project aim to connect investorsand the private sector with the long-termrequirements of food security and nutrition.Significant questions remain unanswered:Can large international agri-businesses co-existalongside local smallholder farmers? Doescommercial agriculture always promote foodsecurity? Do globalised commodity marketsalways benefit poor countries?There is ample room and interest forgovernments, development banks, investors,companies, civil society and local populationsto work together on environmentally, sociallyand financially sustainable agricultural solutions.Further research on how to structurethese partnerships will be critical.
Page 1 and 2: THE RESPONSIBLEINVESTOR’SGUIDE TO
Page 3 and 4: ForewordGlobal competition over sca
Page 5 and 6: 5Appendix 1. Overview of key enviro
Page 7 and 8: 7HEADLINES OF MAIN RECOMMENDED BEST
Page 9 and 10: 9FINANCIAL INVESTMENTS IN COMMODITI
Page 11 and 12: 11Possibility tomitigate ESGrisks b
Page 13 and 14: 13Based on our discussions and inte
Page 15 and 16: 155INVESTMENTSIN PHYSICALCOMMODITIE
Page 17 and 18: 176INVESTMENTSIN REAL ASSETS6.1 The
Page 19 and 20: 197DEBTOR EQUITYINVESTMENTSIN COMPA
Page 21 and 22: 218SPECIAL FOCUS:INVESTMENTSIN AGRI
Page 23: 23“One of the main things in food
Page 27 and 28: 27APPENDIX 1.OVERVIEW OF KEY ENVIRO
Page 29 and 30: 29appears to have been to throw the
Page 31 and 32: 31GOALS OF THE CONFERENCE:• To hi
Page 33 and 34: 33SET THE DIRECTION• Establish an
Page 35 and 36: 35• The opening plenary previewed
Page 37 and 38: 37encing prices levels and volatili
Page 39 and 40: 39PRICE IMPACT: DEFINITION OF RESPO
Page 41 and 42: 41“You really do have to wonder w
Page 43 and 44: 43PARTICIPANT LISTParticipant Name
Page 45 and 46: 45APPENDIX 4.THE PRINCIPLES FOR RES
Page 47 and 48: 47Annexes to the Principles for Res
Page 49 and 50: 49APPENDIX 5.PROJECT TIMELINE2010Ba
Page 52: Published by the UN Global Compact

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