SDG Farmland

Sustainable agricultural land is an attractive but relatively unexplored investment category. The usual business cycle fluctuations are not so prominent – there is little correlation with the financial markets and, more often than not, land prices move in tandem with general price trends. Long-term investors, in particular, consider agricultural land a complementary investment in their portfolios, alongside asset classes such as real estate and infrastructure.

Investing in sustainable agricultural land requires an active approach. Robust care for agricultural land and enhancing its soil quality help to improve biodiversity, reducing the need for fertilisers and pesticides, herbicides and insecticides. This, in turn, underpins the quality of water and air, and causes less damage to the environment. Furthermore, healthy soil makes for healthy food and helps to tackle climate change.

The fund’s sustainability objectives are an explicit part of the investment strategy and are based on five of the United Nations’ Sustainable Development Goals (SDGs). To monitor the achievement of the fund’s objectives, independent experts analyse soil samples both in situ and in the immediate area.

The fund has investments in a wide range of crops, from permanent crops such as olives and avocados to annual crops such as potatoes and grains. To spread risk, the investment team targets a roughly even balance between permanent and annual crops.

Investing in sustainable agricultural land requires a long-term investment horizon, with expected net returns between 6-8% per annum. Events such as drought, insect pests and diseases can temporarily harm harvests but should have a relatively limited effect over a longer period and across the broader portfolio.

The fund focuses on developed economies around the world, with most investments expected to be made in North America, Western Europe, Australia and New Zealand. In these regions, the fund’s managers work closely with agricultural specialists and local partners, who provide operational management and local knowledge and expertise.
 

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