Mark Mansley, investment manager at the £2.2 billion Environment Agency Pension Fund, tells Agri Investor about the fund’s experience of agriculture and timber investing so far and its sustainability guidelines.
How long have you been investing in agriculture?
We awarded a mandate to Townsend Group 18 months ago to invest into real assets for us including an allocation of around 3.5 percent, or £80 million to agriculture and forestry funds globally. It is a discretionary mandate but with dialogue with us. So far we have only made one allocation to timber that has been fairly modestly drawn down and they have been quite cautious because we want them to be.
What have you been cautious about?
Across the whole real assets portfolio we are looking for a 4 percent return plus inflation and we are not sure that many assets can achieve this especially as agricultural assets are starting to become quite expensive globally. We don’t want to invest into anything unless we feel very strongly about it and we are cautious about whether the returns are actually there.
There also some complicated issues over tax oversea and we had to pull a commitment to a US fund at the last minute because of this.
We also have very strict guidelines about sustainability.
What are these sustainability guidelines in a general sense?
It is really about having a proper process across both forestry and agri. In timber we look for certifications such as the FSC or something close. Agriculture is a bit less well defined but again we emphasise on the process and management. It is very important to avoid any accusations around land grabbing. We are also interested in investing in ways of improving the asset and resources such as irrigation.
Some investors complain about a lack of track record, is this another concern?
It is not so much the track record but perhaps more a slight mismatched between the experience of the people involved and the institutional quality and scale of the investments we are looking at. There has been some progress and there are opportunities but perhaps they are not quite robust enough, especially when it comes to sustainability.