It is perhaps a sign of progress that events like last month’s Responsible Investment Forum have taken on much of the feeling of generalist investor confabs.
In years past, such conferences provided an opportunity to gauge agriculture’s profile relative to other sectors with theoretical opportunities for overlapping profit and purpose. However, this year’s New York event focused on the broader fundraising environment and practical issues facing impact investing strategies.
Chief among challenges discussed was the perennial question of data and how to standardize measurement of ‘impact’ to help attract institutional capital. Among the organizations working to advance that effort is the non-profit Global Impact Investing Network, which launched an agriculture impact performance benchmark in March.
The benchmark draws on contributions from 16 ag-focused firms managing an average of $120 million and allows users to gauge their performance against peers in seven key performance indicators drawn from GIIN’s IRIS+ taxonomy. In addition to indicators like “change in farmer income,” “emissions mitigated” and “decent jobs supported,” GIIN’s benchmark also helps calculate how a specific investment relates to the pace of change necessary to reach the UN’s Sustainable Development Goals.
GIIN research director Sophia Sunderji told Agri Investor the ag benchmark’s introduction follows a similar effort in financial inclusion and comes in response to calls for differentiation in the market. Feedback from pensions, endowments, family offices and others, she said, led to a focus on realistic measurements of a firm’s tangible influence and the ability to compare among specialized managers.
“Asset allocators sometimes struggle to understand where and how they should allocate their funds within a certain impact theme or within a certain sector and how to actually pick fund managers,” she said. “What we are hearing from the fund managers is exactly that: ‘We don’t know how to stand out and how to differentiate ourselves because the landscape has become increasingly competitive. There are so many mangers that are flooding the space that are calling themselves ‘impact’.’”
Most of the firms contributing data to GIIN’s project thus far work with smallholders and/or regenerative ag. Previous experience with financial inclusion, said Sunderji, suggests that some of the bigger ag investment firms that declined to participate in the benchmark’s design might choose to contribute later.
“A lot of folks are recognizing: ‘We see there is a ton of value in this, we want to part of it, we would like to be represented in the benchmarks, but the amount of time that it takes, feasibly, to gather all of this investment-level impact data, is pretty significant’,” she explained.
Managers are wise to guard staff’s time fiercely, but those choosing to sit on the sidelines as GIIN sketches the boundaries of public and private interest in their markets may come to regret their lack of influence.
Private markets’ embrace of sustainability might also be understood as a gradual adjustment to demands for increased transparency, in an environment where the externalities of private investment have become difficult to hide. In that context, even agricultural managers who eschew the ‘impact’ label while alluding to inherent connections between agricultural sustainability and profit when addressing climate-conscious LPs, might find themselves left behind if GIIN’s benchmark really takes hold.
No investor wants to defend separate standards for ‘impact’ and ‘traditional’ allocations and if metrics like GIIN’s become table stakes for ag within the impact market, their influence will not be confined there.