Hancock Natural Resources Group has certified its US farmland portfolio to the Leading Harvest sustainability standard that was launched last year following collaboration between institutional mangers and non-profits Manomet and The Conservation Fund.
Leading Harvest provides 13 operational objectives designed to help farmland managers produce continuous improvements toward sustainability. The standard is currently established for use only in the US.
Hancock had hoped to receive certification last year but was only able to complete the process for 70,000 directly operated permanent crop acres before the spread of covid-19 halted the effort, chief sustainability officer Brian Kernohan told Agri Investor.
After resuming audits earlier this year, he said, the entirety of its 300,000-acre US portfolio, which includes tenant-managed row crop properties, formally completed certification in mid-May. Kernohan compared the process to a financial audit and added he expects large accounting firms to eventually get involved with certifying the Leading Harvest standard.
While there were no new additional sustainability practices required by the standard that were outside of what Hancock was already doing, Kernohan said Leading Harvest’s requirement for documentation of communication with tenants about sustainability planning provided an opportunity to update practices regarding community relations and quantifying ecosystem benefits.
“If you manage sustainably, Leading Harvest is a confirming program, not something that will force you to wholesale change what you do,” Kernohan explained. “Documenting how farm management contributes positively to biodiversity was an area that we improved in the course of becoming certified.”
In a sustainability report released in early June, Hancock provided an overview of environmental management practices employed for its $10.6 billion timber portfolio, which includes assets in five countries, and a $3.7 billion farmland portfolio that includes properties in four countries.
The report described how Hancock recently updated the information it provides investors with new metrics that include percentage of forest assets with conservation attributes and the scale of productive forest area harvested annually. It noted that while the sustainability information currently provided to LPs reflects firm-wide performance, Hancock plans to begin offering client and/or fund-level reporting next year.
“The questions have come often enough that we want to now be responsive and provide information at the fund level to be able to meet the clients where they are. What is not clear in this is exactly what the client wants,” said Kernohan, highlighting that jobs creation and biodiversity benefits as among areas of particular interest to certain LPs.
“Investors want more information but I don’t see a dominant trend as to what information they think is most important,” he added.
One obvious exception, Kernohan said, is CO2 emissions and opportunities related to ag and timber’s role in broader efforts to mitigate climate change. Hancock’s report noted demand among select investors for “impact first” ag and timber strategies that prioritize environmental or social outcomes over financial returns.
“Emissions and removals are now starting to become a pretty common question. Questions like: ‘Hey, how much does my asset emit and do I have removals that are offsetting those emissions?’ is not an un-common question,” said Kernohan. “Clients are becoming savvy on the fact that these [ag and timber assets] are natural sinks of carbon.”
Hancock is still evaluating whether to raise a separate vehicle devoted to investments that prioritize carbon sequestration over financial objectives, Kernohan said. He highlighted that Hancock’s existing “thematic” timber and ag investments also provide meaningful positive contributions to the environment.