More than 50% of impact investors expect to add more food and ag – GIIN

More than half of respondents to the 10th annual Global Impact Investor Network survey plan to increase their allocations to food and agriculture over the next five years.

GIIN co-founder and chief executive officer Amit Bouri told Agri Investor: “Increasingly, as investors are looking for diversification in their efforts to mitigate climate change, they are elevating sustainable forestry and sustainable agriculture.”

GIIN’s survey was released last month and drew on a poll of 294 investors collectively managing $404 billion of impact investments.

The survey found that while food and agriculture account for just 9 percent of total assets under management, the sector is the most common target for the impact investors surveyed. Of respondents, 57 percent, GIIN said, reported having some allocation to food and ag and 54 percent said they planned to increase that allocation over the next five years.

By contrast, only 16 percent of respondents have an allocation to forestry, which nonetheless accounts for 10 percent of total sample AUM and trails only energy and financial services in its share of surveyed impact investors’ activity.

Bouri said food and ag has been the most common sector among GIIN survey respondents for the past five years, adding that a growing recognition that food and agriculture are key to efforts to mitigate climate change has added to existing investor interest in the sector.

Impact investors also pursue agriculture for its connections to the employment of low-income populations and potential for environmental impact, in both developing and developed markets, he said.

“That is largely motivated by social justice; whether it’s trying to think about how to address food security or about the labor practices within the agriculture sector and how to  create more economic opportunity for workers, whether they are working in the actual production, all the way through to distribution,” said Bouri.

He added that another factor driving recent interest in food and agriculture among impact investors has been the covid-19 pandemic, which he said has encouraged a more holistic definition of health and wellness and drawn attention to agricultural supply chain challenges.

“Trade constraints are expected to restrict trade flows to key markets, thus increasing food insecurity and labor shortages. Morbidity and movement restrictions are expected to impact the full supply chain of production, processing, distribution and logistics,” GIIN said in a covid-focused issue brief published after the annual survey.

GIIN’s annual survey also highlighted the increasing sophistication of practices and tools to measure and manage the social benefits achieved by impact investments.

Respondents highlighted the UN’s Sustainable Development Goals as a key framework for aligning portfolio strategies and IRIS Plus, a free online system for measuring and managing impact recommended by GIIN, as being particularly useful, said Bouri.

While no single framework has emerged as the most important for the agricultural sector, Bouri highlighted that whereas GIIN’s first survey in 2017 found 85 percent of respondents used proprietary measurement and management schemes, today 89 percent use external systems, tool and frameworks.

He added that given widespread interest in sustainability among investors not narrowly focused on impact investing, managers across markets are recognizing the need to communicate the positive effects of their investments.

“Anyone who is in the market trying to raise funds should expect to be asked how they are understanding the impact that they are having, and how does their investment process incorporate or integrate impact,” Bouri said.