Responsible agri investments produce higher returns

The agri investment community is well positioned to build socially responsible investment principles into agri projects from the beginning and the results of doing so are compelling, according to World Bank officials and agri investment managers working in Africa.

World Bank and the United Nations Conference on Trade and Development (UNCTAD) recently released a report entitled The Practice of Responsible Investment Principles in Larger Scale Agricultural Investments, which focuses on the implications of responsible investment on the investor and the impact on the local communities involved.

The report’s main takeaway was that the investors that were financially and operationally successful tended to be those that had the most positive impact on the surrounding community and host countries as a whole.

Agriculture fund managers, operating in a growing asset class, are in a position to implement these norms from the beginning; this comes in contrast to other asset classes where responsible investing practices are being applied retrospectively by some of the more progressive institutional investors.

The report, detailing the results of a survey on 39 mature agribusinesses in Africa and Southeast Asia, was partly encouraged by demand from public officials and private investors for information about best practice in these regions.

And there are several new agriculture investment projects that are already building responsible investment provisions into their projects such as Bwamanga Sustainable Advisors, the African agriculture asset manager, and Trigon Rufiji, the Tanzanian rice farming project from Trigon Agri. Both firms are going to establish outgrower schemes to help local farmers increase their productivity and create a better local market for the produce.

For both businesses, involving the local community was a sustainable business decision. “Outgrower schemes are of vital importance to the Rufiji Rice project,” said James Maynard, director of Trigon Capital in East Africa. “Not only will outgrowers allow us to increase our total production output, but the involvement and support of the local community will provide us with an effective form of political risk insurance.”

James Tyner, head of strategy and planning at Bwamanga added: “We believe that large-scale agriculture cannot be sustained in West Africa if the communities who live in the immediate vicinities of the farms are excluded. Social tension would result from such an approach.” Tyner has tried and tested this method on a gaming reserve in South Africa.

While ‘responsible agri investment’ can mean different things to different people, in Africa it usually involves the positive involvement of the local community and according to the report, increased job creation was the biggest impact to come out of large agriculture investments.

The World Bank report adds gravitas to a topic that was previously underpinned by hearsay, according to Grahame Dixie, agribusiness adviser of the World Bank’s Agriculture and Environmental Services Department and co-author of the joint UNCTAD-World Bank report.

“We decided that when looking at the success and application of investments into African agriculture, the whole debate was being informed by anecdotes and political opinion so we agreed to generate as much empirical knowledge as possible to find out what was really going on,” he said.

The World Bank has also studied 179 larger scale agribusinesses in Africa and Southeast Asia over a 50-year period and the recent report is part of a gradual build up in intelligence about the impact of responsible investing from the World Bank and its affiliated partners.