The developing country focus of the Principles for Responsible Investment in Agriculture and Food Systems is a bit narrow, but the principles are still significant, according to Paul McMahon, managing director at SLM Partners, the regenerative agriculture-focused fund manager. The firm is currently fundraising for a A$150 million livestock fund in Australia. The UN is voting on the principles next month.
I welcome The Principles for Responsible Investment in Agriculture and Food Systems. Broadly, they provide parameters that we are happy to work within – and already do – when selecting and developing investments.
As always with texts that are designed by international committee, it may not be immediately apparent what these principles say. They can come across as a bit ‘motherhood and apple pie’. But they are significant in that they come down in favour of smallholder farmers and more sustainable production systems. And rather than implying that the focus of investment should be ‘increased food production, at any cost’ they recognise the need to achieve a broader set of goals – food security, poverty alleviation, equitable development, environmental resilience.
My only gripe with the principles is that although they claim to have global relevance they are really designed for agricultural investment in developing countries. They are another example of international organisations, NGOs and rich countries coming together to advise poor countries on how they should run their affairs. It is true that it is in developing countries where the risks of irresponsible investment in agriculture are greatest. But there are plenty of problems with agriculture and food systems in developed countries too – uncertain profitability, an aging farmer population, and the erosion of the natural resources on which our future depends. Responsible investment can, and should, play a role in addressing these problems too.
As for signing up to these principles, we would certainly be interested in exploring this. It would depend on what was required in terms of reporting. Also, how will these principles relate to the existing Principles for Responsible Investment in Farmland prepared by UN PRI?
We find that investors always ask about responsibility and sustainability when evaluating an investment in agriculture. It is a core due diligence criteria. However, they usually don’t care whether an investment manager has signed up to a set of principles or achieved a certification. This is probably wise, as every agricultural investment is unique and needs to be assessed on its own terms. It can be easy for managers to sign up for voluntary principles without necessarily acting in a different way. Investors need to dig into each project to make sure there are no nasty social or environmental surprises.
Finally, I would just say that at SLM Partners we do not see responsible investing as an add on, or a box to check, something that gets a token slide at the end of the presentation. We evaluate and pick investment opportunities that will make a positive environmental impact by regenerating land and minimising impacts on water, air and biodiversity. We do this not only because it is right but because we believe these types of approaches can generate higher returns and/or reduce risks in the long-term. Therefore, adhering to these sorts of principles is not a burden.
McMahon is speaking at the Agri Investor Forum in Chicago in November.