'Sustainability' in Farmland Investment - how ESG standards legitimize farmland as an alternative asset class


André Magnan, University of Regina

Since the mid-2000s, financial actors have been actively developing Canadian farmland into an ‘alternative asset class’. This process began with the establishment of some pioneering farmland investment firms who gradually acquired substantial portfolios of farmland on behalf of private investors, pension funds, and wealthy individuals. In part, this financialization of farmland was spurred by the food price spike of 2007-8 and other global macroeconomic factors that led specialized investment managers to develop a ‘farmland investment thesis’: a growing global population, increasing environmental pressures, and declining farmland would contribute to steadily rising farmland values. These predictions have largely been borne out, with farmland prices showing strong growth over the last 15 years. In recent years, farmland has been marketed as a stable investment during the tumultuous economic times of the global pandemic, rising inflation, and interest rate shocks. These macroeconomic trends have justified an increased interest in farmland investment as a means of portfolio diversification. Across the financial sector, environmental, social, and governance (ESG) standards are increasingly being used to identify risks and opportunities in investment decision-making and to differentiate investments as ‘ethical’ or ‘green’. Farmland investment managers are no exception as established and new players have been developing ESG indicators particular to the context of commercial agriculture. In the most common business model in the Canadian context, farmland investors purchase and manage farmland on behalf of investors, renting the land to commercial farm operators. ESG standards introduce new monitoring and reporting practices, with implications for the landlord-tenant relationship. This paper examines the maturing farmland investment sector, with a focus on the evolving nature of business models and discourses used to legitimize investor ownership of farmland. In particular, we focus on the development of ESG standards among the following key Canadian players: Andjelic Land, AgInvest Farmland Funds, Avenue Living, Bonnefield Financial, Veripath Farmland Partners, and Area One Farms. To varying degrees, each has developed ESG principles and standards that not only impinge on corporate governance matters, but also serve to monitor and regulate farming practices, and in turn ‘discipline’ farmer tenants. While some investor firms have developed ‘in-house’ standards of care, others have adopted internationally endorsed ‘principles of responsible investment’, and still others are turning to third-party certification. We compare these strategies and critically analyze the ESG standards in light of the potential benefits and risks for farmers and rural communities of financializing the farmland market. To what extent are environmental indicators used in ESG strategies – which can include reporting on soil health, water management, biodiversity, and climate change mitigation – adapted to local ecology and agronomic needs? To what extent do social indicators such as labour standards or engagement with local communities reflect local realities? Our paper problematizes the roll out of farmland investment ESG standards as both a project for quantifying and standardizing farming practices and for legitimizing the financialization of agriculture.

Non-presenting author: Emily Duncan, University of Regina

This paper will be presented at the following session: