Marketwatch. March 24, 2021. By Debbie Carlson
7 ways for ESG investors to profit from sustainable agriculture
The original green sector — agriculture — hasn’t been on the radar for environmental, social and governance investors, given industrial agriculture’s heavy dependence on pesticides, fertilizers and genetically modified seeds.
But ESG investors are turning their interest to agriculture as a way to fight climate change. In November, the US SIF, an organization that follows sustainable investing, said sustainable agriculture was an important investing issue for money managers, the first time this issue cracked the top five specific criteria. Of the $17 trillion (link) invested in ESG issues, money managers (link) said they devoted $2.38 trillion to sustainable agriculture while institutional investors (link) devoted $2.18 trillion to the theme.
It’s a harder investment for individual investors; there are no targeted mutual funds or exchange-traded funds for sustainable agriculture and just a handful of stocks to choose from.
Investing in sustainable agriculture is still in early stages, not unlike where the renewable energy sector was in 2007 as far as ESG investor interest, says Erin Fitzgerald, CEO of USFRA, a national network of farmer and rancher-led organizations that’s working to expand ESG investment in sustainable agricultural technologies. USFRA recently released a report (link) about how ESG investors can think about public or private investments in agriculture to mitigate climate change by improving soils.
That could mean a money-making opportunity for investors, especially if the valuation premiums usually given to ESG companies aren’t priced in. But given that it took renewable energy years to become profitable, there could be stumbles. Plus, some ag companies may be improving their environmental record but also have other aspects that ESG investors find distasteful, such as researching genetically modified organisms or poor worker policies.