- Data methodology (Selection Criteria)
- Allocation: Agriculture > 20% or Beverages >20% or Food > 20%
- Fund description keywords: Agriculture, Aquaculture, Fish, Forest, Livestock
- Fund objective keywords: Agriculture
- Fund strategy: Agriculture, Livestock
- Sector holding classifications: Agriculture, Beverages, Food
- Multi asset funds passed through screen – PT’s analysis is open to multi asset funds
- Asset owner information must be accessible on FactSet – Who’s invested in the fund
- Constituents/holdings of the fund must be accessible through FactSet
- Total asset value (TAV) data for 2017 and 2018 have to be available and accessible through FactSet
- Private equity funds screened out
- FactSet (2020).
- Key terms
- Open-End Fund
- An open-end fund is a mutual fund that can issue unlimited new shares, priced daily on their net asset value.
- Exchange Traded Fund
- Exchange Traded Funds (ETFs) are funds traded on a stock exchange. Most ETFs track the performance of a stock or bond index (such as the FTSE 100 or S&P 500).
- Open-End Fund
- Planet Tracker assessed 37 AgriFunds for their ability to incorporate environmental and sustainability factors into their investment decision making and reporting, Planet Tracker found that:
- Overweight Consumer Staples can Increase Portfolio Exposure to Environmental Risks: The AgriFunds have on aggregate, as at Q4 2019, an overweight exposure to Consumer Staples relative to industry benchmarks analysed by Planet Tracker, including the S&P Agribusiness Index and DAXglobal Agribusiness Hedged Index. Consumer Staples in this context include raw and processed food and agriculture products together with food and drug retailers, brewers, household and personal products. This is relevant as, within the Consumer Staples classification, upstream agriculture and food producers are especially exposed to environmental shocks such as drought, flood, deforestation and land use related degradation.
- Consumer Staples Underperformed Sector Benchmarks from 2010 to 2018: Consumer Staples performance within these AgriFunds have underperformed against the S&P 500 Consumer Staples Index between 2010 and 2018. The more weighted these AgriFunds are to upstream and midstream specialist agriculture companies such as producers and traders, as opposed to, for example, downstream retailers, the lower their performance.
- AgriFunds Demonstrate Low Engagement with Environmental Risks and Sustainability Objectives: Based on a risk framework detailing 23 different environmental risks and sustainability criteria, only one fund, DWS Invest Global Agribusiness, reports against more than eight of these metrics in their fund prospectus and latest 2018/19 annual reports.
- Institutional asset managers: Institutional asset managers of these AgriFunds include Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, Wells Fargo and UBS. Many of these managers at an institutional level publicly endorse initiatives such as the SDGs but are failing to convert this into portfolio mandates and reporting at an asset level.
The planetary boundaries concept, introduced by the Stockholm Resilience Centre in 2009, presents a set of nine quantitative planetary boundaries that regulate the stability and resilience of the Earth system. The cost to the planet of reaching and exceeding these planetary boundaries is extreme and may in fact be irreversible with unknown consequences.
- Reporting: Provide annual environmental impact reports for the portfolio.
- Active stewardship: File proxy resolutions against boards and board members failing to transition companies towards more sustainable operations – see for example Green Century Capital Management’s proxy resolutions on deforestation.
Publicly commit to support environmental sustainability through monitoring and active stewardship –.adopt investment policies aligned with Global initiatives such as the UN Sustainable Development Goals (SDGs), 2020 European Green Deal, Food 2030 and the UN Decade of Action on Nutrition 2016 to 2025, to place a strong emphasis on actions and targets aimed at maintaining and stabilising global food systems and supply chains.
Include environmental conditionality in fund prospectuses, collect, report and integrate key environmental metrics into annual reports. Publish sustainability policies in English or another widely accepted business language.
- Design and publish on a portfolio basis a clear set of sector relevant investor principles aimed at eliminating unsustainable practices from fund portfolios. For example, adopting guidelines set out in the Principles for Responsible Investment (PRI) Sustainable Land Use Coalition, PRI’s Investment in Agriculture and Food Systems, the Committee on World Food Security Principles for Responsible Investment in Agriculture and Food Systems and OECD Guidance for Responsible Agricultural Supply Chains.
- Assess on a company and aggregated portfolio basis the risk exposure to pre-defined time-bound environmental risks such as deforestation, water scarcity and biodiversity impact. Industry tools can support this process, for example using TRASE, Global Forest Watch – Pro, Forest 500, SCRIPT to assess deforestation risk at a portfolio level.
- Planet Tracker is a non-profit financial think tank aligning capital markets with planetary limits. It was created in 2018 to investigate the risk of market failure related to ecological limits, focusing on oceans, food & land use and materials such as textiles and plastics. Planet Tracker intends:
- To generate breakthrough analytics
- To redefine how financial and environmental data interact
- To change the practices of financial decision makers to help avoid ecological collapse.
This report is funded in part by the Gordon and Betty Moore Foundation through the Finance Hub, which was created to advance sustainable finance, and by Thirty Percy.