My Way of Thinking: Impact investment strategy increasing world w
Richard Keller, editor The latest way to take agricultural land out of conventional farming is to sell it to investors looking to do “impact investing.” Although there are many types of agricultural investing that are impact investing, a big share seems to be by investors interested in saving the plant with organic production.
“Impact investing is very much the idea that we can use capital and capital market businesses to drive solutions to social and environmental problems, “said Chris Larson, with New Island Capital, talking to members of the American Society of Farm Managers and Rural Appraisers during the society’s annual meeting.” Institutional investors are starting to think more deeply about how their investment decisions are impacting the world beyond the financial returns they seek to generate with those investments.”
Without much tracking, Larson estimated the current global impact investing at between $100 billion and $150 billion. The company for which Larson works is one that specializes in impact investing.
He downplayed talking about investors advancing organic production. But organic farming is a righteous cause to some people who have money but no exact idea about what they want to finance and how it fits into feeding the world’s population. People with money can sometimes be easily influenced to invest in what sounds good.
My firsthand experience with millionaires, who have more money than sense, is those who have thrown millions of dollars into the meditation movement preached by the late Maharishi Mahesh Yogi. They believe the world can be saved by X number of meditators simultaneously meditating about the same solution to a world problem—everything from changing the weather to ending a war. The Maharishi movement came to my hometown when it purchased the bankrupt Parsons College in the early 1970s, and the meditators remain in Fairfield, Iowa, operating the Maharishi University of Management.
Larson made reference to switching land from conventional agriculture to “more sustainable” production methods. This indicates the farming methods being used by the huge majority of U.S. farmers are not considered sustainable by impact investors. But there is much more to impact investing than changing crop production to organic production.
“A lot of the thesis around impact investing is that we can place capital into businesses that are doing good things, and that [we] can keep going on into the future and eventually scale larger. Renewable fuel is a great example of that. Microcredit and microfinance in the developing world is a prime example where there is income that is reinvested and success besets continued success,” Larson said.
He also specifically mentioned impact investing being used for farm worker employee benefits, providing land for young landowners, helping with international markets for low-income producers, conservation land improvements and land conservancy trusts.
He explained convergent and divergent investment strategy as it pertains to impact investing. Convergent strategy is reinforcing financial return or increasing the yield of assets. Divergent strategy is accepting a trade off of social gain for a reduced financial return.
There also is negative investment strategy where investors have said they won’t invest in something they don’t believe is appropriate; examples have been nuclear power or South African businesses during the 1980s because of racial segregation. The negative investment philosophy can hold true against agricultural production entities using biotechnology and genetically modified crops, too.
In referring to all impact investment, Larson said he thinks “there are a lot of untapped opportunities to execute these strategies.”
As I began, I believe with so many people in charge of big cash who don’t understand conventional farming and biotechnology, the more financing of organic and non-conventional agriculture is going to occur.
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