Agriculture-focused investors will be able to assess the impact of their investments by asset class, geography and agricultural theme.
The Global Impact Investing Network’s (GIIN) new impact benchmark for the agriculture sector aims to provide investors with more standardised metrics through which to peer-assess the on-the-ground impact of investments and identify areas of underperformance.
“Impact data is multi-dimensional and complex, and there has been an expansion in focus from solely impact measurement to impact management, with investors asking [the GIIN] what good impact performance looks like,” Sophia Sunderji, Associate Director of Research at the GIIN, told ESG Investor.
“Our agriculture benchmark aims to better support investors looking to drive their investments towards more impactful opportunities and address the global social and environmental challenges across the sector that need solving,” she said.
As well as being able to compare their degree of impact against market peers, the pilot benchmark allows investors to measure their degree of alignment with the UN Sustainable Development Goals (SDGs) across seven KPIs. These range from changes in farmer income to the amount of greenhouse gas (GHG) emissions mitigated through these investments.
The benchmark, which is available through the GIIN‘s IRIS+ platform, applies different filters to the data, such as asset class, geography and sector-specific characteristics (i.e., arable or livestock).
Over time, as more investors use the benchmark and more historical data is logged, investors will be able to assess their performance compared to previous years, and ultimately where there is need for further investment, Sunderji said.
Local and global context
The impact benchmark was co-developed alongside 16 agriculture-focused impact investors and currently includes nearly 1,200 annualised investments.
“We [contributed to the] validation of the KPIs and filters, offered suggestions for the display and provided data on our agriculture-related investments,” said Camila Alva Estabridis, Impact Associate at AXA Investment Managers Alts, one of the impact investors that co-developed the benchmark.
Other investors involved in the benchmark design include ABC Impact and EQT Partners.
Alva Estabridis noted that it was challenging to “reach our investees and engage them to provide/validate the information needed in a timely manner”, with some investees not able to disclose in line with some of the benchmark’s KPIs.
“But this was an opportunity for us and our investees to identify further improvements and refinements to be considered in our reporting,” she added.
“This tool can help us to set ambitious impact targets, prioritise investments, evaluate our performance and the performance of our investees, engage with our companies to make sure they are on track, and to enrich our reporting,” said Alva Estabridis.
Jessica Villaneuva, Senior Director of Technical Areas of Practice at Mennonite Economic Development Associates (MEDA), told ESG Investor that “the local context is particularly relevant for agriculture-focused investments”.
“The fact that the benchmark outlines geographical differences is very important,” she said.
“For example, while the agriculture sector may contribute 25% of one jurisdiction’s GDP, it can reach up to 80% in some emerging markets and developing economies (EMDEs).”
MEDA is an international economic development organisation focused on creating business solutions that address poverty globally, including improving agri-food market systems across Latin America, Africa and Asia. Going forward, it will be referring to the pilot benchmark as it develops its in-house impact dashboards and frameworks, Villaneuva said.
In 2021, the World Economic Forum and investment consultancy firm Mercer published research that noted sustainable agriculture as one of the top three areas of focus for 30 surveyed asset owners, who collectively represent US$3.4 trillion in assets.
The GIIN will now be focused on encouraging more investors to adopt the benchmark.
“The benchmark is only as good as the data that’s in it,” said Sunderji. “In order for it to become a genuinely decision-useful tool – one that investors can refer to when setting targets, identifying investment opportunities, and disclosing their impact performance – we need a lot more investors.”
The agriculture benchmark is the second in the GIIN’s impact series, following the financial inclusion benchmark launched last year. Sunderji said the third benchmark will be focused on the energy sector and should be launched by the end of this year.
Two further benchmarks will be launched in 2024.
Last week, the GIIN released new guidance on impact investing in listed equities, which was developed with insights from more than 100 investors.
‘Guidance for Pursuing Impact in Listed Equities’ is structured around four main aspects of listed equities impact investing: setting the fund or portfolio strategy, portfolio design and selection, engagement, and using performance data.