Sustainable farming can offer portfolio diversification and inflation protection
The need to invest in sustainable farming is becoming increasingly urgent. Burgeoning populations, more demand for high protein food as middle-class wealth expands and an increasing squeeze on arable land due to climate change and urbanisation are all pressurising agricultural production. Maxence Foucault, Environmental, Social & Governance Specialist, tells Daniel Morris, Chief Market Strategist, that farmland investing can offer strong diversification benefits with its low correlation to more traditional assets. It can also offer a hedge against inflation, as the products that are grown and the land itself are part of the inflation bucket.
Agriculture sits at the crossroads some of today’s critical environmental, social and health challenges. It can also help ensure sovereign security by increasing the capacity to produce locally, depending less on international markets and geopolitical stress factors, potentially reducing price and supply volatility. “Sustainable farmland investing can offer attractive long-term risk returns, a meaningful spread over the risk-free rate, and stable and predictable cash yields, as well as the potential of a positive local impact.”
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