The recent news that overseas investors have acquired over 10 percent of Australia’s farmland
and 9 percent of water entitlements in its agriculture sector has struck a political chord in the country. Large grain-producing nations like Brazil and Argentina have passed laws to restrict the foreign ownership of land
. In other global grain hubs, like Ukraine and Russia, compromised harvests due to droughts could result in export restrictions. In a globalized economy, the combination of scarcity, market and population pressures, and weather volatility will make fertile land an increasingly precious resource.
A shift is underway in global financial markets, where global investors perceive that owning what grows on the land – or better still, owning the land itself – may be a hedge against the risks of more volatile financial markets. A surge in farmland investments is expected to grow over the next decade is due to a number of combined pressures: a growing global demand for commodities, rising commodity prices, ecological limits, and the fact that farmland is a “real asset” that offers diversification to the portfolios of investors at a time of market volatility.
The need to increase food production against the backdrop of resource limits, social vulnerability, and population growth, puts the question of land at the center of a new security agenda.
In sub-Saharan Africa large-scale acquisitions of land that neglect local livelihoods and resource scarcity, commonly referred to as “land grabs,” put the region’s future in the balance. Not all land investments have negative consequences, but given the lower levels of land tenure by communities and the fragility of human security in sub-Saharan Africa, regulating land investments with foresight is an urgent issue. Population growth and climate change underpin this agenda. A worse-than-average drought, exacerbated by climate change, may be all that is needed in certain places to realize the political, humanitarian, and ecological risks that are slowly building momentum.
From Land Grabs to Land Stewardship
Progress now depends on moving from a land grabs debate to land stewardship solutions. This shift, which the Earth Security Initiative summarized in a report published this month, The Land Security Agenda: How Investor Risks in Farmland Create Opportunities for Sustainability, requires an improved understanding by investors and political leaders of three priorities: managing land degradation, protecting human rights by focusing on food security and land ownership, and keeping economies within ecological – especially water – limits.
The agenda we have developed discusses why these issues form part of a new risk management agenda for investors as well as for countries seeking to attract foreign capital, whose economic competitiveness and political stability may be compromised by these trends. But managing these risks, we argue, will require making human rights and ecological limits a central feature of a new investment paradigm.
A range of international investors is already searching for solutions to engage practically with this debate. Among those with whom we have engaged throughout the study are individual investment funds, people seeking change within the financial sector, and investor networks such as the UN-backed Principles of Responsible Investment. Recently, governments, international organizations and civil society groups have also agreed on a set of voluntary guidelines for land governance under the auspices of the Committee on World Food Security. These developments are positive steps, but their voluntary nature remains problematic. The focus must now be placed on operationalizing their recommendations to ensure real accountability and creating political incentives in host countries to regulate their land to ensure long-term and equitable prosperity.
A Call to Action
In The Land Security Agenda we call on investors to turn their attention to their land and commodities portfolios, as well as the investments currently under due diligence, and begin to ask how soil resilience, the prosperity of local people, and freshwater limits are being considered. We recommend beginning to assess the risks of countries according to how well their governments are managing these issues.
We similarly call on heads of state in countries seeking to attract large investments in land to become more aware that these risks may undermine their country’s wealth, their stability, and economic competitiveness. Political leadership is needed to champion and enforce regulations that will encourage investments and modernization while protecting a country’s social and natural capital.
Some of the recommendations we have developed, which would help set the tone for investors and governments to move from voluntary principles to action, include:
The global competition to access scarcer resources will increasingly define our age. Land investments by companies, private investors, and governments are likely to be at the forefront of this trend. Today we are at a critical inflection point. Either these investments will bring much needed benefits to host countries by lifting people out of poverty, modernizing economies, and keeping development within ecological limits, or they will be a driver of a new colonialism, leaving locals landless and worse off, and putting greater and unchecked pressure on freshwater. The Land Security Agenda argues that all stakeholders involved, whether they know it or not, have a stake in trying to make the land agenda work for the long term.
- Define land security parameters: Establish a set of verifiable measures that allows stakeholders to distinguish those land investments that advance equitable and sustainable prosperity from those that do not. Based on these criteria, which we suggest must consider people, water, and soil, it is possible to advance their integration into three important areas of the investment cycle: the identification of investment opportunities that build positive value, the due diligence process, and the performance reviews of fund managers.
- Build better country risk profiles: If the population of a given country is dependent on agriculture for livelihoods, shouldn’t issues like soil erosion, water availability and lack of recognition for people’s land rights increase that country’s sovereign risk? We think so and now seek to develop a “land security index” to help investors and host country governments assimilate these trends into their decisions as well as increase the advocacy capacity of local civil society.
- Advance the formal recognition of land rights on a large scale: The universal call for the prior and informed consent of communities must be supported, but will be of little practical value if communities do not hold the legal rights to their land or are not well informed about their rights and the commercial opportunities available to them. Civil society groups working to advance good governance, land titling, and capacity building – many of whom we have spoken to during this study – are in a position to help create a “land security partnership” that builds technical and political momentum for the formal recognition of land rights on a large scale, as well as the resourcing and oversight that government agencies will require to implement them.
Alejandro Litovsky is the founder and director of the Earth Security Initiative and lead author of the report. The Land Security Agenda can be downloaded here.
Sources: DGC Asset Management, Land Commodities Asset Management, Telegraph.
Image Credit: Cover of the The Land Security Agenda.