Impact Investor Club – Agriculture – 18/05/16

The subject might be agriculture, but the challenge of standardised measurement continues to prevail.

Once again, the Impact Investor Club convened in London to discuss sustainable agriculture and resource efficiencies. The keynote address was given by Dr Steven Fawkes of EnergyPro, a business that looks at the admittedly niche proposition of financing energy efficiency. However, whilst delivering his speech, the parallels with impact investing were nothing short of uncanny – using energy more efficiently has significant social benefits, but there’s a lack of standardisation when it comes to quantifying or measuring the opportunity. Similarly, investors often struggle to find projects to back, whilst the ‘issuers’ are often challenged by the fact this can be run commercially, rather than on a grant-funded basis.

Perhaps the single most striking comment from Dr Fawkes was the observation that research undertaken by the University of Cambridge has shown that globally our energy efficiency is an average of just 11%. That’s the end-to-end rate at which raw power is currently converted into its final use. It’s way too low, but does this give us a starting point when it comes to the measurement question – the seemingly recurring issue that afflicts so many non-traditional investment ideas?

Sadly it’s a bit more complicated – something that became clear as the conversation unfolded. Sterling Suffolk’s Cliff Matthews was one of the panellists, advocating the growing of tomatoes in high tech greenhouses here in the UK. This used to be a big domestic industry until the energy crisis of the 1970’s when it became cheaper to import, either from warmer climates or from places like Holland where investment in the sector has seen great efficiencies being delivered. So with these new technologies, can we show a simple energy efficiency metric – something significantly better than the 11% figure produced by the academics? Not really. There’s a defined social benefit as you need skilled employees to work in these computer-controlled factories – no longer is it just a case of ‘picking the red ones’. As for the environmental benefit, growing the tomatoes here in the UK saves on the carbon emissions of transport – shipping from Spain generates around 240g of CO2 per kilo of fruit – so long as you’re not using excessive amounts of energy to heat the greenhouse. Sterling Suffolk is using an energy-from-waste system to fulfil this vital aspect of a project that could supply 10% of the national tomato crop. So it absolutely ticks the boxes as an impact investment, but there’s no common reporting standard.

Kevin Milne of Obtala Resources, the African Forestry and Agriculture company, was also on the panel. Obtala works on the farm to fork principle, not just growing a crop then exporting it, but instead locally processing that food into a branded, marketable product. Again this is delivering a real social benefit as well as being more energy efficient, but how do we measure this? Immediately you have the food miles that Sterling Suffolk is looking to avoid, but projects like this require a skilled local workforce so Obtala is building schools as well as factories – it suddenly puts a very different spin on the great work being done by the likes of Comic Relief with their work on the continent. We’re still in agriculture, saving energy and have a whole different set of metrics – but it’s an impact investment all the same.

Cedric Lecamp of Pictet Asset Management completed the panel, with the take of a fund manager on the demands a growing global population puts on agriculture. Cedric explained how the current level of waste in the food chain – that same farm to fork concept – is 1.3 billion tonnes a year, with a monetary value of more than the entire Swiss GDP. Ironing out these inefficiencies will clearly go a long way in ensuring that the world can feed an ever-growing population, but the standardised measurement question remains unanswered.

Arguably the panel provided further evidence of the fact that impact investing provides huge opportunities to make a real difference – but we can’t go expecting it to be measurable on a one-dimensional, linear scale. The problems each impact investor will want their money to address will be different so the onus must therefore be on the issuers – the businesses that are seeking the funding – to provide a clear and concise indication of the specific challenges they are tackling. We have to accept that this doesn’t sit neatly as numbers in a spread sheet, but by providing a comprehensive narrative, the growing number of impact investors will be perfectly placed to make those fully informed decisions as to where they should put their cash.

For more information please contact:

Tony Cross

Monk Communications