managed farmland near bangalore is an alternative investment class which is currently gaining traction on account of traditionally strong performance and positive returns to investors, especially in comparison with some other traditional assets. Nevertheless, it is important to think about the impact of agricultural investments in developing countries especially and to consider how to use those investments so as to contribute to sustainable development. Recently, the International Institute for Environment and Development (IIED), an independent non-profit research institute, published an article exploring the purchase of land by agricultural investment funds in developing countries and the actions that might be taken to promote investments that will genuinely support local communities.
The IIED article, entitled “Farms and Funds: investment funds in the global land rush” (published in the IIED Global Land Rush January 2012 news brief), notes the increase in investment funds land and agribusiness purchases in developing countries. Investors (financial players as well as individuals) are expecting high long-term returns due to a range of factors, such as increasing demand for food and rising land prices.
The article points out that even though in many African countries the agricultural sector has historically suffered from a lack of sufficient investment, it doesn’t follow that the investments being made now are ethical per se. The importance is stressed of considering how agricultural investments in developing countries can both benefit the investors and contribute to the sustainable development of the region where they are being implemented.
Among the measures recommended in the IIED article are the promotion of “good” investments and the discouragement of harmful ones by for example introducing disclosure and transparency requirements in the investors’ home countries as well as increasing government and investor accountability. As for the host countries, the article recommends the development of investment models which include local farmers. This is particularly important since in developing countries weak government structures can mean that the rights of local communities are often not sufficiently safeguarded by appropriate institutional measures.
In any event, agricultural investments will benefit local communities only so long as they are used for promoting sustainable agricultural practices. In relation to agriculture, sustainability means that natural resources such as soil or water need to be used at a slower pace than they are replenished, meaning that crop harvesting needs to be synched with necessary replenishment practices. And sustainable agriculture is beneficial for investors as well since it increases land productivity and crop resilience, meaning better returns in the long run.
