November 1, 2023
ESG: More than a Buzzword in Farmland Investing
“ESG Investing” has gained lots of attention–both good and bad–over the past 5-10 years. What used to be a niche corner of impact investing has become a greater part of the general investing landscape with the behemoths like BlackRock opining on sustainability and offering investors ESG-packaged funds...

Gold Leaf Farming 

“ESG Investing” has gained lots of attention–both good and bad–over the past 5-10 years. What used to be a niche corner of impact investing has become a greater part of the general investing landscape with the behemoths like BlackRock opining on sustainability and offering investors ESG-packaged funds. It’s now not uncommon for companies across all industries to have ESG goals, publish a sustainability report, or otherwise signal to the market that they take the Environmental, Social, and Governance (ESG) elements of their business seriously.

Critics of the growing focus on ESG generally fall into two categories:

The first are those that think for-profit companies should focus purely on maximizing returns for their investors. Their view is that addressing the various elements of ESG is not what companies exist to do in a capitalist economy. Stewarding the environment, removing social inequality, and other ideals that fall within the realm of ESG should be left to governments, non-profits, religious institutions, community organizations, etc. After all, they say, that’s the explicit purpose of those organizations.

The second category of critics are those that see ESG aspirations as just the latest attempt of companies to greenwash their businesses. Take, for example, a hypothetical cigarette company. This group of ESG critics doesn’t want the company to elevate its brand by pleading to be carbon neutral by a specific date, hiring a more diverse leadership team, etc. They want them to stop selling cigarettes. That’s an extreme example, but it makes the point. This group is concerned that all companies, even those whose businesses they see as fundamentally opposed to various ESG goals, will find ways to use the language of ESG to grow their business without making any meaningful changes to their operation.

As farmers and managers of agricultural investments, many of the fundamentals of ESG are not corporate green-washing “nice-to-haves” but critical to the success and profitability of our business.

Efforts like water conservation and fair labor treatment that other industries might promote as new “sustainability initiatives” are actually core and necessary to running a profitable farming company. Unlike greenwashing practices seen in other industries, investing in sustainable farming practices offers a unique alignment of economic incentives. We get to operate in an industry where responsible investments and stewardship of natural resources yield financial rewards and contribute positively to our planet and people.

A couple examples:

Water – Our Most Precious Resource

Conserving water isn’t just a responsible choice; it’s a lifeline to profitability. A farm that is wasteful with water in a given year incurs more cost than needed to grow its crops and risks profitability. If this over-use continues for many decades, the water resource itself may be depleted and the farm will fail due to lack of sufficient water. Each Gold Leaf farm uses a variety of soil moisture sensors, flow meters, micro irrigation systems (like drip), weather forecasting tools, and other technologies to make sure we’re as efficient as possible in converting water into healthy food.

These technologies and the farming practices they enable not only conserve water but also reduce costs. This drives better returns for our investors while protecting the long-term water resources upon which our farms and the communities around them depend.

Organic farming – Premium Pricing for Less Chemically-intensive Practices

Organic crops command premium prices in the market, a reflection of the growing consumer preference for sustainably-produced foods. Gold Leaf is one of the largest organic almond and pistachio growers in the U.S. Although switching a farm to organic requires additional capital during the 3-year transition period, the returns once the transition is complete are better than if the same farm continued conventional operations.

Farming organically increases soil health, water retention, and pollinator habitat. It decreases erosion and chemical use…. All while increasing profitability.

Fair wages and benefits: A Path to the Strongest Talent

Organic farming at scale is hard. It requires experienced farm managers leading teams of disciplined, detail-oriented farm operators. We attract and retain excellent farmers by investing in them through industry-leading wages & benefits (e.g., fully paid healthcare and ownership equity in their farms). We believe that by building a world-class farming organization filled with people who are aligned with the long-term goals of sustainably farming our farms and giving their families financial security, we can do the “hard things” that steward the natural environment and generate best-in-class returns for our investors.

Conclusion: Farming Sustainably Means Farming Forever

While many industries and companies invest in and report on ESG initiatives to check a corporate box, we care about farming sustainably because it can be the difference between a farm that will only last for another 10 years due to water scarcity and a farm that can be passed down for several generations.

Conserving water, investing in our people, and regenerating rather than depleting our soils and natural resources will allow us to cultivate strong long-term investments for our partners. Without this approach, we would spend more money on inputs most likely for a lower crop output, especially in the long run.

Reach us at investors@goldleaf.ag to learn more about how our offerings can be strong additions to your portfolio while also being good for people and the planet.

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