Fossil fuel companies get all the attention from investors seeking to further climate sustainability, but the $8 trillion food and agricultural industry is also rife with extractive practices that damage the environment.
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China-based Syngenta, Germany's Bayer and BASF Agricultural Solutions, and Corteva in the U.S., collectively account for 62.3% of global market share in agrochemicals that go into food supplies. In the commercial seed market, 10 companies controlled 40% of the global market 25 years ago — now, only two firms have 40% of the market.
The study said that ESG investors should look at the extractive agrifood business with the same skeptical they turn to the oil and gas industry.
"The oil that it takes to bring food to the table of an average American consumer over a year is about the same amount of oil that they pour into their car every year," Jim Thomas, a former research director and former co-executive director of ETC Group, said during a virtual event hosted by Adasina Social Capital, a ESG investment firm in San Francisco.
According to Thomas, the highly concentrated industrial food chain is responsible for one third to a half of global gas emissions. And it extracts 70% of freshwater and about 75 million hectares of forest each year.
Clean-up costs
That's costing money for the industry.
"The investment system should be like a social infrastructure, not a commodity extracting profits, particularly in this mounting crisis," Thomas said. "People really do need access to healthy food and less carbon in the atmosphere."
Investments are pouring into the industrial food chain. At the close of 2020, the private equity industry managed more than $7.5 trillion in capital, with increasing influence over the levers of corporate power in food and agriculture, according to the study. BlackRock, Vanguard and State Street collectively control more than one quarter of all institutional shares of leading agribusiness corporations. The asset managers are among the top three or four institutional shareholders for retailers Walmart, Kroger, Costco and Amazon.
"It's time to divest from the Industrial Food Chain," the report said. "Institutions under pressure from civil society have already succeeded in partly directing funds away from tobacco, arms and fossil fuels on moral grounds. Grassroots climate movements have successfully named fossil fuel companies as the obstruction to meaningful climate action. Food movements should follow suit."
Adasina Social Capital said that ESG investors should make assessments targeting the industries of agrochemicals and pesticides, synthetic fertilizers, commercial seeds, livestock breeding and genetics, agricultural commodity traders, gene editing in food and industrial livestock and meat processing.
"Really targeting those particular industries, and particularly the corporate concentration in those areas, is going to help us move in solidarity with and align with social justice," Rachel J. Robasciotti, the firm's CEO and founder, said during the virtual event.
The firm already excludes from its portfolio those companies that fail its
Many big industrial food and agriculture businesses are relatively unknown because they are privately held or state-owned companies, such as the pesticide maker ChemChina. The lack of transparency means that, in the absence of regulatory oversight, "we can't fully track assets or determine corporate market share," the ETC group said.
"As corporate concentration increases, companies are becoming more guarded with their information. In a world where market intelligence is proprietary, it is becoming much more difficult to know the level of food-system control exercised by a handful of multinational enterprises", the report said.
The report said investments should shift to practices such as local farming. What's known as "agroecology" is inherently a system that can regenerate itself and is feeding 70% of the world while using only 25% of the resources," Thomas said. By contrast, the traditional, dominant agribusiness model feeds only 30% of the world but uses 75% of the resources, he added.
Approximately 30% of farms around the world are estimated to have redesigned their production systems around agroecological principles, according to a 2020
However, funding to these practices has stalled: a fraction of U.K. and Belgian development aid, and minimal U.S. agricultural research funding, goes to agroecology, the report found. The Bill and Melinda Gates Foundation, the biggest philanthropic investor in agri-development, has made total grants to all recipients of
Said Thomas: "There's a lot of value in supporting territorial economies where the more money you put in locally, the more and more builds up economic activity, rather than sending away."
