How we invest in farmland: An introduction to Nuveen's global agricultural sustainability approach

May 8, 2019 @ 12:01 am

Why sustainability matters

The world's population continues to expand — reaching 6 billion at the dawn of the 21st Century and nearly 10 billion projected by 2050. Exploding population and rising protein consumption are driving the need for more efficient agriculture to meet rising global demand for food, animal feed, clothing fiber, biofuels and other farm products.

We believe that our farmland investments can help to meet global demand for food, while encouraging sustainable practices over the long term. In partnership with our tenants, local operators and farm managers, we foster sustainability best practices and promote investment in farming innovation to improve efficiency.

As we execute our investment strategy, we are committed to pursuing the UN-backed Principles for Responsible Investment (PRI) Farmland Guidelines, which we helped to develop in 2011 with other farmland investors. These five guidelines — regularly monitored with Key Performance Indicators (KPIs) — are designed to promote:

  1. Environmental sustainability
  2. Labor and human rights
  3. Existing land and resource rights
  4. High business and ethical standards
  5. Transparency in reporting progress toward meeting the Farmland Guidelines

Our approach to farmland investment

With investments that often last 20 years or more, we are committed to preserving farmland for the long term – conserving water, minimizing chemical use and nutrient runoff and respecting the rights of our tenants, partners and local communities. These commitments define our approach:

  1. Acquire farmland assets generally with long-term investment horizons.
  2. Emphasize the purchase of existing agricultural land rather than converting virgin land or forest.
  3. Respect local laws and best practices for protecting sensitive environmental or cultural areas.
  4. Diversify land holdings by geography, climate factors, crop types and agricultural markets.
  5. Apply capital and technology to increase productivity and minimize environmental impact.

Nuveen implements farmland investments through our affiliated asset manager, Westchester, with local offices to effectively oversee global farm properties across four continents.

Pre-acquisition due diligence

We follow a strict due diligence process that covers legal ownership rights, the suitability of third party managers, joint-venture partners, tenants or operators, and financial risk and return. We also assess a range of environmental impacts and risks, including pesticide storage, harvesting practices, water rights and water use efficiency, and presence of endangered species.

Post-acquisition management

Following acquisition, our team actively monitors each farm with annual site evaluations to assess performance against the PRI Farmland Guidelines. Each year, Westchester is required to report on a variety of property standards, including infrastructure maintenance, harvesting practices, and compliance with legal, employment and other local regulations.

Asset managers

Westchester identifies and underwrites our farmland investments, including negotiating lease and crop management agreements. The firm's local managers work with farmers and crop managers to promote sustainable farming practices.

Farm operators

Working through Westchester, Nuveen encourages farmers to implement the Farmland Guidelines and our tenant Code of Conduct in their day-to-day operations. How we do this depends primarily on crop type:

  1. Row crops are planted or harvested annually and include corn, cotton, grain cereals, sugarcane and soybeans. Land is typically leased to local tenant operators, including many who have farmed our land for 10 years or more. This continuity helps to foster a consistent approach to pesticide storage, harvesting practices, water rights and water use efficiency – issues which are fundamental to sustainability.
  2. Permanent crops, such as vines or trees, are planted once and produce crops over many years. Examples include apples, tree nuts, citrus, avocados and wine grapes. Westchester and a local crop manager provide joint management support to optimize the success of these crops. Unlike largely mechanized row-crop farming, most permanent crops require significant manual labor typically hired and supervised by the local crop manager.

Respecting land and resource rights

We are sensitive to investors' concerns about inadvertently violating insecure land rights, which may be acknowledged by local governments but not protected by law. We perform title searches and other legal reviews to help verify that land we acquire has a sound title. In addition, we take steps to protect the land rights of indigenous populations, such as in Australia, Brazil and Chile.

For a full version of this article, please visit nuveen.com.

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell, or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her advisors. Investing involves risk; principal loss is possible. There is no guarantee an investment's objectives will be achieved. Investments in farmland have specific risks, including fluctuations in property value, higher expenses or lower income than expected and environmental problems and liability. Nuveen provides investment advisory solutions through its investment specialists. 827351-R-O-04/20

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