The agricultural sector is regularly in the spotlight these days. Whether this relates to healthy food, the climate, biodiversity or spatial planning: the agricultural sector plays a key role in several of the major issues currently facing our society. Yet this also creates opportunities alongside the many challenges. The transition to more sustainable, nature-inclusive farming requires a long-term outlook and cooperation across the entire food chain. Investments in farmland are a key part of this transition and well suited to combining financial return with sustainability goals.
Nevertheless, investments in farmland are still relatively rare in the portfolios of many European investors. This is perhaps understandable; farmland prices in many European countries are relatively high and expected revenues and returns therefore low. Yet when we look more broadly a much more varied picture of this asset class emerges. In particular in major agricultural countries, such as the US, Canada and Australia, we see that farmland is included in the portfolios of large pension funds and has generated an attractive rate of return for some time now. For a variety of reasons we believe that farmland could well be given a more prominent role in the investment portfolios of institutional investors in the future. This is on the one hand because of succession problems in an ageing sector and on the other hand due to interest from investors wishing to make a difference in food production and sustainability.
In this white paper we take a closer look at farmland as an asset class, describing both its general characteristics and long-term trends. We also specifically examine sustainability aspects and the different ways of investing in farmland. Our aim is to sketch a clearer picture of this multi-faceted asset class and help investors carefully weigh up the pros and cons of investing in farmland.