Public Pension Funds Play Active Role In Global Land Grabs

calpers_outsideSome of the biggest players looking to profit from global land grabbing are pension funds, that was the startling revelation in a recent report by an international non-profit organization, Grain. That’s right, land grabbing, the practice whereby multinational companies, hedge funds, and governments of developed nations are leasing or buying large tracks of land across the African continent and other countries around the world in a feverish rush to reap profits from explosive growth in commodity prices, including prices on food and bio-fuel, also attracts pension fund managers. According to Grain, globally, the pension fund pool represent approximately $23 trillion in assets and an increasing portion of these funds is now being invested indirectly and directly in this highly controversial practice. (For a detailed analysis of land grabbing see Grain’s 2008 report and our article here).

As Grain explains, the pension fund managers:

see in farmland what they call good “fundamentals”: a clear economic pattern of supply and demand, which in this case hinges on a rising world population needing to be fed, and the resources to feed these people being finite. Fund managers see land prices relatively low in places such as Australia, Sudan, Uruguay, Russia, Zambia or Brazil. They see those prices moving in sync with inflation (and, importantly, wages) but not with other commodities in their investment portfolios, thus providing a diversified income stream. They see long-term pay-offs from the rising value of farmland and the cash flow that will in the meantime come from crop sales, dairy herds or meat production.

For the farmers in countries where lands are sold or leased away land grabbing is not simply an academic discussion.  The list of places affected includes Ethiopia, Uganda, the Democratic Republic of Congo, Liberia, Mali, Zambia, Malawi, Senegal, Nigeria, Ukraine, Russia, Georgia, Kazakhstan, Uzbekistan, Brazil, Paraguay, and even Australia.  As Grain’s 2008 report poignantly states:

[F]armers and local communities will inevitably lose access to land for local food production. The very basis on which to build food sovereignty is simply being bartered away.  …  In fact, what should be obvious is that the real problem with the current land grab is not simply the matter of giving foreigners control of domestic farmlands. It’s the restructuring. For these lands will be transformed from smallholdings or forests, whatever they may be, into large industrial estates connected to large far-off markets. Farmers will never be real farmers again, job or no job. This will probably be the biggest consequence.

And while the local governments, as well as the investors and the development agencies tapping foreign lands, may defend the land grab strategy by arguing that jobs will be created and food and bio-fuels will be left behind, the reality is that this promise, even if we were to believe it, does not replace land and the opportunity for locals to work and live off their land.

According to Grain, currently, the public pension funds’ hold of commodities like farmland make up, on average, 1–3% of the portfolios but by 2015 the number is expected to rise to 3–5%. This is significant since the funds are huge funds and small numerical movements could represent billion of investment dollars.

Since public pension fund monies are those that belong to the workers, Grain argues that labor unions, employee-benefits planning bodies, pension boards, governments, and others who are responsible for strategy decisions about how pensions should be invested and grown can and should be persuaded to divest from farmland and other agricultural commodities. “Pension funds may be one of the few classes of land grabbers that people can pull the plug on, by sheer virtue of the fact that it is their money.”