As global economic risks, such as fluctuating currencies and crashing stock markets increase, more and more investment funds, agribusinesses and sovereign wealth funds invest in farmland. A safe bet, since it is a fixed asset with potential for high returns, given the rise in land and commodity prices and the inexhaustible demand for food.
Has thus farmland become the new gold?
So far, U.S. and European Pension Funds are said to be the biggest institutional investors in both commodities and farmland and are expected to increase their share. As the 2007 financial crisis hit pension funds very hard, they seek to diversify the investment portfolios. However, some of them have been accused of being involved in land grabbing. In 2015, the global farmland fund TIAA-CREF was held responsible for acquiring Brazilian farmland illegally. It involved a local businessman, who was said to have violated human rights during the process of displacement of small farmers to get hold of their land.
Such illegal land grabs took place although TIAA-CREF declares to follow the principles of responsible and transparent farmland investment. Additionally, in 2010 Brazil implemented a law that forbid foreign companies of owning more than 25% of rural lands of any municipality. But TIAA-CREF found ways to collaborate with national companies in order to avoid such laws. Also, local corruption and weak land rights could have facilitated the process of the illegal land acquisition.
With this in mind, it seems as if the causes of land grabbing go beyond what can be identified at first glance. That is why we should take a second look.
TIAA-CREF for example manages Swedish, U.S. and Canadian pension money. In other words, the retirement money from millions of people in the U.S., Canada and Europe were used to fund land grabs, without them knowing it.
Do you know where your pension funds are being invested?