It may not be a household phrase yet, but it’s already shaping the future of agriculture.
And in five to 10 years, Canadian producers may be operating their farms differently because of ESG (environmental, social and governance) investing.
In the last 11 months, I probably received 150 emails from dozens of agriculture and agri-food corporations, touting their sustainability programs.
Many firms focus their efforts on greenhouse gas emissions.
Maple Leaf Foods, for instance, frequently promotes how it is carbon neutral and plans to be “the most sustainable protein company on Earth.”
BASF announced in mid-November its plan to reduce carbon dioxide emissions, per ton of crop, by 30 percent.
Other players, like General Mills, are trying to shift millions of acres toward regenerative agriculture.
In my 12 years at the Western Producer, I’ve probably written 80 stories about these corporate sustainability programs and what they mean for Canadian farmers.
But whenever I asked a corporate rep the “why” question — why are you doing this — I never got a satisfactory answer.
They usually gave me a comment from the public relations team, such as, we want to “contribute to the pressing needs of society” or we want to “ensure that our supply chains are resilient” in the face of climate change.
The real answer to the “why” question is likely ESG investing.
In July, RBC Wealth Management published an article explaining environmental, social and governance investing and why it could become the biggest thing in the world of money management. (https://ca.rbcwealthmanagement.com/irene.so/blog/2506506-What-could-be-the-Next-Mega-Trend)
The article notes that ESG investing is growing exponentially, and the amount invested in ESG funds could rise by $15 to $20 trillion over the next two decades.
Some experts dismiss ESG as a fad, driven by socially conscious millennials who want their investments to align with their personal values. Millennials want everyone to drive a Prius and they only drink coffee made with fair trade, humanely raised coffee beans, so companies that emit tonnes of greenhouse gas do not meet their ethical standards.
That’s the cynic’s view.
Many others, including RBC, believe ESG will become a fixture of the investment industry.
RBC cites a Wealth-X report, noting that $15 trillion will be transferred to and inherited by millennials by 2030. Therefore, millennials and their preference for ESG investing “could easily become the most powerful driving force when it comes to investing … in the next decade.”
The directors of agri-food companies are aware of ESG investing and what it means for their share price. A rep of a food processor and major grain buyer in Western Canada confirmed it’s a key reason for the company’s sustainability programs.
Corporations such as Maple Leaf Foods and Corteva Agriscience need a sustainability story (and evidence of sustainability) when they speak with investors. If they aren’t reducing greenhouse gas emissions or cutting fertilizer use, a pension fund manager will scratch them off the list of corporations that qualify for an ESG fund.
If dozens of money managers scratch a company off that list, less money will flow toward it and its share price will drop.
Few chief executive officers will say this out loud. They won’t say that sustainability programs are necessary to prop up their stock price.
But Maple Leaf Foods is starting to lift the veil.
In a November news release, it said the Coller FAIRR Protein Producer Index, which evaluates protein corporations for ESG performance, ranked Maple Leaf as the second best in the world.
“Not only is Maple Leaf Foods one of the highest ranked companies globally, it is the only Canadian protein producer included on the ranking,” the news release says.
None of this means that the leaders of agri-food companies are solely driven by share price.
There are thousands of good people in the sector who genuinely want to make a difference and make agriculture more sustainable.
However, if a CEO of agri-food company is focused on an ESG ranking and the impact on stock price, what does this mean for Canadian farmers?
It means sustainability programs to cut fertilizer and pesticide use, make soil healthier, reduce greenhouse gas emissions and improve treatment of livestock are here to stay in production agriculture.
It’s not a fad, and the programs not going away.
Canadian producers will need to accept sustainability requirements and make the necessary changes on their farms.
Fighting it would be like battling a horde of millennials. There’s too many of them and you cannot win the fight.