On Shaky Ground: Risks in land investments
Introduction
Investment in land is an increasingly popular asset class, with recorded agricultural transactions involving foreign investors reaching an estimated 83 million hectares in developing countries since 20001. In the context of rising consumption of food and biofuels, and with potential for long-term yields, land can be an attractive asset.
Investment in agriculture can also – under the right circumstances - be beneficial to the local population, with the potential to improve employment rates, healthcare and food security.
However, land acquisitions have also come under increasing criticism from civil society and local communities for facilitating the forced displacement of local communities, food and water shortages, the destruction of biodiversity such as forests, and the destruction of sacred sites. For many, land investment is nothing more than landgrabbing.
There is increasing case-study evidence of such impacts leading to significant local and political opposition threatening the financial viability of particular land investments. In addition, inadequate impact assessments may lead to inaccurate crop yield estimates and an incorrect pricing of an investment.
This briefing outlines some of the major risks affecting land investments. It uses case-study examples to demonstrate the consequences of inadequate due diligence and failures to follow best practice. The briefing also suggests a series of questions for asset owners to pose when considering a land investment either directly or via a shareholding to enable them to make an informed risk assessment.
Download the briefing: http://shareaction.org/sites/default/files/uploaded_files/investorresources/OnShakyGround.pdf
