Swedish buffer fund AP2 under scrutiny from NGO over Brazilian farmland investments

Responsible Investor  | April 22nd, 2013

Swedish buffer fund AP2 under scrutiny from NGO over Brazilian farmland investments

Major institutitional investor accused of lack of transparency

by Meagan Rees

Sweden’s SEK227.3bn (€26.7bn) state buffer fund Andra AP-fonden (AP2) has been accused of a lack of transparency and snapping up cheap agricultural land in Brazil by campaign group Swedwatch, an NGO which monitors Swedish business relations in developing countries. AP2 denies the allegations.

Swedwatch, however, claims that AP2’s unwillingness to pinpoint the exact location of its landholdings in Brazil, where its investments are estimated at $54m, has less to do with claimed commercial confidentiality and more to do with buying up more land in surrounding areas while it is still cheap.

“AP2 has chosen not to disclose information about the location of the acquired land. This has made it impossible for Swedwatch to undertake field studies in Brazil and examine whether AP2’s land investments follow international guidelines on ethics and the environment,” said Swedwatch researcher and report author Malena Wahlin.

It’s not the first time that AP2, a founder member of the Principles for Responsible Investment in Farmland, has had to deal with unease about its investments in farmland. In 2011 it responded to campaign group GRAIN by saying that it only invests in farmland in countries where there are stable and transparent land governance framework and legal system of property rights in land.

But Swedwatch says AP2 has an insufficient monitoring system in place for its landholdings based in a country affected by reports of toxic pesticides, poor working conditions, threats to biodiversity and agricultural encroachment (including soybean and sugar cane plantations) on indigenous land.

AP2 has invested a total of $450m in TIAA-CREF Global Agriculture (TCGA), a company established in 2011 which looks to invest $2bn in farmland in major grain-exporting nations, primarily in Brazil, Australia and the US. TCGA has acquired 60,000 hectares in Brazil divided into 11 farms across four states.

In a statement in response to Swedwatch’s report, AP2 said it ‘took on board’ the NGO’s transparency concerns and that it plans to organise a trip for NGOs to Brazil.

A spokesperson told Responsible Investor: “For AP2 it is important that sustainability issues are addressed both when evaluating new agricultural real estate and when ensuring that the land is farmed in a sustainable manner,” However, the spokesperson reiterated its commercial defence on the farmland location: “The exact location of TIAA-CREF Global Agricultures’ properties is competitive information and is not disclosed publicly.”

The spokesperson added: “AP2 does not consider the acquisition of agricultural real estate from equal parties in countries with clearly defined ownership rights to be ‘land grabbing’. “TCGA only invests in well-established areas and large-scale farmland and buys nothing from family farms.” The fund said it had visited the farms in Brazil at least once every six months.

The Principles for Responsible Investment in Farmland currently have 20 signatories and investors signing up to the code must require their investment managers and operators to adhere to them. 

IPE | 23 April 2013

AP2 criticised for lack of transparency on farmland investments

GLOBAL – Swedwatch, a charitable organisation focusing on improving the social and environmental impact of Swedish companies operating in developing countries, has criticised AP2 for its investments in Brazilian farmland.

In a report entitled 'Investment without transparency', Swedwatch claims AP2 has refused to disclose the location of farmland it owns there due to competition concerns and a desire to increase its investment while the land is still cheap.

The report claims there are no regular checks on conditions at these farms, and that pesticides and poor working conditions pose a number of risks for workers and the environment.

It also accuses two of AP2's business partners of violating indigenous people's rights and labour laws.

AP2 said it had taken Swedwatch's observations on board and was working to increase transparency within its farmland investments in Brazil.

It made its investments through the TIAA-CREF Global Agriculture fund. The scheme said it had already disclosed the four areas in which the fund invested, and provided information on the tenant farmers connected to the areas in question.

AP2 is also planning a trip for a number of NGOs to the farmlands.

The pension fund said it worked with other institutional investors to create responsible investment principles for farmland investing and implemented these in 2011.

These principles include reducing environmental impact and promoting good labour practices, human rights, land rights and business ethics.

Author: Pirkko Juntunen
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