Pension funds: key players in the global farmland grab
GRAIN, June 2011
Large scale agricultural land acquisitions are generating conflicts and controversies around the world. A growing body of reports show that these projects are bad for local communities and that they promote the wrong kind of agriculture for a world in the grips of serious food and environmental crises. 1 Yet funds continue to flow to overseas farmland like iron to a magnet. Why? Because of the financial returns. And some of the biggest players looking to profit from farmland are pension funds, with billions of dollars invested.
Pension funds currently juggle US$23 trillion in assets, of which some US$100 billion are believed to be invested in commodities. Of this money in commodities, some US$5–15 billion are reportedly going into farmland acquisitions. By 2015, these commodity and farmland investments are expected to double.
Pension funds are supposed to be working for workers, helping to keep their retirement savings safe until a later date. For this reason alone, there should be a level of public or other accountability involved when it comes to investment strategies and decisions. In other words, 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. This makes pension funds a particularly important target for action by social movements, labour groups and citizens' organisations.
The size & weight of pensions
Today, people's pensions are often managed by private companies on behalf of unions, governments, individuals or employers. These companies are responsible for safeguarding and "growing" people's pension savings, so that these can be paid out to workers in monthly cheques after they retire. Anyone lucky enough both to have a job and to be able to squirrel away some income for retirement probably has a pension being administered by one firm or another. Globally, this is big money. Pension funds are currently juggling US$23 trillion in assets. 2 The biggest pension funds in the world are those held by governments, such as Japan, Norway, the Netherlands, Korea and the US.
- the largest institutional investors are planning to double their portfolio holdings in agricultural commodities, including farmland;
- they are reportedly going to do it very soon;
- the new surge in money will push up global food prices;
- high food prices will hit poor, rural and working-class communities hard.
It may not be easy to influence pension fund managers themselves. After all, they have no objective other than to make money – including their own cut – with the funds handed to them. But surely labour 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.
One recent experience in the US, recounted by Sarah Anderson of the Institute for Policy Studies, gives a good example:
A coalition of family farm, faith-based and anti-hunger groups, along with business associations, have initiated a campaign to persuade investors to pull out of commodity index funds. Their first target: CALSTRS, the California teachers' retirement system, which had been considering shifting $2.5 billion of their portfolio into commodities. In response to the divestment campaign, the CALSTRS board decided on November 4 to adopt a different strategy. Instead of $2.5 billion, they will invest no more than $150 million in commodities for 18 months, while further studying the potential problems. 10
Such divestment campaigns – which could aim at ensuring that pension funds do not buy into agricultural land overseas – are clearly within reach and could make a difference. And they can add their weight to the broader momentum under way in so many of our countries to rethink two vital matters: food and agricultural policies, which require constructive investment strategies; and retirement systems in general. There is too much at stake not to seize these opportunities
Above: Fighting for public water services, a Canadian teacher’s union placard reads, “YOU DON’T SUPPORT PRIVATE WATER, WHY DOES YOUR PENSION FUND?” Pension funds are increasingly important targets for action by social movements, labour groups and citizens’ organisations.