INVESTING	
  IN	
  AGRICULTURAL	
  INNOVATION:	
  
JUMPING	
  THE	
  KUZNETS	
  CURVE	
  
	
  November	
  2013	
  

www.cl...
Why	
  are	
  you	
  here?	
  

www.clarmondial.com	
  
Kuznets’	
  theory	
  of	
  development	
  
Society	
  demands	
  a	
  beMer	
  environment	
  as	
  it	
  grows…	
  

Env...
Why	
  agriculture?	
  
• 
• 
• 
• 

Heavy	
  reliance	
  on	
  agriculture	
  par;cularly	
  among	
  rural	
  poor	
  
I...
Trends	
  to	
  help	
  jump	
  the	
  curve	
  within	
  agriculture	
  
• 
• 
• 
• 
• 
• 
• 
• 
• 

Mobile	
  &	
  RFID	...
Example	
  #1:	
  Producers	
  that	
  aggregate	
  

Investor	
  

Smallholder	
  farmers	
  

Nucleus	
  Farm	
  

Contr...
Example	
  #2:	
  Market	
  &	
  Supply	
  Chain	
  Infrastructure	
  

Farmer	
  

Products	
  graded	
  &	
  receipts	
 ...
Example	
  #3:	
  Reliable	
  &	
  affordable	
  energy	
  

Land,	
  waste	
  products	
  

Gasifier	
  /	
  
digester	
  /...
How	
  to	
  invest?	
  
Type	
  

Pros	
  
Asset	
  backed	
  
Infla;on	
  hedge	
  
Low	
  correla;on	
  to	
  equity	
  ...
Inves^ng	
  to	
  jump	
  the	
  curve	
  
Fit	
  depends	
  on	
  a	
  host	
  of	
  factors,	
  including:	
  
	
  
ü  ...
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Tanja havemann

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Measuring the impact of investments remains a main challenge for sustainable finance professionals and, together with Climate Change, an overarching theme at TBLI. Sixteen related workshops offer debate on ESG and Impact Investing trends, private equity, portfolio strategy, food production, emerging markets, sustainable energy or philanthropy investing.

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Tanja havemann

  1. 1. INVESTING  IN  AGRICULTURAL  INNOVATION:   JUMPING  THE  KUZNETS  CURVE    November  2013   www.clarmondial.com  
  2. 2. Why  are  you  here?   www.clarmondial.com  
  3. 3. Kuznets’  theory  of  development   Society  demands  a  beMer  environment  as  it  grows…   Environmental   degrada5on   ?   Stage  of  economic  development:  Income  per  capita   …But,  the  global  environmental  resource  stock  is  diminishing  rapidly,  and   do  emerging  economies  need  to  go  through  the  same  growth  paradigm?     www.clarmondial.com  
  4. 4. Why  agriculture?   •  •  •  •  Heavy  reliance  on  agriculture  par;cularly  among  rural  poor   Improved  agriculture  can  reduce  poverty  &  s;mulate  growth   Increasing  pressure  on  land  for  food,  fuel,  fiber,  habitats   Environmental  resource  base  is  being  degraded  &  altered       For  developing  economies  to  grow  &  prosper  with  constrained   natural  resources,  they  have  no  choice  but  to  jump  the  curve!   www.clarmondial.com  
  5. 5. Trends  to  help  jump  the  curve  within  agriculture   •  •  •  •  •  •  •  •  •  Mobile  &  RFID  technology     Applica;on  of  ‘big  data’     Regional  infrastructure  &  connec;vity   Voluntary  labeling  &  cer;fica;on     Urbaniza;on  &  growing  middle  class   Financial  product  innova;on   RemiNances   Innova;ons  in  agri  supply  chains   Legisla;on:  Coopera;ves,  collateraliza;on,  standards,   transparency,  trade,  food  safety,  market  liberaliza;on…     www.clarmondial.com  
  6. 6. Example  #1:  Producers  that  aggregate   Investor   Smallholder  farmers   Nucleus  Farm   Contracts  that  help  smallholders  gain  access  to   exper;se,  inputs,  infrastructure  and  markets   www.clarmondial.com   Security  to  investor  /   buyer  increases  
  7. 7. Example  #2:  Market  &  Supply  Chain  Infrastructure   Farmer   Products  graded  &  receipts   issued:  More  flexibility  &   transparency  to  farmers.   Buyer   Warehouses  /  Markets   www.clarmondial.com   Central  point  of  purchase   provides  the  buyer  more   transparency  and  choice.  
  8. 8. Example  #3:  Reliable  &  affordable  energy   Land,  waste  products   Gasifier  /   digester  /  solar     Energy     RE  Facility   Energy  /   steam  /  heat  /   by-­‐products   Agri-­‐facility   Grid   www.clarmondial.com  
  9. 9. How  to  invest?   Type   Pros   Asset  backed   Infla;on  hedge   Low  correla;on  to  equity  markets   Stable  returns  if  well  managed   Cons   Direct  equity  in   land  owner  /   manager   -­‐  -­‐  -­‐  -­‐  Trade  finance  /   produc;on  loans   -­‐  Poten;al  for  higher  returns   -­‐  Transac;on  costs   -­‐  Less  risky  due  to  shorter  ;me  and   -­‐  Difficult  to  assess  risk   collaterals   -­‐  O`en  missing  basic  underlying   -­‐  Smaller  ;cket  sizes   infrastructure  &  informa;on   Listed  equi;es   linked  to   agriculture     -­‐  Liquid   -­‐  More  accessible   -­‐  LiNle  choice  par;cularly  in   developing  countries   -­‐  Ability  to  influence  may  be  low   -­‐  Typically  indirect  exposure   Agri  products  &   technologies     -­‐  Can  generate  high  returns   -­‐  Growing  demand  due  to   mechaniza;on,  etc.   -­‐  Rela;vely  new  sector,   dominated  by  large  co’s   -­‐  Regula;on  &  patents     www.clarmondial.com   -­‐  -­‐  -­‐  -­‐  Med-­‐low  returns   Illiquid  asset  /  long-­‐term  view     Poli;cal  &  reputa;onal  risk   Larger  ;cket  size  
  10. 10. Inves^ng  to  jump  the  curve   Fit  depends  on  a  host  of  factors,  including:     ü  Partners   ü  Risk  /  return  appe;te     ü  Deal  size,  term  and  transac;on  cost   ü  Speed  to  act  /  entrepreneurialism     ü  Non-­‐financial  outcomes   ü  Geographies       The  right  deal  depends  on  the  par^es  involved,  but  we  see   opportuni^es  throughout  the  value  chain.     www.clarmondial.com  

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