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ESG From Farm to Fork: Doing Well by Doing Good

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In the food and agriculture sectors, many companies are “doing well by doing good”, and blue-chip investors believe that these corporates will drive outsized returns.

At a time when sustainability has taken the globe center-stage, it’s no surprise that Environmental, Social and (Corporate) Governance (ESG) was also front and center at this year’s Farm to Market Conference, where we hosted conversations with many of the world’s most significant food and agriculture companies.

In three different keynote panels, investors and companies across the value chain discussed how ESG has evolved into a pillar of investing and corporate strategy, and how this trend has accelerated since the onset of the global pandemic.

We encourage you to catch the full replay, linked below to the conference app (event code: 2021F2M), if you missed it during the live conference.

A panel on ESG Investing: Public and Private Perspectives, which featured commentary from Joanna Reiss, co-lead of impact investing at Apollo Global Management, Dwight Anderson, Founder of Ospraie Management, and Marc Khouzami, Managing Director of BMO Capital Markets’ Impact Investment Fund, discussed how ESG and impact investing are becoming imperative to generating alpha.

BMO Capital Markets Fertilizers & Chemicals Analyst Joel Jackson led an ESG Crop Input Producer Panel with Fertilizers and Crop Chemicals leaders – CF Industries (CF), OCP Group (Private) and FMC Corporation (FMC) – which looked at the advancements to lower carbon use in farming and fertilizer production, and generally create more sustainable crop inputs and grain production.

The ESG Food Chain Panel saw sustainability officers from some of America’s largest multi-food manufacturers, processors and retailers drill down on the “E” of ESG as the world turns its attention to mitigating climate impacts in a sector which is estimated to be responsible for about 1/4 of global greenhouse gas emissions each year. Led by BMO Capital Markets Food Retail Analyst Kelly Bania and Food and Agribusiness Analyst Ken Zaslow, the panel saw multinational packaged food manufacturer Kellogg (K), multinational agribusiness Archer Daniels Midland Company (ADM) and Kroger (KR), North America’s largest traditional supermarket and second-largest food retailer, discuss how successful companies need to not only manage the environmental impacts to meet a minimum threshold and the demands of investors but also food security.

“ESG was originally a risk management function. It’s now becoming a holistic part of how we seek and underwrite businesses, and we’re cognizant of all the ways ESG can help or hurt the companies we own. We want companies to be doing good things in the world.”

 -- Joanna Reiss, co-lead of impact investing at Apollo Global Management --

On ESG and Financial Returns

Across panels, experts agreed that strong ESG practices are linked to strong financial performance.

“I think that today it is already established that sustainability is linked directly to financial performance. We all know about the Who Cares Wins report launched in the beginning of the 2000s that established a clear linkage between financial performance and ESG performance. Now, environmental engagement can be a real opportunity for growth, and we see the ESG component bringing a lot of value to us and to our ecosystem.”

 -- Hanane Mourchid, SVP, Sustainability Platform and Green Industrial Development, OCP Group --

“If you are bringing products to the marketplace that meet unmet needs in a sustainable way, you are going to be able to capture more value, not only for the grower in terms of how they grow productivity, but on how you improve your productivity with those customers.”

 -- Mark Douglas, President and CEO, FMC --

On Differentiation and Best Practices

Asked about what success looks like in the context of ESG, panelists noted that  companies today need to not only manage ESG broadly to meet a minimum threshold, but also need to develop “Super Powers”1 to differentiate themselves and be able to compete and meet the demands of investors and society at large.

“For ADM, our Super Powers really come from our place in the agriculture value chain. We are the bridge between the consumers and farmers. So, we focus on innovation, which we can spread throughout that value chain, utilizing our relationships with the farmers in order to incentivize them toward better and more sustainable practices on the farm… to be more resilient, efficient and productive in their own footprint.”

 -- Alison Taylor, Chief Sustainability Officer, Archer Daniels Midland Company (ADM) --

On ESG Success Stories:

ESG has now become a fundamental pillar to many of the world’s most important companies, and it is already having an impact.

“The goal of Zero Hunger, Zero Waste is to really get after this big hairy audacious problem which is that 40 percent of the food produced in this country finds its way into a landfill every year, at the same time one in eight or one in nine Americans go to bed hungry every night … By 2025 we want, as an organization, to have donated three billion meals to feed hungry families in our communities across the country. As a step goal, we wanted to reach one billion meals by 2020 off the baseline year of 2017 and I’m happy to share that we hit that goal.”

 -- Keith Dailey, VP of Corporate Affairs, Kroger --

On Next Opportunities

From farms and fertilizers to packaging and distribution, ESG and impact investing are opening new avenues.

“Companies are taking large outdoor ag indoors …They want high volume and low cost per square foot, and you can do something different with small flexible systems. You can disrupt the economic and food inequity that's in both rural and urban areas.”

 -- Dwight Anderson, Founder of Ospraie Management --

“We're trying to find ways of recycling and reusing plastic, or even moving away from plastic to something that’s fiber-based, like straw … That's an interesting area, where some companies are using waste straw to make fiber-based materials, instead of using trees.”

 -- Marc Khouzami, Managing Director of BMO Capital Markets’ Impact Investment Fund --

On Carbon Management on the Farm

As a potential revenue stream, the subject of carbon management on the farm is topping the list of issues in food and agriculture. The key question is becoming: will carbon management be a burden or a benefit?

“I think, ultimately, for this to have a bigger role in terms of farm level income, there needs to be a more structured policy in place and, frankly, a real cost of carbon and a regulated traded market for it, and I think at that point the value to the grower will become significant.”

 -- Tony Will, President and CEO, CF Industries --

On Challenges to the ‘E’ in ESG

In the Food and Agriculture industry, like many others, the greatest challenge to controlling environmental impact are Scope III emissions, what happens along the value chain before and after their direct operations, whether that be farm gates, transportation emissions, or processing facilities.

“When we look into the future and where the world needs to go around net zero greenhouse gas emissions by 2050, the categories that are in Scope III for most of us are where the magic happens. The challenge is that the science isn’t there yet. [For example], we don’t know how to measure carbon sequestration at scale in agriculture. There are many, many smart people working on it, and we’re trying to help it along, but I think that we have to realize where we are in this journey, which is in aspirations while we are creating the science and support.” Amy continues that as ADM, a partner of Kellogg, points out, “Partnerships are key and the space is changing so rapidly… as ADM finds new tools, they pass to us [Kellogg] and as we finds new tools we pass to Kroger. It’s all part of the system and a huge amount of collaboration is necessary.”

 -- Amy Senter, Chief Sustainability Officer, Kellogg --

On the Top ESG risks to your business

“Undoubtedly climate change, whether it’s drought, too much rain, saltwater filling aquifers because of rising sea levels. All those elements play out and that takes us back to the core principle of developing technologies to help plants become more robust in their growing cycles and improving yields.”

 -- Mark Douglas, President and CEO, FMC --

On What the Future Holds

As the sector looks to the future and the challenges to feeding the world sustainably, panelists agreed that climate change and the need for continuous innovation will feature heavily in successes or failures.

“I think the inflection point between food security and climate change is going to be more apparent every year, and certainly within five. That’s going to drive a lot of our activity and certainly a lot in the equity space… What is on the shelf now is completely different from what will be on the shelf five years from now, in terms of how fast technology is going to develop. A lot of our goals are going to be influenced by that.”

-- Alison Taylor, Chief Sustainability Officer, ADM --

[1] Kelly Bania referenced a recent research report by Ken Zaslow in asking about company “Super Powers”

Michael Cippoletti Directeur général et chef - Alimentation, produits de consommation et vente au détail


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