This can(’t) be an asset class: The world of money management,“society”,and the contested morality of farmland investments

Introduction

How can an investor find a new vehicle that isn’t gimmicky or prone to “bubble” and that, even better, has a track record of success and profit? Like solutions to many problems, the answer is found right under one’s nose. (Colvin and Schober, 2012: 188, An investor’s guide to farmland)

Farmland and agricultural activities around the world are increasingly being treated as an “investment play”. Between 2005 and 2017, the number of investment funds specialized in food and agriculture assets skyrocketed from 38 to 446, with current assets under management surpassing $73 billion, excluding timber (Valoral Advisors, 2018). During the same period, approximately US$45 billion have been invested in farmland by institutional investors such as pension funds, endowment funds, insurance companies as well as high-net worth individuals (Lapérouse, 2016: 1). ¹ Between 2008 and early 2018, 114 farmland funds have been closed (Preqin, 2018), offering investors a direct (the own-operate approach) or indirect exposure to farmland (the own-lease out approach) (Ouma, 2016).

While these numbers seem tiny compared to other “asset classes” – investors had channelled $533bn alone into natural resources globally as of June 2017 (Preqin, 2018: 56) – one cannot deny that something has happened in the “AG space” (to use the industry vernacular). As a consequence, the US-focused NCREIF Farmland Income Index, one of the few sources of institutional farmland returns, dramatically increased from $1.1 billion to $8.1 billion between 2008 and 2017 (Conrad, 2018), and similar upward trends are reported from other major crop producing regions such as South America, Australia, and Europe (Lapérouse and Vitón, 2017).

The green gold rush has been driven by a number of factors. When the financial crisis hit the market, and the monetary policy response of quantitative easing changed the global interest regime, many institutional investors such as pension funds panicked because of shortfalls in returns in established “asset classes” such as government bonds or corporate securities (Appelbaum and Batt, 2014; Fairbairn, 2014; Ouma, 2014). Due to ever-growing liabilities, their viability as financial institutions was under serious threat (Clark and Monk, 2017: 49). This resulted in a scramble for investment opportunities that promised higher risk-adjusted returns. Farmland seemed to be a safe bet. What better “market fundamentals” than an ever growing world population, changing dietary preferences towards meat and protein in “emerging markets” and a rising demand for agri-fuels and carbon sinks in the light of peak oil and climate change on the demand side, and the limited availability of agricultural land, stagnant or decreasing productivity levels in core production regions, and climate change induced crop failures on the supply side (Bergdolt and Mittal, 2012; Colvin and Schober, 2012; Garner and Brittain, 2012)? Farmland also offered other qualities such as being uncorrelated with other asset classes in terms of its market pricing or being a seemingly straightforward, tangible investment. In a world that had just been shattered by complex and toxic financial products, farmland investment offered an attractive and healthy “value play”.

The finance-driven land rush has attracted critical interest from scholars, regulators, activists, and the media around the globe. Most early academic interpretations have mobilized the notion of financialization to make sense of it. These considered the finance’s run on farmland as yet another example of the relentless extension of financial market forces, potentially leading to the dispossession of local communities from their ancestral lands through the advancement of a shareholder-oriented form of agriculture (Clapp, 2014; Fairbairn, 2014; Gunnoe, 2014; McMichael, 2012; Russi, 2013). Critics have also argued that financialization reduces land’s “multiple affordances” (Li, 2014: 10) to the quality of exchange value: When farmland was being treated as a “pure financial asset” (Fairbairn, 2014: 281) – akin to its urban counterpart – speculation and rent-seeking would reign over productive investment. More recently, a literature has emerged that problematizes the notion of “asset” itself in the context of farmland investments (Ducastel and Anseeuw, 2017; Larder et al., 2017; Ouma, 2018). Formulated in response to more structuralist readings of the finance-driven land rush, such studies have cautioned us against taking for granted “the asset” as a stable social formation that exists a priori, but as something that is the outcome of a particular operation of capital: assetization (Birch, 2017; Muniesa et al., 2017; Ward and Swyngedouw, 2018). ² These studies have also lobbied for conceptual refinement, emphasizing that assetization equals neither financialization, commodification, capitalization nor marketization, four terms that frequently pop up in the literature dedicated to farmland investments.

What has been largely absent from this and the more general debate on assetization, however, is an investigation of its moral dimensions (for exceptions, see Kish and Fairbairn, 2018; Sippel, 2018). Such an endeavor seems to be justified for at least four reasons. First, in existing debates on financialization and the operations of modern finance, “‘morality’ and ‘finance’ are often presented as antithetical to one another” (Ouma et al., 2018: 504). The criticism that many NGOs have levelled against the financial industry – accusing them of immoral and unproductive activities such as land and food speculation – is indicative of this (e.g. Grain, 2008; Herre, 2013; Hawkes, 2016).

Second, asset managers often insulate themselves against criticism by resorting to the turf of the “economic”, underlining the legal duty they have to serve the interests of original asset owners (i.e. savers, wealthy individuals, organizations) and their legal representatives (i.e. pension funds, insurance companies, family offices, endowments). By doing so, they fetishize the fundamentally normative and thus malleable character of their trade.

Third, at a time when the planet not only seems to overflow with commodities, but also with assets (Haldane, 2014; Muniesa et al., 2017), there is an urgent need to unpack and problematize the normative foundations of assetization. This is even more imperative against the backdrop that with regard to the treatment of economic institutions and practices, more often than not, “[w]hat was once a matter of legitimacy becomes simply a matter of how things are” (Sayer, 2007: 264). The case of farmland investments provides a unique opportunity to document the moral struggles surrounding the legitimization of an asset class in situ, since the asset class is still in the making.

Finally, there is an increasing acknowledgement across the social sciences that markets more generally should be considered moral projects, “saturated with normativity” (Fourcade and Healy, 2007: 299–300), and that marketization is often a morally contested process (Çalışkan and Callon, 2010; Cohen, 2017; Elyachar, 2005; Radin, 1996; Zelizer, 1979). If the latter holds true for markets and marketization respectively, then this must also apply to assets and assetization.

Based on these insights and identified lacunae, and drawing on several years of fieldwork-based research on and in the “agriculture investment space”, I shall argue that central to the assetization of farmland is the globally distributed effort to bestow it with a legitimate financial worth. ³ While many financial actors paint the picture that farmland has an absolute or intrinsic value, and that this value can be “unlocked”, I shall demonstrate that farmland only gains its financial worth through collective yet contested practices of classification, valuation and valorization. This process has an internal (related to the financial industry) and external (related to “society”) dimension. Within the finance industry, this involves its positioning of farmland as an “asset” in the relational investment universe of the world of money management (Ortiz, 2014): farmland only becomes a legitimate asset class if it can be meaningfully set in relation to other asset classes, and if the underlying “assets” generate legitimate returns to investors. Assetization involves the production of a specific form of financial knowledge about farmland/agriculture through which the social, material and temporal aspects of farming are aligned with the moral conventions governing the money management industry. Furthermore, I shall demonstrate that the legitimation of farmland as an “asset class” has been thwarted by attacks of social forces such as NGOs, as accusations of immorality (i.e. speculation, land grabbing) have become major reputational risks for the supertankers in the industry – institutional investors. This notwithstanding, “capital” and its supporters have worked hard to overcome these internal and external barriers to accumulation. Eventually, the cases presented here allow us to problematize the often-invisiblized morality of finance, which is as much about “value” as it is about “values”.

Placing assets and assetization in financialized capitalism

The notion of “asset” has an interesting history. Deriving from an Anglo-Norman French legal term that first surfaced in the mid-16th-century, it originally denoted a “‘sufficient estate’ (to satisfy debts and legacies)”, but quickly “passed into a general sense of ‘property’, especially ‘any property that theoretically can be converted to ready money’ by the 1580s” (etymonline.com/word/assets). Today, it is a key notion in economics and the world of investment management, describing “a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit” (investopedia.com/terms/a/asset.asp). Financial assets, in particular, represent “investments in the assets and securities of other institutions, comprising of stocks, sovereign and corporate bonds, preferred equity, and other hybrid securities” (Ortiz, 2014), but also of urban and rural real estate, infrastructure or various forms of “natural capital”. We even talk of stranded assets now! As Birch (2017) shows, assets can also be intangible, with intellectual property rights and various forms of legal arrangements constructed around them (e.g. licensing) providing important income streams to financial investors and corporations (see also, Birch and Tyfield, 2013). The asset now seems to be so widespread as a source of financial income, or better rent (Andreucci et al., 2017), that Haldane (2014) recently proclaimed the “age of asset management”. ⁴

Yet even though the asset management industry has grown tremendously in size over the past two decades, its internal operations, and the social and material glue that holds these together, still remain rather opaque (Dörry, 2016). Indeed, as late as 2014, at a time when the world’s pension funds, insurance companies, mutual funds, and their various intermediaries such as private equity funds managed 97$trillion, more than the world’s GDP (Arjaliès et al., 2017: 1), the Governor of the Bank of England puzzlingly acknowledged that “analysing and managing the behaviour of asset managers is […] a greenfield site” (Haldane, 2014: 14). More theoretically grounded interventions have mobilized the notion of assetization to make sense of contemporary operations of finance (Birch and Tyfield, 2013; Muniesa et al., 2017), including farmland investments (Ducastel and Anseeuw, 2017; Ouma, 2018; Sippel, 2018). In a more foundational sense, an asset is a “property that yields an income stream” and is not meant for immediate sale (Birch, 2017; see also Leyshon and Thrift, 2007). This definition is useful, because it allows us to differentiate an asset from a commodity: What is being traded in so-called financial markets are propertied claims on future income (Knorr-Cetina, 2012), not objects produced during the labor process. In other words, “the elementary units of this economy consist not of exchange relations but in liability structures” (Vogl, 2015: 117). ⁵ Thus, assetization as the process of turning something into a source of future income should not be equated with other popular political economy terms such as commodification or marketization. While certain types of assets – especially in their securitized form (Langley, 2018: 7) – can be traded in markets and thus have a quasi-commodity character, the underlying form of value is distinct from a commodity for its income stream generating quality. Assetization should also not be used synonymously with capitalization (Muniesa et al., 2017) – a set specific accounting techniques for capitalizing the assumed future value of an asset in the present – or the notion of financialization – shorthand for the “the increasing dominance of financial actors, markets, practices, measurements and narratives, at various scales, resulting in a structural transformation of economies, firms (including financial institutions), states and households” (Aalbers, 2015: 214). Assetization and capitalization are important practices through which the financialization of nature, economy and society progress (Ward and Swyngedouw, 2018), but need to be distinguished from the latter as empirical phenomena.

Assets do not necessarily produce “real value” in the sense of an objectivist theory of labor (i.e. as an outcome of labor practices), as Marazzi (2011) notes with regard to those segments of financial markets that involve serious financial engineering (such as markets for currencies, bonds, complex derivatives). Rather, their production involves financial and material investment “in apparatuses of producing and capturing value produced outside directly productive processes” (Marazzi, 2011: 54). While this may be true for a number of financial assets, this is different for some “real” or “alternative assets”, to which farmland (alongside real estate, commodities, energy, private equity, or infrastructure) belongs. With some real assets, material engineering – alongside often-simpler forms of financial engineering – is key to the “administration, control and maintenance of property” (Braun, 2017: 3). Thus, the production of such “real assets” rests on concrete interventions into an organization or a “thing” (a building, a bridge, etc.) in order to transform its laboring and value-delivery capacities.

While the assetization of almost everything, including farmland, has provoked moral critique, its own moral character has so far rarely been acknowledged, let alone excavated. However, we need to study “the moral and political subconsciousness of the technicalities of finance” (Muniesa et al., 2017: 89) […] “before developing, eventually, a moral stance against or in favour of it” (Muniesa et al., 2017: 51).

Assetization as a moral process: A conventionalist reading

One theoretical perspective that lends itself particularly well to such an endeavor is convention theory and its application to financial markets, particularly through the work of French economist André Orléan (2012, 2014) (using the example of the stock market). Broadly anchored in a moral economy take on the economy, convention theorists have argued that all economies, even the most disembedded (Polanyi, 2001[1944], destructive, and profit-seeking ones, are moral economies (Sayer, 2015; Stark, 2009):

all economic institutions are founded on norms defining rights and responsibilities that have legitimations (whether reasonable or unreasonable), require some moral behaviour of actors, and generate effects that have ethical implications. (Sayer, 2007: 4)

This insight helps us question the peculiar idea of fundamental value (Bryan and Rafferty, 2013; Orléan, 2014; Ortiz, 2014), which many financial market players and economists believe to be inherent in an “asset”. A conventionalist perspective suggests that such values are “not natural, but are produced by particular actors or groups of actors in a specific social environment” (Ducastel and Anseeuw, 2017: 4). Indeed, something is not born as an asset, but turned into one.

The existence of uncertainty in the future-oriented endeavor of turning money into more money is a crucial factor, yet it is not enough to explain the conventional universe of the world of money management. Three concomitant developments have been crucial to the moral evolution of modern finance. Flanked by both regulatory and organizational restructuring, these have transformed the sociality, spatiality and materiality of the money management industry at large. First, there is the transformation of finance from vice to force of good. Historically, financial industry representatives and finance economists have tried hard to reframe their trade – at various points in time frowned upon as mere speculation, rent-seeking and extraction (Aitken, 2007; Christiansen, 2016; Goede, 2005; MacKenzie, 2006) – into a socially useful activity (Ortiz, 2014). The idea that finance is useful and productive moralizes even the most-profit-seeking financial activities as still representing a service to society (Mishkin, 2007: 3). It reimagines financial actors as moral agents and wealth creators rewarded for the time waited before their money is returned with interest (Sayer, 2007). As Vogl (2015: 80) succinctly puts it, “like no other social invention before it, the intricate network of innovative financial products is said to ensure the realization of ‘distributive justice’ across all life situations” (see also Ortiz, 2014). More recently, in an attempt at moral rejuvenation, new forms of social, responsible or impact investment have emerged seem to alter the moral fabric of the world of money management (see section “Responses from industry players”), but do not fundamentally break with the expansionist logic of capitalist accumulation (Kish and Fairbairn, 2018; Langley, 2018). In addition, such attempts clash with prevailing liberal understandings of fiduciary duty in mainstream finance (Lydenberg, 2014).

Second, there is the strong influence of financial theories such as the efficient market hypothesis, the shareholder value conception of the firm and modern portfolio management theory (MPMT) on the praxis of investing (Appelbaum and Batt, 2014). In addition to the cognitive influence these have had over financial actor’s decision-making, such theories became engrained in public regulation (Lydenberg, 2014). For instance, until the 1960s, investment managers in the US were only allowed to invest in low-risk assets such as government bonds, based on the so-called prudent man rule. Buttressed by developments in finance economics and law since the 1970s (Appelbaum and Batt, 2014; Lapérouse, 2016), money managers such as pension funds were subsequently allowed to invest in riskier products. Due to the influence of MPMT, the “decision whether or not to invest in a particular security (company stock or government bond) was replaced with an [scientifically-grounded, my addition] assessment of the risk profile of asset classes and how those summed-up to the entire portfolio” (Clark and Monk, 2017: 39). At the same time, the notion of fiduciary duty came to be defined in very liberal terms as the duty to generate returns for shareholders according to the shareholder theory of the firm (Fama and Jensen, 1983; for a critical assessment, see Appelbaum and Batt, 2014; Lydenberg, 2014). Potential moral hazards linked to principal-agent problems between money holders and managers were meant to be tackled by strict guidelines on investor responsibility and liability. This led to new forms of contractual relationships in the money management industry as many investment managers outcontracted vital services such as asset management, investment advice or data provision, and at times have even been legally obliged to do so (e.g. in the case of investment advice, see Arjaliès et al., 2017). This is the reason why most of the investments in financial markets today, including markets for farmland, occur through extended “network[s] of delegation” (Muniesa et al., 2017: 133). Even though we have seen some “disintermediation” taking place among large institutional investors in the wake of the financial crisis in order to curb external management costs (Appelbaum and Batt, 2014), many pension funds and other institutional investors “have abandoned their own strategies and rely almost entirely on external portfolio managers who claim proprietary advantage in terms of their information processing over the bulge bracket investment houses” (Clark and Monk, 2017: 55).

Third, quantification and data technologies are to be considered. In tandem with the scientification of finance, these have been instrumental in not only “taming risk” by rebalancing information asymmetries in financial markets, but also in helping money managers justify and rationalize their investment decisions in an “objective” manner. Haunted by the fiduciary imperative, numbers appear to be the most effective way to turn investment into a rational activity, free of any subjective impulses or other kinds of “animal spirits” (Akerlof and Shiller, 2010) that would go against the idea of efficient markets. Even though the financial crisis and many scholarly accounts have demonstrated that investment in practice can follow quite different scripts (Ouma and Bläser, 2015), the trust in and importance of numbers is part and parcel of the “finance-specific order of knowledge” (Vormbusch, 2012: 314) that regulates the allocation of capital into existing and new asset classes. Historically, the scientification-cum-quantification of finance has contributed significantly to legitimizing its operations (Goede, 2005; MacKenzie, 2006). It has turned certain financial activities deemed as outright gambling at various points in history into a rational endeavor, in which money managers are equipped to fulfil their fiduciary duty towards other people’s money. Quantitative comparisons between the risk-return profiles of different assets and asset classes as well as various techniques of risk and return management are expressions of the new moral order, which these developments have produced.

The case for farmland investments can be evaluated in light of these developments. According to a discourse actively nurtured by the financial industry, finance’s role in agriculture is not only a profit-seeking, but also a redeeming one: “Investing in agriculture can help diminish impending shortages while it shows a substantial profit for the investor!” (Black Earth Agriculture, 2012). Investments into farmland are said to create a win–win situation for both investors and target countries, while at the same time closing the food, yield, energy and generational gaps of this world. ⁸ While investors would reap relatively secure returns, target countries would benefit from investments, employment effects, technology transfers, and the diffusion of a new managerial culture in the agricultural sector. Here, the historically cultivated image of finance as a giant “problem-solving machine” is mobilized to give its workings social legitimacy (Palmer, cited in Langley, 2018: 14).

While this may be a good story for “society”, arguments mobilized within the industry come along with a more specialist tone. Given that institutional investors and delegated asset managers constantly have to weigh the future worth of existing investments vis-à-vis the potential future worth of alternative investments (Ducastel and Anseeuw, 2017; Ouma, 2016), university-based economists and “economists in the wild” (Çalışkan and Callon, 2010) have tried to scientifically back up why farmland has a superior inflation hedge quality and risk-return profile compared to other asset classes (see Figures 1 and 2). For instance, a prominent economist in the field and his co-authors note that for the top US states (1970–2010),

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Figure 1.

Components of US average farmland returns, 1970–2010 (based on acreage in production).

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Figure 2.

Risk-return profile of Illinois farmland compared to other asset classes, 1970–2011 (what Figure 2 shows is that farmland in Illinois (a frontier state for financial investments in farmland in the US) has historically outperformed many other asset classes at much lower volatility (i.e. risk of return, measured as standard deviation, 1970–2011). Even though this point often only made for contexts where data is available – such as parts of the US – it has been quickly universalized as an inherent feature of farmland in general).

On top of that, much of the argument for farmland/agriculture as an investment opportunity indeed invokes the basics of MPMT, which stipulates that “diversification increases expected portfolio returns while reducing volatility” (Cumming et al., 2013: 21) – add farmland to your portfolio, and you will be able to diversify away the risk (Chen et al., 2015; Sherrick et al, 2013)! While farmland investment thinking rooted in MPMT is not new – it can in fact be traced back through to the 1960s (Barry, 1980; Kaplan, 1985; Kost, 1968) – and a few US institutions have targeted the sector since the late 1970s (Koeninger, 2017; Lapérouse, 2016), the recent hype for farmland as an alternative asset class has towed farmland investments from obscure specialist journals to a much larger public. ⁹

Legitimation struggles: From within

Legitimation struggles: Outside forces

External barriers to assetization: “Society” fights back

Reminiscent of Polanyi’s “double movement” (Polanyi, 2001[1944]), NGOs have criticized the rising interest in farmland among financial investors post-2008. Their “noise” has had a profound impact on the evolution of farmland as an “alternative asset class”, creating troubles for several large institutional investors and banks (see Figure 3). The US pension giant TIAA, the leading investor in farm- and forestland globally, recently even became the target of a divestment campaign ¹³ (see Figure 3). On top of that, activists in a variety of geographical contexts have become increasingly interested in the question of “who owns our land”. ¹⁴ Thus, reputational risk associated with farmland-based investments poses the number one risk, especially for institutional investors such as pension funds. Which teachers’ union’s money manager really wants to be involved in an ugly land grab posse in, say Tanzania or Cambodia, where smallholders have been displaced? The land grab discourse poses a dilemma for asset management firms who want to raise capital for farmland investments but face the challenge of encountering institutional investors who anticipate reputational risks:

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Figure 3.

Recent NGO reports targeting finance-driven investments into farmland and agriculture.

Concerning reputational risk, personally, I consider that as one of the biggest risks, as one of the biggest entry barriers. Basically, we overfulfill the criteria in that domain, but that was something we needed to learn. (interview asset manager 2, 2014)

At an investment conference in 2013, one industry pioneer remarked that what was urgently needed was to “de-risk” and “de-mystify” agriculture as an asset class:

Particularly in Germany you have this stigma over the asset class. Here we are discussing how many billions of dollars we need for agriculture and you have all this talk about land grabbing and sustainability. (field diary, 2014)

(S)he not only referred to the challenge of managing reputational risks, but also hinted at the more general problem of legitimizing the “asset class”. As soon as you leave the popular institutional-grade contexts of the US, Australia or New Zealand ¹⁵ risks multiply. While reputational risk is not the only one that investors may encounter when placing their capital in parts of Africa, Asia or South America, ¹⁶ it is a crucial one. This can even lead to situations where previously open doors for research have been suddenly closed. When revisiting a large private equity project in Tanzania in 2017, a senior manager wanted to make sure that I had not joined a prominent US “anti-land grab” NGO, which previously had attacked their investment with a controversial report – putting a final round of capital raising at stake.

Responses from industry players

So given the conventional architecture of the money management industry and the role of reputational risk in a future-making endeavor that seems to rest on fragile grounds, how have investors, banks and asset managers dealt with the land grab discourse that threatened a legitimate framing of their “asset class”?

First, some have reviewed their internal economic, social and governance (ESG) criteria. For instance, the press speaker of an asset manager who was attacked for supporting “land grabs” in South East Asia during an NGO campaign in 2010 admitted during an interview that the attack left them unprepared and they were not particularly focused on sustainability issues around that time. They subsequently reviewed their ESG criteria to incorporate more social aspects. However, his organization would not use the term sustainability, but rather referred to “responsibility”, because they eventually were “trustees” and have to act in the very best interest of their clients: “When we would talk of sustainability, the NGOs would not buy into it anyway” The prime goal of his organization remained “economic” and this was why they had a “communication problem” with NGOs, because “we simply speak different languages” (interview company representative, 2013).

Indeed, becoming more “responsible” by reviewing ESG criteria has become a more generic approach in the industry (Burwood-Taylor, 2015), especially among asset managers serving large pension funds who are now pressured to make public their ESG footprint (Table 1).

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Table 1.

Example of an ESG framing in an Africa-focused asset manager’s annual report.

Compliance against the fund’s responsible investment code
Section summary	2013%	2014%	2015%	2016%	% Change
Environment	49	69	68	79	11 ↑
Social	86	94	90	98	8 ↑
Health and safety	40	78	60	93	33 ↑
Other social matters	52	76	62	92	30 ↑
Governance	69	87	91	96	5 ↑
ESG management systems	57	71	80	87	7 ↑
Animal welfare	90	100	100	100	0 –
Overall	63	82	79	92	13 ↑

Source: own research.

ESG: economic, social and governance.

As institutional investors have become increasingly wary of public backlashes, some larger ones (including TIAA, Swedish AP2 and six other institutional investors) took their commitment to ESG to a higher level in 2011 by launching the “Principles for Responsible Investment in Farmland”, which set out general guidelines for institutional investors, farmland asset owners, and managers. Others have subscribed to principles launched by multilateral organizations, such as the “Principles for Responsible Agricultural Investment” launched by the World Bank, FAO, UNCTAD and IFAD in 2010 (Stephens, 2013) or FAO’s “Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security” (Seufert, 2013). Additionally, separate roundtables for popular of “assets” such as soy, biofuel and palm oil have been launched. Even though such agreements have attracted criticism from NGOs that they represented watered-down, voluntary frameworks in which value still trumped values, these frameworks have had an important function as legitimation devices in the world of finance. For instance, when asked about ESG criteria in the “AG space” – obviously before being hit by the recent divestment campaign – the director of global real assets at TIAA confidently responded:

We partnered with a group of institutional investors to establish the Principles for Responsible Investment in Farmland. These principles provide guidelines to responsible investment and management of global farmland. We ensure consistency with the principles by employing a rigorous investment approach that includes a number of policies, procedures, and checklists that assess, mitigate, and manage risks. (Burwood-Taylor, 2014b)

Other industry players are convinced that “over time, there will be a ‘grading system’ of asset owners and managers that rewards good environment and social stewardship (‘a race to the top’)”. ¹⁷

Furthermore, asset managers, commercial banks and development finance institutions (DFIs) have been working out new models that allow more financial capital to be channelled into risky frontiers such as African farmland/agriculture – be it through more classical reinsurance arrangements such as the Multilateral Investment Guarantee Authority (Daniel, 2012), a “patient capital” approach through which DFIs finance risky early stage investments (Palmer, 2010). More recently, “impact investment” strategies in agriculture have gained traction. ¹⁸ These usually do not target large-scale farming operations, but other entry points of the agricultural value chain in the countries of the Global South, such as smallholder production. ¹⁹

The strategies outlined above represent crucial steps in bestowing financial investments in farmland and agriculture with more legitimacy and protecting them against criticism from “outside”. However, the aggregated risk of investing in farmland and agriculture still puts off many institutional investors, and the recent controversy around TIAA’s investment has sent shockwaves through the industry. While reputational risks associated with potential criticism from the public are only one element of the risk equation, it is enough for some actors not to move into or to move away from certain “geographies”. ²⁰ For instance, in 2017, the Canadian Pension Investment Board announced that it would stop making further allocations to farmland and that it was open to selling its existing portfolio in North America after it faced resistance from local farmers who feared farmland price hikes and being locked out from land markets (Tilak and Scuffham, 2017).

At a global level, the response to this climate of “investment angst” has been that some asset managers have teamed up with specialized intermediaries to develop more structured investment approaches through which deals, risks and returns are managed more methodologically. This includes managing reputational risks. Potential land grabs or potentially adverse social, ecological or economic impacts, however, usually do not enter the game as moral questions, but as threats to value creation. On the other hand, an industry narrative has emerged that maintains that investing responsibly fits with the fiduciary imperative of the investment management industry because ESG “makes financial sense” (Janiec, 2016) and “should be looked at as a value creation tool, not just a risk management mechanism” (Burwood-Taylor, 2015). Thus, moral and social questions are reframed as economic ones, and finance maintains its autonomy from society. As Kish and Fairbairn (2018: 584) note succinctly by citing Roy (2012), such claims – both with regard to the responsible or impact investment variant – are part of “the ‘ethicalization of market rule,’ in which global finance makes human suffering visible as a means to justify expanded capitalist solutions”.

Conclusion

In this paper, I have provided novel insights into “the moral grounds on which the legitimacy of capital placements into farmland are negotiated” (Ouma et al., 2018: 503). My effort is connected to the critical project of other scholars who have called for an unpacking of the concrete operations of capital “in particular material configurations, shedding light on processes of valorization as well as on the frictions and tensions crisscrossing them in lived and grounded circumstances” (Mezzadra and Neilson, 2015: 6; see also Braun, 2016; Vogl, 2015). When we break down large-scale phenomenon such as assetization into a series of practical operations that nowadays often occur along global investment chains, we can disclose “capital’s own methods such that they might be both reappropriated and redeployed” (Martin et al., 2008: 128). However, we can only specify the preconditions of finance capital’s operations and their footprints across “range of social sites and activities” (Martin et al., 2008), if we understand the moral fabric that holds its generative operations together. This, again, requires abandoning the ontological divide between the “economic” and the “moral” – between “value” and values” – that is as much a part of classical economic sociology (Stark, 2009) and popular discourse as it is of neoliberal reasoning (Ortiz, 2013). It risks reifying the popular conception of finance as an autonomous sphere that colonizes the life world, but is out of reach for most of us. This distinction is often drawn by the finance industry and critics alike. While money managers argue that they are first of all committed to satisfying investors due to their fiduciary duty (and thereby relegate criticism to the realm of the “political”, “social”, or “moral”), critics often accuse finance of economizing something that should not be economized – at least not according to a financial market frame of worth. On the contrary, I have shown here that assetization is itself firmly entangled with culture, morals and values. The social struggle for more sustainable agricultural futures would then not be about fighting economics with morals, but about fighting morals with morals. Morals can be changed and opened up to debate, while “the laws of the market” often cannot.