Switzerland’s Clarmondial Ag has finalized a partnership with Luxembourg-based Duff and Phelps Management Company S.A.R.L and Pictet Asset Services to launch a novel fund designed to invest in responsible agricultural businesses active in existing supply chains.

The open-ended fund was formed to serve as an affordable credit vehicle for agricultural producers who meet sustainable environmental and social benchmarks. However, it will have a particular focus on small and medium enterprises (SMEs) in emerging and developing countries that meet best practices standards.

“We are excited to launch this product, which links investors interested in sustainable agriculture investing and fixed income with the financing need of value chain stakeholders working with smallholder farmers to promote rural economic development, food security and climate smart agriculture,” said Tanja Havemann, Director and Founder of Clarmondial AG.

Every Need Creates Investment Opportunity

If current macro trends, including population growth and rising wealth and standards of living in emerging countries continue, global food demand is projected to climb by 70 percent, while demand for crops and animal feed will double, according to the report Pursuing the Global Opportunity in Food and Agribusiness issued by McKinsey & Co. in June 2015. Meanwhile, the global arable land bank is declining due to degradation and pollution, and the natural resources needed for this production are constrained.

Facing conditions such as these, technologies that increase agricultural yields, or enable farmers to produce crops on previously marginal land or under previously untenable conditions are more critical than ever – particularly in emerging economies where the bulk of the growth in food demand will occur. Meanwhile, agricultural productivity is gaining only one percent per year at this time – half of what it was in the 1960s and 1970s, according to McKinsey & Co.

This undeniable need to produce more food from less land, while also doing so in a sustainable manner, has created a need that only agtech can fill, giving investors a new asset class that can provide a return on investment while also benefitting the world in which we live.

Structure

The AIFMD-compliant fund created by Clarmondial and its partners will be structured as a scalable, commercial, fixed income product that will employ a demand-driven approach to bridge the gap in financing along the agriculture value chain, while also providing investors with an investment vehicle that supports sustainability, food security, and climate smart agricultural practices.

“We see an increasing demand from institutional investors for loan strategies,” said Claude Pech, Global Head of Business Development and Client Relationship Management at Pictec Asset Services. “Clarmondial’s vehicle will be available for qualified investors who are looking for mid- to long-term investments with commercial returns and a sustainable impact on agriculture business.”

As the AIFM, Duff & Phelps will manage the portfolio and risk for the fund, which submitted an offering memorandum and other documents to Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) for approval on October 24.

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Lynda Kiernan