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AGRICULTURE CAPITAL (ACM Management Company, LLC)

PRI reporting framework 2020

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Yes, AC has begun to evaluate the various scenarios that could be relevant to our business in a climate-constrained context that affects honeybees and wild pollinators.
Describe Yes, AC does this in order to understand more fully risk exposure from climate-related water scarcity (drought).

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

When evaluating investment opportunities and asset operations, AC evaluates scenarios with climate-related implications, including water scarcity and risk. To date, analysis of various water scenarios under dynamic California climate and weather conditions has provided the impetus for widespread deployment of high-efficiency irrigation systems across our business; the development of private water storage to impound available water during wetter periods to mitigate drought impacts; the potential for groundwater recharge to improve long-term crops conditions; and a broader understanding of the likelihood of changes in agricultural land use based on the cost of water and the value of certain crops.

Similarly, we are aware of the risk to pollinator ecosystems from climate disruption and have evaluated system improvements and restoration that mitigate our risk exposure. We understand the bees provided by pollinator service providers are more susceptible to changing climate conditions and less active during times that could be critical to key crops, so we have implemented strategies across our business to restore native habitat to encourage wild bees and other pollinator activity through improved landscape connectivity.

Describe

The work described in the above section not only occurs during potential asset evaluation but is ongoing for AC during the ownership period. Successful implementation of risk mitigation projects in one location helps to support analysis of similar projects elsewhere. While we rely on memorializing impact and risk mitigation projects in investment documentation at the outset of ownership, our active ownership strategy lends itself to continued work to assess conditions that change as a result of weather, demographic shifts, or the regulatory environment.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Please explain the rationale

Everything AC does to mitigate climate and ESG risk and drive toward enhanced value has a time horizon in mind that goes beyond the term of the investment. We seek to create the conditions that preserve and enhance an assets value such that future ownership would be motivated to pursue similar operational approaches. Certainly, our view is long term and far past the term of the investment, but our modeling currently takes into consideration the period of time for which our investors rely on our management.

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          Internal analysis of historical drought
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.5. Additional information [Optional]

Our work is undertaken with a mindfulness of the important role agriculture must play in addressing climate change. The food system contributes an estimated 19%–29% of anthropogenic greenhouse gas emissions, both globally and in the U.S.6 Agriculture is a heavy emitter, yet agriculture is unique among industries because of its potential to draw carbon out of the atmosphere. We believe that regenerative food production can have a net positive effect on climate change, and as such we are focused on business practices that measure and manage our energy use, minimize our greenhouse gas (GHG) contribution, and accelerate the shift to renewables and innovative energy management technology.

This year, we are pleased to share a preliminary inventory of our greenhouse gas emissions in our Pacific Northwest farming operations, the result of our sustainability data collection efforts across the business. Our greenhouse gas inventory allows us to locate cost-effective reduction strategies, move toward emissions pricing, and prepare for regulatory interventions and carbon credit opportunities. (Modeling our California carbon footprint is ongoing and will be shared in subsequent reporting.) Based on the Agricultural Guidance from the Greenhouse Gas Protocol—a framework for quantifying climate impact, our emissions are divided into different “scopes” and assessed within the boundary of areas where we have operational control. We have used the Cool Farm Tool—a globally recognized calculator—to model our farm emissions. The EPA Center for Corporate Climate Leadership and the USDA COMET-Energy tool provide emissions factors for our off-farm sources. Although we have not yet sought external audits of our calculations, these figures represent our good faith efforts at conservatively reporting on our emissions based on the best available models and data.

Direct fugitive emissions (gases that leak from industrial equipment) from refrigerants can be an important factor for operations with substantial cold storage capacity, but our state-of-the-art packing facilities feature efficient ammonia refrigeration systems. Since ammonia has zero ozone depletion potential and zero global warming potential, our refrigeration systems do not release fugitive emissions. Two of our Pacific Northwest farms are net sinks of carbon. The Cool Farm Tool model indicates that carbon stocks on these farms sequester over one metric ton of CO2 per acre annually due to the beneficial tillage and cover cropping practices on these farms. Conversion from annual crops to no-till permanent crops has helped minimize soil disturbances and build soil organic carbon on these properties.

Our cover crop plantings of clover and perennial grasses also contribute substantially to carbon stocks by increasing biomass production and protecting soil health. Finally, woody biomass accumulation in our crops represents a significant carbon sink. The estimated annual biomass production of our crops far exceeds our total CO2 equivalent emissions. However, since the emissions impact of this stock depends on its long-term fate and the method of accounting, in the interest of conservative reporting we omit woody biomass from our total fund level emissions.


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Carbon footprint (scope 1 and 2)
          measuring to manage
        
          annual CO2e (metric tonnes)
        
          USDA COMET Energy tool and Cool Farm Tool
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

At Agriculture Culture (AC), we believe strongly that the key elements that comprise our approach to ESG leadership (as outlined in our ESG policy and elsewhere in our materials) also describe our fundamental framework for addressing risk. We believe sustainable methods of food production can dramatically reduce our exposure to the following critical business risks at a global scale:
- Climate disruption
- Water scarcity
- Other environmental factors
- Chemical use and crop protectants
- Labor
- Food safety

CLIMATE DISRUPTION
Atmospheric pollution from the use of fossil-based sources of energy is contributing to global climate instability and, by extension, can lead to major business disruption in the form of wide temperature swings and more catastrophic storm and weather-related events. As such, we are focused on business practices that we believe can mitigate the effects of climate change. We measure and manage our use of all forms of non renewable energy and are deploying energy management technology and other equipment to ensure that we are using as little energy as possible to produce the most high quality, nutritious food and are working to reduce our exposure to fossil energy price volatility. We are also actively evaluating opportunities to deploy renewable sources of energy throughout our business. We recognize that soil health is the most critical indicator of the long-term productivity and health of agricultural investments, and we believe soil quality is severely threatened. We utilize leading edge techniques such as cover cropping and composting to maximize soil organic matter and microbial health, simultaneously improving the essential role that healthy soil – and particularly soil that is not tilled as in our permanent crop context – can play in sequestering carbon that in many other farming operations is actually a contributor to climate change.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

100 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

25 Percentage of AUM (+/-5%) per asset class invested in the area
75 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Synergistic farmland and midstream processing properties focused on permanent crops

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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