From the Portfolio 21 Team
Portfolio 21 has many criteria that we use in our research effort to find the companies that are global leaders in environmental, social, and governance performance.
Periodically, we conduct in-depth topical research to test and update broad sets of our criteria. Portfolio 21 has always had a policy to not invest in agricultural biotechnology companies, and we seek food manufacturers and retailers that demonstrate strong support for the localization of food supplies and promote sustainable farming techniques and organic certification.
Over the past few months, we took a deep dive into genetically modified organisms (GMOs) in global agricultural and food systems in order to evaluate our policy. Our inquiry into this subject led to our new white paper, “The Case Against GMOs: An Environmental Investor’s View of the Threat to our Global Food Systems.” Download the paper here- http://bit.ly/1v4H4Se
Portfolio 21’s President, John Streur, made the following comments on what motivated the firm to share this research:
“As we got into our background research, we read of an industry that bullied its critics, overwhelmed government regulators and used the global agricultural and food systems as a source of profits at the expense of many participants. It was disappointing, disturbing and even a little hard to believe. Then, we got a small taste of this treatment ourselves when we were denied permission to use certain data for our report that we had obtained from a pro-GMO public website.”
“The underlying premise of GMOs may actually hold some positives for society, but the way the companies that control this technology use it prevents the potential benefits from being achieved. We are left with many negatives. Portfolio 21 will continue to avoid these companies and our current research strengthens our long held position.”
The report is designed to provide an informative overview of this controversial issue and profile the key findings that support Portfolio 21’s anti-GMO position. Topics covered include the history of industrial agriculture, the regulatory framework of the United States and Europe, and global context for the rapid rise of GMO crops in the developing world.
The Case Against GMOs White Paper – Introduction
Genetically modified (GM) crops have been surrounded by controversy since their first deployment nearly twenty years ago, but have still become the fastest-adopted crop technology in recent history.
In 2012, GM crops were planted on over 420 million acres, and for the first time over half of this area was in developing countries. To give a sense of the scale of this area, all of the 2012 GM crop fields would cover nearly all of the state of Alaska. Over the course of the twenty years since they were introduced, GM crops have been planted on a cumulative 4 billion acres of land, an area roughly the size of Russia.
The steady upward trend of global GM crop adoption is well documented by the International Service for the Acquisition of Agri-biotech Applications (ISAAA), an industry trade group, in its yearly research brief “Global Status of Commercialized Biotech/GM Crops” however, ISAAA denied our request to publish their data in this report.
The adoption rate of these crops is astounding. Tens of thousands of farmers are now reliant on the agricultural biotechnology companies responsible for the sale and development of GM seeds. The GM food produced reaches hundreds of millions of consumers.
And production impacts almost every part of the global food system, from small, independent farmers in South America to the regulatory bodies of the European Union.
The question remains, what exactly are these impacts?
Purveyors of transgenic products claim that GM farming boosts yields and farming incomes by saving on fossil fuels, pesticides, and labor. Another claim arising from this assumption is that GM farming represents a step toward environmental sustainability by decreasing emissions and the use of agricultural chemicals. GM advocates also maintain that these products pose no health risks to either the farmers or consumers.
None of these arguments have held up over extended periods of use or in the face of independent testing. Pesticide and herbicide-resistant crops (by far the most widely used GM varieties) actually lead to an increase in pesticide and herbicide use over time horizons of as little as four years.
Financial gains, which farmers make through increased yields, are offset by increased spending on patented seeds, fertilizer, and herbicides or pesticides, leading to a net decrease in income for all but the largest mega-farms.
These higher input costs are especially damaging when small, more marginal farmers experience crop failure. Elevated levels of bankruptcy and consolidation have frequently occurred following the deployment of GM crops.
Perhaps the most pervasive argument for GM crops is centered on the message that these crops are needed to “feed the world.” The underlying assumptions of this argument, however, are simply incorrect. At current levels of global production, there is enough food for every person on earth to have 3,000 calories per day.
The problem lies with distribution, income, and food waste. GM crops can actually exacerbate hunger issues by pressuring farmers in marginal areas to grow cash crops for export or extensive processing. Farmers who make the switch to GM products usually get an initial increase in their yields, but this can be attributed to the varieties used as a base for the commercially available transgenic varieties. Furthermore, in repeated tests, conventional breeding has been just as or more successful at delivering “climate-ready” crops that incorporate drought or flood resistance.
For environmental, social, and governance (ESG) focused investment strategies, agricultural biotech represents an unacceptable level of risk across a wide range of factors. The problem lies less with individual companies or products, but rather with how GM agriculture in its current iteration jeopardizes the whole agricultural system. Just as these risks are system-based, the consequences would manifest themselves by changing the very biological, economic, and social framework of food systems.
Almost twenty years into the GM experiment, a range of these risks (Environmental, Social, Governance/Regulatory, Reputational, and Financial) have become clear.
When taken together, these risks form a very clear basis for exclusion from an ESG investment strategy. It is important, however, to distinguish between the systemic risk and the risk presented by the technology of genetic engineering. Genetic engineering, in and of itself, is simply a tool. Indeed, it represents an opportunity to change the parameters of agriculture, which could be beneficial if given the proper regulatory framework and directed toward health and sustainability.
In the current market, however, developing genetically modified organics (GMOs) demands massive investments, which then drives the need for massive returns. When looking at the small number of transgenic technologies in use today, it becomes apparent that the nature of selection favors a certain set of corps that are best suited to large-scale, mechanized cultivation. This is amplified by the leveraging of intellectual property rights over seeds, planting materials, and tools used for genetic engineering. In its current state, the main goal of GM agriculture is to increase sales of seeds and certain agro-chemicals.
Read the complete White Paper here- http://bit.ly/1v4H4Se
From Portfolio 21
All investments include risk and have the potential for loss as well as gain. Our investment strategy generally includes investments in foreign securities, which are subject to the risks of currency fluctuations, differing accounting standards, as well as political and economic instability, particularly when investing in emerging markets. Our environmental, social, and governance (“ESG”) policies could cause us to make or avoid investments that may result in underperforming similar portfolios that do not have an ESG policy. Diversification does not assure a profit or protect against a loss.
Portfolio 21 (www.portfolio21.com ) provides this message to convey general information about our firm’s investment philosophy and not for the purpose of providing investment advice. You should consult an advisory representative of Portfolio 21 for investment advice regarding your specific situation.