Canadian Investment Review

Can Canadian farmland be a hedge on climate change?

Written by Yaelle Gang on Thursday, June 6th, 2019 at 7:59 am

Canola field with farm structures on a background highlighted by a sunset © Alexander Kolomietz /123RF Stock PhotosCanadian farmland can be a hedge on climate change, says Bernice Miedzinski, president of StarBridge Capital Ltd.

To support this, she notes many crops need water and Canada has access to water resources. As well, climate change is accompanied by a longer growing season, which could be good for Canadian farmland, Miedzinski says.

“We can grow things today that we couldn’t grow 10 years ago and we’re seeing dramatic increase because you’ve got a longer growing season. All of these things are to the detriment, I would say, of anybody that is south of us and if you look at which regions are going to be OK from a farmland standpoint, it’s typically the northern hemisphere, like Russia, Canada, Greenland, Denmark. So we have less risk of drought overall across Canada than certainly I think the U.S. is going to face.”

While the northern hemisphere may be well-positioned, it’s not free of risk, says Karen Lockridge, principal on Mercer Canada’s responsible investment team, noting there’s still exposure to one-time events like flooding and droughts. “Well, generally, yes, we’re going to fare better. That doesn’t mean that Canadian agriculture or farmland is immune from risks itself. It’s just they’re going to be different types.”

In addition to looking at farmland investment through an environmental lens, there are also social and governance considerations for investors.

On the social side, for example, it’s important to consider labour practices, health and safety and the mental health of employees, Lockridge says. And on the governance side, considerations can include how policies may change such as the rules around which chemicals or antibiotics can be used, she adds.

Technology is helping pave the way for a more responsible future.

“The key is you can use technology today to actually reduce the amount of fertilizer, for example, that you put on the land, which is usually important and you can actually enhance your yields,” says Miedzinski

She notes technology is being deployed to use water more judiciously or reduce the environmental impact of livestock. In addition, she highlights controlled-environment agriculture, such as growing food in a green house or using land-based aquaculture to farm fish.

“The challenge is a lot of uncertainty with climate change in terms of weather patterns and effects on the soil and arable land, so we need to really be creative about how we are going to grow our food,” says Miedzinski. “And the things that we can grow indoors, or in . . . a controlled environment, I think there’s certainly a lot of venture capital that has gone into the space to try and come up with innovative solutions to help on that side.”

That said, not everything can be grown in a green house. “The hedge is finding places where there is still high-quality land because certain things we can’t grow in a greenhouse,” she says.

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