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Real assets/private markets: Data-fueled insights may help drive farmland performance, address risk factors

Justin "Biff" Ourso
Head of Real Assets
Aerial view of farmland

Nuveen is the largest manager of farmland assets globally, with nearly 2 million gross acres of farmland across the United States and Australia, and in parts of South America and Europe.1 In managing these assets, we employ rigorous sustainability practices, both because it aligns with our corporate values and because long-term investment success in this sector demands sound and diligent stewardship. Technology plays a major role in informing our farmland investment and management approach. From a global investment perspective, we conduct data analysis to understand how macro trends will impact and support financial performance. Our models take into consideration the rising world population, changing dietary patterns of expanding middle income classes in developing markets, as well as the reduction in arable land in the coming decades and how such factors will drive supply-demand balance for food and fiber. We also analyze data that relates to climate change, because its manifestations—from droughts and floods, to wildfires and deforestation—represent a threat to sustainable agricultural production and enduring investor value.

 

With technology and data insights, farm managers may improve yields while ensuring long-term asset sustainability.

Thanks to technological development and data analysis we can clearly see ...

 

  • Critical details — Satellite imaging, combined with land history databases and expert analysis, give us a bird’s-eye as well as bottom-up view of a farmland asset.
  • Effects of time — Imagery and data analysis identify historical changes in land use, terrain and climate effects.
  • Compliance performance — Rigorous analysis ensures that we acquire and manage farmland in accordance with relevant regulatory frameworks that promote zero deforestation and sustainable agriculture.

Beyond this global view, data also plays a vital role in driving strategies to reduce risk and increase productivity within each of our farmland assets. Although a rigorous and consistent overarching due diligence framework exists, each farm is distinguished by its local attributes, which defies one-size-fits-all evaluation:

  • Crops differ by type and region: Wine grapes require cultural care and harvesting techniques that are far different from that of tree nuts or apples. What’s more, there may be very different methods for cultivating and sustaining potato yields in the U.S. as compared to Poland.
  • Climate risks vary greatly: California regions must address drought conditions, while regions with complex biomes such as natural forests or savannahs must forestall deforestation.
  • Land record availability varies: Land purchases in developed markets often can rely on very long and detailed records of land usage and rights, while documentation in emerging markets can be much harder to find and authenticate.

This thoughtful analysis lays the groundwork for our diversification strategy across the regions and crops. This allows us to mitigate risk. The combination of rich data sets and deep local experience—provided by our Westchester subsidiary and local farmers—allows us to tailor our sustainability activities to each individual farm to address threats to productivity in the short term while helping to ensure long-term performance and value. Let’s look at two examples of this tailored approach in action.

California: Aerial image data drives greater water efficiency

 

In California’s Central Valley, nearly all of our tree nut operators have begun using aerial spectral imagery to optimize water and nitrogen use. High-resolution, multi-spectral images provide farmers with accurate, real-time information about the water and nutrient status of plants, and flag irrigation leaks and blockages for repair. Images captured throughout the growing season let farmers gauge their progress in addressing issues. When combined with soil moisture monitoring programs already in place, this data-intense imaging technology helps to derive optimal value from every drop of water in this drought-challenged part of the U.S.

Brazil: Integrated data analysis reduces risk

 

Before we purchase farmland in emerging markets such as Brazil, we carefully assess data from a range of sources to crystallize our understanding of each asset’s history and to reduce risk. At times, it’s hard to find documents that confirm land ownership in the past, so title searches and farmland licenses may not be sufficient. So, we use satellite images, some dating as far back as the 1950s, to understand the historical use of land, cultivation patterns, any transformation or development, the presence of indigenous populations, and environmental issues. We also review government GPS data—such as the Brazilian National Institute of Agrarian Reform electronic system— to substantiate ownership claims, indigenous territories and conservation areas. Such rigor is essential to reduce deforestation risk, respect the rights of indigenous peoples, and preserve positive relationships with communities. Finally, not only do we conduct our own extensive analysis, but we also hire third-party experts to verify and confirm information from companies, farmers, tenants and lenders.

Data and technology can potentially increase alpha and manage risk for investors by strengthening our sustainability practices across our global farmland assets. Whether we are scrutinizing past uses of land we’re seeking to acquire, or comparing image data to optimize our resource use, we’ll continue to harness data and technology to help ensure productive and sustainable farms across our portfolio.

Transparency: Powered by technology

 

Each year, Nuveen publishes a farmland sustainability report that details our integrated approach to meet the U.N.-backed Principles for Responsible Investment (PRI) Farmland Guidelines as we manage our agricultural holdings.
nuveen.com/institutional/farmland-map

 

1 Pensions & Investments, 01 Oct 2018. Rankings based on institutional tax-exempt assets under management as of 30 Jun 2018 reported by each responding asset manager.

Risks and other important considerations

Investing involves risk; principal loss is possible. There is no guarantee an investment’s objectives will be achieved. An investment which includes only holdings deemed consistent with applicable Environmental Social Governance (ESG) guidelines may result in available investments that are more limited than those that do not apply such guidelines. ESG criteria risk is the risk that because the criteria excludes securities of certain issuers for nonfinancial reasons, an investment may forgo some market opportunities available to those that don’t use these criteria.

The investment advisory services, strategies and expertise of TIAA Investments, a division of Nuveen, are provided by Teachers Advisors, LLC, and TIAACREF Investment Management, LLC.

Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA).

Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternatives Advisors LLC a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.