All well and good; but the investment writers here at the IC are amoral at best, so we don’t usually give much thought to how many orangutans have been orphaned to make way for a palm oil plantation, or how many lungs have been kippered by a tobacco multinational, just so long as they offer an attractive yield or return on capital. It may sound cold, but we're only here to enhance your material well-being; you’re on your own where moral rectitude is concerned.
On the face of it, you would think that establishing ethical investment criteria is fairly straightforward: no fags, no booze, and no arms. But of course, you might also consider eschewing investments in companies engaged in animal testing or gambling. There is even a case for avoiding companies that effectively support oppressive regimes, although how anyone could be expected to fill up their car on that basis is anyone’s guess.
Happily for those of us who are morally deficient, there are a lot of grey areas in ethical investment. I was reminded of this when my editor brusquely demanded that I pen a lowdown on the agricultural sector. That's because there has been growing criticism of the way in which agri-business multi-nationals (both private and public) have been conducting their affairs.
The chorus of disapproval has grown louder as the global agricultural sector has consolidated. The global agricultural supply chain is increasingly dominated by a few large transnational buyers (including agri-food processors and commodity traders). It means that primary producers often capture only a fraction of the international price of a trade commodity; think of the relationship between UK dairy farmers and the supermarkets writ large. The increased concentration of pricing power in global agriculture means that poverty reduction and rural development have been retarded in farming communities in both developed and developing economies. US small-holders were forced off the land en masse during the 1970s and 1980s to be replaced by industrial farming co-operatives, and this pattern is now being repeated across the globe.
Going to seed
For one of the best examples of how the supply chain has fallen into the hands of the few can be seen in seed production. During the early part of the 20th Century, this practice was overwhelmingly in the hands of farmers and public-sector plant breeders. Now, however, it's estimated that the proprietary seed market (excluding farmer-saved seed) accounts for over 80 per cent of the commercial seed market worldwide; the top three companies - Monsanto (NYSE: MON), DuPont (NYSE: DD), Syngenta (Ch: SYNN) - account for 47 per cent in aggregate.
These agri-business giants now employ what might be called an integrated model, whereby their seeds (IP-protected) are sold to farmers, along with a range of ancillary products such as pesticides and fungicides that have been developed for optimal use with the patent seed technology. Farmers have even been sued for carrying out the age-old practice of saving seeds after harvest. The companies say that the use of these bespoke systems is essential if we are to meet the challenges posed by growing food demand and the effects of climate change, while critics argue that by removing choice it is simply a way of stitching up the biggest market in the world.
Which begs the question: should big agri-business be accorded the same pariah status as big tobacco? Well, just like the tobacco industry, the big players in global agri-business spend millions on political lobbyists to further their influence, although things don't always go according to plan. Last year, the so-called 'Monsanto Protection Act' was struck from a Senate spending bill following vociferous opposition from food safety advocates. The controversial provision would have stripped US federal courts of the right to halt the sale and propagation of genetically modified seeds and crops if tests revealed concerns about their safety.
And there’s obviously an international dimension at play. In 1974, as National Security Advisor, Henry Kissinger was instrumental in the publication of a highly contentious National Security Study Memorandum that centred on the "Implications of Worldwide Population Growth for US Security and Overseas Interests". Among its conclusions the Memorandum explicitly raised the question of whether the US should consider giving preference in terms of food aid to countries that are deemed "constructive in use of population control measures". Kissinger is reported to have said that if you "control food, you control the people".
That quote sprung to mind when I came across recent speculation (some would say 'wild' speculation) that Ukraine's President Viktor Yanukovych halted the steering talks on entry to the European Union (EU) only after it became clear that EU trade deals could open up Ukraine's vast wheat acreage to Monsanto's proprietary seed technology.
If you think that the Saudis have enjoyed disproportionate political patronage due to their pivotal position in global oil markets, just imagine the kind of leverage a country would get if it effectively controlled global farm inputs. And if you still think that politics aren't bound-up with access to our most natural resources, consider the appalling case of Syria.
Ostensibly, the ongoing conflict in Syria is a political struggle between forces loyal to Bashar al-Assad's Ba'ath government and those seeking to bring it down. Of course, things are hardly that clear-cut. The April 2011 uprising - popular or otherwise - was quickly subverted by competing foreign powers intent on either re-shaping the Middle-East, or increasing their influence in the region - or maybe both. It doesn't pay to dwell on the mixed agendas of Hezbollah, Washington or the House of Saud - historians will take care of that in due course. But it may be worth considering whether the conflict is not rooted solely in ideology, but is yet another manifestation of an uprising brought about by a shortage of food staples - or in the case of Syria - water.
Water wars
The notion that Syria's civil war could have been triggered by basic shortages - as opposed to the doctrinal schism between the Sunni and Shia branches of Islam - might seem fanciful. But there's no shortage of historical precedents; food riots broke out prior to the original 'Arab Spring' uprising in Tunisia, the Bolshevik revolution of 1917, and the storming of the Bastille in 1789. Eight years ago, rural areas in Syria were forced to endure a prolonged drought that forced many small-holders off the land. Political analysts from Washington's Smithsonian Institute have ventured that the displacement of a sizable portion of Syria's farming community and subsequent migration to urban centres could have fuelled civil tensions throughout the country.
And it gets worse. The Smithsonian points to project data from the Gravity Recovery and Climate Experiment (GRACE), a dual satellite system launched in 2002 by NASA and Germany’s aerospace centre. GRACE found that the water systems of the Tigris-Euphrates Basin - made up of Turkey, Syria, Iraq and western Iran - are disappearing at a faster rate than any other area on the planet, with the exception of northern India.
With bloody borders to the south, it is hardly surprising that Turkey is taking an increasingly hard line in relation to the conflict in Syria. It's certainly true that Syria - and its bedfellows in the region, such as the Kurdish PKK independence movement - have been agitating in the region for decades. And, of course, there are still residual Cold War tensions from the regional alliances built up by the Soviets and Uncle Sam. But could it be that Ankara's motives are partially linked to the politics of regional water supply? Although it's strongly denied by Turkey, estimates suggest that since the mid-1970s, hydro-electric programmes in the country have cut groundwater supplies to Syria by 40 per cent and to Iraq by a staggering 75 per cent. The failure of Iraq, Turkey and Syria to reach a water-sharing agreement on the Tigris and Euphrates rivers could mean that the cradle of civilisation will be running dry by as early as 2025.
The possibility that the Syrian crisis was, in part, precipitated by a water crisis shouldn’t surprise us. It's long been thought that water, as opposed to crude oil, will be the progenitor of the wars of the 21st century. It could be argued that the policies of the International Monetary Fund and the World Bank have exacerbated problems linked to regional water supplies, particularly for low-income communities across the globe, through strict privatisation conditions attached to their lending. Some of the best (should that read 'worst') examples of this came from Central and South America. There was widespread outrage due to the privatisation of water supplies in Cochabamba, Bolivia when the engineering giant Bechtel set up a subsidiary, Aguas del Tunari, in early 2000 and promptly hiked up water prices beyond the reach of the bulk of the population. European corporations such as Suez, Vivendi, Agua de Barcelona and United Utilities have come under particularly heavy criticism for their involvement in the region’s water supplies.
