Tokyo-based Nippon Life Insurance Company makes its first investment in a farmland investment fund through a US$92.5 million investment in an overseas farmland investment fund managed by Hancock Natural Resources Group
Japan's Nippon Life makes a US$92.5 million offshore farmland investment
In a bold move from a not-often seen geography, Tokyo-based Nippon Life Insurance Company (Nippon Life) announced its first investment in a farmland investment fund – making a commitment of A$119 million (US$92.5 million) in an overseas farmland investment fund managed by Hancock Natural Resources Group (HNRG).
“This investment by Nissay (Nippon Life) is very significant on several levels,” commented Greg Mellinger, CEO of HighQuest Partners, the organizing entity for Global AgInvesting conferences. “First, they are one of the most prestigious and conservative investors in Japan. Second, institutional capital from Japan into agricultural asset classes has largely been absent and this new development will undoubtedly raise many eyebrows in Japan among their peers. Lastly, Nissay would have kicked the tires very hard and gone through many rounds of approvals, diligence, fund scrutiny, and reflection in order to reach this decision. This may bode well for the many Japanese institutional investors we know about who are also in the process of learning about agricultural investment opportunities in key regions. I applaud the Nissay initiative and congratulate both their team as well as the Hancock Natural Resources Group who I am sure worked very hard to earn this mandate.”
Nippon Life notes multiple drivers behind the decision to make its first capital commitment to a farmland fund, including the potential for return on investment tied to growing global food demand in association with climbing population growth; the historical record of successful performance displayed by farmland investments stemming from both the sale of crops and lease revenue; and the diversification such investments provide for an asset portfolio and their low correlation to bonds and listed equities.
Farmland also appealed to Nippon Life as an investment class due to the long-term nature of the investment, the positive effects such investments could generate for society, and the potential such investments have to support the achievement of the UN Food and Agriculture Organization’s (FAO) food security goals.
Toward this end, Nippon sees its investment in the fund managed by HNRG, which has 30 years experience in technologically-advanced agricultural production, as a means to support the stabilization of farmers’ incomes, and a way to lessen the environmental impact associated with food production.
A Mighty Mission
Internally, aligning with its Mid-term Management Plan (Fiscal years 2017-2020), Nippon Life has committed to make investments totaling JPY 1.5 trillion (US$140 billion) in “new and emerging growth fields”, and has established a goal of investing JPY 200 billion (US$1.8 billion) in ESG (environmental, social, and governance) bonds and similar investments over the four-year period.
This investment framework stems from Nippon Life’s ongoing work providing products and services and asset management, among other capabilities to businesses engaged in achieving the “Sustainable Development Goals” (SDGs) adopted by participating countries during the United Nations Sustainable Development Summit held in September 2015.
Aiming to achieve greater sustainable development within society, alleviate poverty and starvation, and to affect change in regard to climate change, energy use, and unrest, the UN’s SDGs consist of 17 goals and 169 targets which all participating countries and businesses hope to achieve by 2030.
For Nippon Life, this investment is deeply aligned with these goals of ending hunger, achieving food security, improving nutrition, and supporting sustainable agriculture.
Japan Stepping Up and Out
When discussing capital flows and trade relations between Australia and Asia, China is often the first Asian country that comes to mind. However, after years of flatlined economic growth, Farm Online reports that Japan, the third largest economy in the world, is stepping up and out into overseas investment markets. As tourism jumped 30 percent between 2013 and 2017 hitting 24 million visitors in 2016, along with hosting the Olympic games in Tokyo in 2020, and the Rugby World Cup in 2019, Japan is turning a corner and is taking its rightful place on the international stage.
“Japanese companies are leaders in their fields and they’re showing strong interest in partnering with agriculture in Australia,” said Grant Knuckey ANZ Banking Group’s Japan general manager.
Japan is Australia’s second largest export market, and its second largest source of FDI after the U.S., according to Austrade. As such, it follows suit that the fund invested in by Nippon Life will focus on investments in Australian farmland, before expanding its geographic reach to other countries.
As Japan’s economy continues to strengthen, its companies are increasingly looking at offshore investments, including in Australia’s traditional sectors, such as agriculture.
Between 2010 and 2016 Japanese investment in Australia skyrocketed by 78 percent to reach a value exceeding $91 million, according to the report Japanese Investment in Australia: A Trusted Partnership, released last year by Austrade.