Managing Climate Risk with AI

We know that climate change can present challenges for agricultural investors, such as the risks of global warming having an impact on harvests. So how do we use artificial intelligence to mitigate these risks?

Managing climate risk with AI

We know that climate change can present challenges for agricultural investors, such as the risks of global warming having an impact on harvests. So how do we use artificial intelligence to mitigate these risks?

Finding opportunities in the face of climate change

Taking a scientific approach in our regenerative farmland strategy we look for and invest in those agricultural areas we believe will in fact benefit from climate change and avoid those at risk.

Applying artificial intelligence (AI) to our climate risk models enables us to accurately forecast the impact of climate change on specific agricultural areas. We do this by comparing local data with higher resolution ground and satellite data, using machine learning to calibrate our seasonal and long-term models of temperature and precipitation.

We are a leader in deploying AI in our business. Portfolio manager Tim van den Pol describes our approach. “We think about what the climate is likely to do and then try to mitigate for this. Often there is a lot of anecdotal evidence from brokers, but it’s hard to quantify, so we use a data-driven way to test our hypotheses.”

As climate conditions change, so do the best areas for farming. For example, prime areas are moving away from the US corn belt into northern Ontario, to Denmark instead of southern Germany or northern France, in Australia to its wetter west coast and in New Zealand southwards.

Our AI tool allows us to recognise those areas that best serve our objectives: enabling the new generation of farmers to grow their farms as a business, while protecting the environment, and aiming for long-term returns for the investor.

For example, we have invested in a citrus orchard in Covadonga, northern Spain, which provides conservation land suitable for biodiversity projects. Initially, the location was chosen because of its cooler microclimate as it is protected by hills in the north.

Before investing, our agronomic team onsite mapped the climate against necessities for growing citrus (no frost in the early season, nor extreme heat in the flowering season, nor high rainfall during harvest time). These points were then matched against the AI’s climate forecasts. They showed the weather stays relatively stable until 2050, when it starts to warm slightly but less so than for other citrus orchards further inland.

This detailed modelling also enables us to identify any potential risks. We can then improve productivity by finding ways to address those risks.  One of our key strengths is our owner/occupier and owner/lease relationships with local farmers which mean we are able to work closely with them to make sure agreed plans are delivered.

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Want to know more? Please visit our website to learn more about our farmland strategy and the potential opportunities.

 General risks to take into account when investing in Farmland

Please note that all investments are subject to market fluctuations. Investing in agricultural land has an average risk. These categories are generally characterised by stable income and relatively stable collateral. On the other hand, the tradability can be limited. Profile of the typical investor: The strategy may be suitable as an additional investment for professional and well-informed investors who:

• Are interested in allocating capital to global farmland through investments who are large enough to ensure a professional, efficient and scalable operation protect the integrity of the asset class and also create a positive impact through a progressive farmland strategy;
• Seek a long-term investment (10 years or more);
• Understand and accept the considerable risks involved in investing illiquid asset classes;
• Can bear considerable losses; and
• Have experience of the structure, risks, disadvantages and advantages of investing in (non-traditional) markets

Disclaimers

This is a marketing message. Van Lanschot Kempen Investment Management NV is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of Van Lanschot Kempen Investment Management NV at the Dutch Authority for the Financial Markets (AFM). The Fund is notified for offering in a limited number of countries. The countries where the Fund is notified can be found on the website. The Fund is only available for professional investors. The information in this document provides insufficient information for an investment decision. Please read the prospectus (available in English) and the sustainability-related disclosures before making an investment decision. These documents of the Fund are available on the website of VLK. The information on the website is (partly) available in Dutch and English. Here you can also find our sustainability-related disclosures.

Capital at risk The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested. Past performance provides no guarantee for the future.