Zembla documentary blasts ABP, PGGM and Mn Services, saying commodity investments behind food crises

Report says funds are ignoring research that speculation is fuelling food price bubbles.

The three largest Dutch pension funds ABP, PGGM and Mn Services have come under fire from an influential Dutch television documentary and a government-sponsored report over their major holdings in commodity derivatives, which critics claim have contributed to global food crises.
The allegations were aired in a December 23rd broadcast of investigative show, Zembla, the programme that caused huge controversy in the Netherlands in 2007 when it revealed that some large Dutch pension funds were invested in companies involved in child labour and the production of landmines and cluster bombs. The programme led to a major overhaul of pension fund investment in arms companies. The latest documentary accused the large Dutch pension funds, which jointly invested just under €17bn in commodities derivatives (approximately 5% of the global market) in 2010, of fuelling financial speculation in agricultural commodities that led to severe food price spikes in developing countries last year and in 2008. The pension funds say the food price increases have been the result of real supply and demand factors. Dutch pension funds are some of the biggest global institutional investors in commodities. PGGM, and its owner and main client, pension fund PFZW, has 7% of its total investment portfolio invested in commodity futures. The pension funds positions in commodities derivatives was revealed in a report, titled: Dutch banks and pension funds in agricultural derivatives markets, published in December by the Dutch Centre for Research on MultinationalCorporations (SOMO), which received financial assistance from the Dutch Ministry of Foreign Affairs. The report estimated that of the three pension funds’ total commodity derivatives allocations, PGGM and APG invest 10% and 16% respectively in agricultural commodities, with Mn Services’ share estimated at 25%. The SOMO report claimed that an increasing number of academic studies broadly show that that the dramatic rise in financial investments in agricultural commodity markets is impacting prices, both in futures and in spot markets, leading to food price bubbles, which it said had a “devastating impact” on the most vulnerable populations prone to food shortages. The report said that total commodity assets, invested mostly through derivatives, had grown from a negligible amount a decade ago to more than US$400bn today. It said the pension funds and other Dutch financial institutions should stop investing in staple food derivatives, provide more transparency about their commodity trading activities and answer research critiques that financial investments are distorting the world food market. PGGM has published a paper on its commodity investments on its website. At the beginning of 2011, both the Dutch parliament and the Ministry of Economic and Agricultural affairs (ELI) held related hearings after parliamentarians pressed the government on the issue. To date, the Dutch government has said there is “little evidence of a causal relationship” between increased financial speculation and the increase in food prices. Link to SOMO report and Link to Mn Services response