INVESTMENT CONTRACTS FOR AGRICULTURE: MAXIMIZING GAINS AND MINIMIZING RISKS

The report analyzes the impact of large-scale agricultural investments in developing countries, identifying five key positive outcomes and five primary downsides. It argues that while domestic laws are the best foundation, investment contracts can fill regulatory gaps to ensure responsible conduct. The authors propose a three-stage contracting process—preparation, negotiation, and monitoring—and provide specific legal options to embed social, environmental, and economic safeguards into these agreements to prevent project failure and community conflict.

• Employment creation is the primary benefit of large-scale agricultural investments, though it often lacks gender balance and senior-level inclusion for nationals. A study of 39 projects showed they directly employed approximately 39,000 people and indirectly employed 150,000.
• Outgrower schemes, where investors contract with nearby small-scale farmers, are the most successful business model for technology transfer and rural income growth, creating one job per 3 hectares compared to one job per 19 hectares in pure land investments.
• The establishment of processing facilities and local business development plans helps expand market opportunities and is generally perceived more favorably by host countries due to the absence of land acquisition conflicts.
• Community Development Agreements, if enforceable and integrated into the main contract, can create a virtuous cycle where financially successful investors provide infrastructure like medical centers and schools, improving project viability.
• Reduced access to land and poorly executed resettlement plans are the most significant negative impacts on local communities, often stemming from a failure to recognize informal or customary land rights.
• A lack of transparency and inadequate community engagement during land deals often leads to mistrust and operational difficulties, which can be mitigated by making contracts public documents.
• Approximately half of the agricultural investments studied were unprofitable or failed due to flawed concepts, such as incorrect crop choice or location, highlighting the need for independent verification of feasibility studies.
• Environmental and social impact assessments (ESIAs) are frequently treated as symbolic 'box-ticking' exercises and are rarely integrated into actual business operations or contracts.
• Local communities often lack sufficient mechanisms to raise grievances and seek redress, necessitating the establishment of company-level grievance mechanisms based on international standards like the IFC Performance Standards.
• Stabilization provisions that freeze domestic laws at the time of signing are widely considered unacceptable, although limited stabilization for fiscal issues like taxes may still be supported.

APA

International Institute for Sustainable Development (2015). INVESTMENT CONTRACTS FOR AGRICULTURE: MAXIMIZING GAINS AND MINIMIZING RISKS. https://www.iisd.org/system/files/publications/world-bank-agri-investment-contracts-web.pdf

Chicago

International Institute for Sustainable Development. INVESTMENT CONTRACTS FOR AGRICULTURE: MAXIMIZING GAINS AND MINIMIZING RISKS. 2015. https://www.iisd.org/system/files/publications/world-bank-agri-investment-contracts-web.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=INVESTMENT CONTRACTS FOR AGRICULTURE: MAXIMIZING GAINS AND MINIMIZING RISKS |date=June 2015 |url=https://www.iisd.org/system/files/publications/world-bank-agri-investment-contracts-web.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2015investment, author = {{International Institute for Sustainable Development}}, title = {{INVESTMENT CONTRACTS FOR AGRICULTURE: MAXIMIZING GAINS AND MINIMIZING RISKS}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = jun, url = {https://www.iisd.org/system/files/publications/world-bank-agri-investment-contracts-web.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }