Integrating Sustainability into Commodity Investing

Generally, commodity investments can be divided into direct and indirect investments. Direct investments include real productive assets, such as agricultural land or physical commodities (e.g., gold), whereas indirect investments include debt or equities from commodity-related companies and commodity derivatives (see Figure 22). A main discussion concerning commodity investments and ESG or sustainability issues revolves around the impact of physical and derivative investors on commodity prices. Numerous organisations and political parties claim that commodity investments influence commodity prices, especially food commodity prices, which may, in turn, adversely affect food security in developing countries. This chapter focuses on ESG issues related to physical and derivative commodity investing, while leaving aside investments in real productive assets as well as debt and equity investments in resource companies.