Asset Trip with Artem Milinchuk: Why This Startup Founder Believes ESG Is the Future of Investing

So you have the majority of your investments in US farmland then? Can you talk a little about why that is and how it aligns with your investing goals?

You know for me it's mostly the fact that as a founder, I need to show that we eat what we kill. So I, and most of our principals, actually invest in every deal. But beyond that, it's really the fact that farmland is a long-term, uncorrelated real asset that is very stable. 

Historically, there's very low volatility, and it produces attractive long-term returns. It's a long-term asset that should be in almost anyone's portfolio because when you look at the Sharpe ratio (the quality of the portfolio measured by return commensurate to risk), adding farmland almost always improves portfolios by that metric, which is the sort of metric that most professional methods use when they assess a portfolio.

Can you talk a little bit about your investing goals? Do you invest mostly for long-term, for passive income, both?

It's really long-term price appreciation. It's passive income of course, and a lot of our deals are development deals, meaning that cash flows only come in a few years later...sort of that more delayed gratification. 

And then honestly also just peace of mind, because with farmland you don't need to check the stock price every day. [You're not thinking], "Oh suddenly the environment has changed, we're in a different state of the world. This technology is over, oil is over, tech is in, tech is back in the doghouse." Because everyone needs to eat all the time, so I don't need to worry if my investments are producing, which is, at the end of the day, what an investment does. It's never going to go out of fashion.

How did you get started investing? How old were you and what was your first investment?

I started investing in the first year of university where we had this mock stock trading competition and I think my first investment was just the mutual fund for Russia, which is where I used to live at the time. I did quite well, I thought I was a brilliant investor. I invested more, and then I think there was a correction.

If you could go back to the beginning of your investing journey and do anything differently, what would you change about the way you've invested thus far?

Honestly just having a longer-term horizon. Every time I tried to chase a particular fad or got excited by a particular trend, it never turned out well. But when I just took a little bit of time to think “Why does this have value? Is the price reasonable for this investment?”, I have almost always done well.

Apart from farmland and FarmTogether, do you use any other investing platforms or invest in any other alternative assets?

Coinbase a little bit, and I have Fidelity accounts. A lot of this is broadly for me to follow the markets because as a capital markets platform we need to be ready to talk about farmland in the context of the broad investment landscape. With Fidelity, I can see stocks, bonds, all those sorts of traditional assets, and then with crypto, I can also see what's going on in that more innovative corner of the market. 

It may be paradoxical, but I think farmland is an especially great investment for people who invest in crypto, because crypto is so high risk and then farmland is sort of this healthy, stable part of your portfolio. If crypto is the crazy sugar, then farmland is like the salad of your investment diet.

Are there any alternatives you've been curious about or are eyeing? 

Honestly, we're just so focused on farmland. So, I'm interested in any products that touch what I call 'natural assets' because that's what we really deal with. Occasionally a place like New Zealand will have the more developed natural assets and investment platforms. Or recently, I was pitched an oyster farm. I'm kind of narrow-minded. I just try to keep my head down and, of course, focus on what we do best, which is farmland.

Are sustainability and impact investing concerns for you or are you mostly concerned with returns and risk management?

I wouldn't even call [sustainability] a concern—it's central to how I think about investing. In fact, I'm not going to name the platform, but I mentioned I hold a small amount here and there on different investment platforms because I want to know what's going on. Well, I recently closed one of my accounts with one of those investment platforms because the so-called "sustainability portfolio" was anything but. 

At the end of the day I don't want to bash people that are not wearing sustainability on their heart and living their life to that standard, not at all, but at least avoid greenwashing. You can honestly say "this is an oil company investment" but if you call a portfolio sustainable and it's not, I'm going to leave. I emailed the founders and never heard back so I closed my account there.

With sustainability and impact investing becoming so much more popular in recent years, is that something you've seen a lot more of, these companies and funds that do a lot of greenwashing?

You know, I don't think there's actually that much greenwashing, surprisingly. Well, let me rephrase that: There's definitely quite a bit of greenwashing but surprisingly, to me, there are a lot of companies and investments that actually do the right thing. 

So, for example, we're a part of the Leading Harvest standard, a sustainability standard specifically in farmland. And we're also looking to do regenerative agriculture. But we just haven't found the deals that truly fit that, and we're actively looking. We're a great example of how you could easily just slap “regenerative” on something [that isn't] and most people trust you're doing the right thing, but we would never do that. 

And I see more and more companies trying to truly understand what's the actual impact, what's the actual measurement? At least in agriculture there's definitely a lot of good, very honest discussions and the farmers themselves are very, no pun intended, down-to-earth and grounded in how they think about it. Life is short, and climate change is really the biggest issue we're facing, and when people trust you, engaging in greenwashing is just incredibly toxic, so I'd avoid it at all costs.

I think a lot of investors, especially those who are new to sustainable investing, are questioning whether or not hopping on that train is really going to make a difference. So, as someone who sees what's happening on the ground, are you optimistic about the impact this form of investing can have on the world?

Oh absolutely. I think there's something like $32 trillion of capital with an ESG type mandate or something that's ESG connected. We're definitely moving in the right direction, even if I think of 5 or 10 years ago. We were very early with ESG in 2012 or 2010. At the time it still looked like this hippy-dippy thing. Today it's mainstream. 

Two things: One is that every investment platform is selling an investment product, and an investment product is not just about returns. It's about everything. And part of that is impact. So we have a lot of investors actively demanding ESG, who only want to do ESG deals, and they're very inquisitive. You definitely can't fool them. So we see firsthand how that resonates. 

Secondly, when you think about ESG, you're thinking “Is your investment making a positive impact? Can you quantify it?” But there's also this much more pragmatic view, which is with our investments, are we taking into account what are very likely changes in social dynamics that will result in loss? Or that will result in regulatory compliance? So a great example is when we looked at oil in Canada as far back as 2009 or 2010, and we were modeling scenarios that would introduce a carbon price. So is that ESG? Yes, in a way, that's ESG investing. 

When you're making a decision, you're saying “What if society changes and what we're investing in becomes pricier?” So in a way being an ESG investor is almost just being an investor, where you have to think about what will happen to society in 5 years, and all the trends are pointing toward more regulation and more demand from consumers. I have this joke I like which is if that alternative medicine worked it would just be called medicine. Well, ESG investing at some point will just be called investing.

So you truly believe that sustainable investing isn't just about the good it does in the world—it's also just a smart investing decision?

Absolutely, absolutely.

For folks who are really thinking about making their portfolio more sustainable or getting into ESG investing for the first time, do you have any advice for getting started?

I would take a look at the biggest companies that are pushing ESG out there, so start reading BlackRock letters and looking at the ETF and the principle that BlackRock promotes. Our advisor, friend and mentor is Richie Prager who was a former key executive at BlackRock. This ESG part is, in a lot of ways, their life work. Right now I have a lot of trust in the way BlackRock thinks about ESG. 

If something changes, do your homework as always, and look at the results. "A good tree doesn't bear bad fruit," right? So at the end of the day, take a look at the action and the results of that particular investment.

What are your biggest investing wins and your biggest investing losses?

I hate to sound self-promotional but it was honestly just betting on myself and FarmTogether and farmland. Because in a way when you start a company you're putting all your time and money into investing in yourself and one idea. So that's the biggest win there.

And then the biggest loss...it was selling Tesla too early.

Take your own Asset Trip

If you're interested in investing like Artem, you can check out these platforms:

• Coinbase: Coinbase offers a trusted and easy-to-use platform that allows you to buy, sell, and track all your crypto in one place and even schedule your buys daily, weekly, or monthly. 
• FarmTogether: With FarmTogether accredited investors can select from a curated portfolio of properties, locations, and crop types to invest in US farmland.