It’s been another few weeks of extreme weather here in Australia, with searing temperatures breaking records in numerous places across South Australia and Victoria, bush fires in Tasmania, and multiple mass fish kills reported in New South Wales.
We’ve talked before about the effects of climate change and how Australian agriculture is likely to be more vulnerable than a lot of other places to its effects (even if the current government still doesn’t seem ready to get on board with the scientific consensus).
But it’s worth considering all these issues again after some interesting developments in the ag investment space in recent weeks.
Firstly, Australia saw an intriguing deal in which non-profit organization The Nature Conservancy partnered with local operator Tiverton Agriculture to purchase A$55 million ($39 million; €35 million) of farmland in New South Wales.
In the process, TNC and Tiverton pledged to save the land from irrigated agriculture, retaining a large swathe of ecologically-significant swampland and building on an existing working relationship with the local Aboriginal community in the process. It’s not just a pure conservation play, though, with the existing cattle stations on the site to be retained and run using sustainable farming practices that will help generate revenues for the joint venture, in turn helping TNC deliver returns to its investors as well as meeting its stated green goals.
It’s been billed as the largest deal of this type yet seen in Australia and as Chris Olszak, partner at Aither, who worked on the deal, told Agri Investor: “I don’t see why these deals won’t continue to happen. There’s a lot of support from banks and institutional investors for these deals.”
The deal is likely a sign of things to come.
As if to underline that point, Sydney-based Gunn Agri Partners is launching its Sustainable Cropland Transformation Strategy.
In a point of difference, the fund will use proprietary research to target regions of Australia that will be less affected by climate change and buy properties in those areas. It will then use sustainable farming practices to improve soil carbon and yields, providing measurable benchmarks to investors alongside all the usual financial and agricultural indicators that they would expect.
And this trend isn’t confined to Australia, either. In Europe, Insight Investments’ farmland fund gained a Guernsey Green Fund accreditation recently, with the firm’s head of farmland telling us that self-certification would soon be a thing of the past as large investors increasingly want measurable proof of a fund’s environmental credentials.
Individually, these stories are interesting in and of themselves, but taken together at precisely the time when extreme climatic events are again causing headaches for farmers and others across swathes of Australia, they represent a wider trend.
Working with a manger who is strong on ESG is no longer just a nice-to-have for LPs; it’s an imperative.
Vehicles like Gunn Agri Partners’ and platforms like TNC that offer LPs a chance to invest sustainably while still generating returns are only going to become more common.
And while investors into other asset classes are interested in ESG too, the synergy between sustainability and agriculture is particularly obvious. After all, without looking after the land and water, production of food and fibre will become more difficult, if not impossible in some places.
It remains to be seen how Gunn Agri Partners will fare with fundraising, but TNC has found huge success already with raising and deploying capital.
You can bet that ag investors in Australia and around the world will increasingly be asking their managers what they are doing on conservation and sustainability, and how it is impacting their financial returns.
Will you have a good answer?
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