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CEFC ‘open to investments’ in equity funds, regenerative agriculture and agtech

CEFC has made its first investment in carbon sequestration with a A$1.7m commitment to the Soil Carbon Company.

Australia’s Clean Energy Finance Corporation “hasn’t set a limit” on how much it could invest in agriculture, director Rory Lonergan has told Agri Investor.

Lonergan said the sector is attractive to the CEFC because of its unique potential, alongside forestry, to sequester carbon and potentially have a negative emissions output overall.

“We haven’t set a limit on how much we’d like to invest in the sector,” Lonergan said. “It’s opportunity-driven and we assess [investments] on a case-by-case basis, largely driven by the impact we feel they can have across the sector.”

The CEFC, backed with funds from the Australian government, made its first investment in bio-sequestration at the end of June with a A$1.7 million ($1.2 million; €1.0 million) commitment to the Soil Carbon Company. The start-up is developing a microbial treatment for seeds with the potential to increase the level of organic carbon in the soil in which they are planted.

The commitment was part of a wider A$10 million capital raising that was also backed by  Grok Ventures, Artesian and Hong Kong investment group Horizons Ventures.

CEFC’s investment was made via its Clean Energy Innovation Fund, a vehicle created to invest A$200 million of the corporation’s capital in early-stage clean technology companies.

The fund’s director Kristin Vaughan told Agri Investor that Soil Carbon Company was attractive because of the trials it was already conducting in the field with farmers.

“We thought that was a key part of how you create a product that’s actually used by farmers,” she said. “In terms of the technology itself, there were some very promising early studies around how much additional organic carbon these microbes could actually deposit into the soil.

“Here, [the carbon] seems to be deposited as melanin, which is resistant to hydrolysis, and in soil micro-aggregates, which are anaerobic, so you don’t have those dual issues of it reacting with water and air and being released back into the atmosphere.”

Increased carbon in the soil can enable it to retain more water and improve the ability of crops to withstand extreme weather.

A 2018 report from the University of Sydney’s United States Studies Centre found that Australia had invested $0.12 per capita in agtech in 2016, compared with $5.80 in the US and $6.05 in Israel.

Vaughan said this showed that Australia’s sector was still some way behind those of other countries but was ripe for growth and further investment.

“If we look at Australia’s competitive advantages, we should be really good at agtech,” she said. “We’re seeing opportunities come through … to grow the space.”

Backing funds

The CEFC last year committed A$8 million to Tenacious Venturesinaugural fund, which held a first close on A$20 million in Q1 2020 and made its first investment in waste management start-up Goterra in June.

The CEFC has also committed A$100 million to Macquarie Infrastructure and Real Assets’ agriculture platform and has invested more than A$350 million through smaller asset finance programs in the sector. These co-finance programs support investments in smaller-scale transactions to enable farmers to benefit from clean energy technologies.

Agricultural technologies account for 33 per cent of all co-finance projects that CEFC has financed to date through this program. These projects include updates to energy-efficient on-farm equipment, improvements to on-farm buildings, energy- and water-efficient irrigation equipment, and the installation of small-scale solar generation.

Lonergan said the CEFC was talking to fund managers about further investments and that further equity investments were a possibility.

“One of the challenges in the sector is that there’s a high degree of fragmentation with lots of farms, in many cases that are maybe sub-scale,” he said. “We’ve focused on trying to play at the more institutional end, because we think if we can get some of the large players to be at the leading edge, it can have a trickle-down effect, or demonstration benefits, to other players.

“We continue to be open to investments in the space that drive real change through the sector. We’re looking for opportunities to drive uptake of technology or farming practices that reduce the emissions intensity per unit of output. Soil carbon is potentially a big part of that and the regenerative agriculture theme is at the forefront of that.”