Field Notes: COP28 fails to deliver for carbon markets; Ara closes Fund III on $2.8bn; mixed 2024 outlook for Australia

COP28 fails to deliver agreement on Article 6, which is needed for a global carbon market; Ara Partners closed its Fund III above target on $2.8 billion; Rural Bank expects a mixed year for Australia in 2024; deals round-up and more. Welcome to Field Notes, the start-of-the-week briefing for our valued subscribers only.

First look

Sunlit trees in a forest

COP28 fumbles global carbon market deal

COP28 delivered milestone agreements and pledges across food and ag, fossil fuels, catalytic capital and more under the umbrella text named the UAE Consensus.

But the voluntary carbon market, which has continued to grow in importance to farmland and forestry strategies, was left short of its global trading mechanism once again as an agreement could not be reached on Article 6.

Introduced in 2015 at COP21 in Paris, Article 6 would create a mechanism for trading GHG emission reductions between countries under the supervision of the Conference of Parties, the decision-making body of the UN Framework Convention on Climate Change.

“If this is not approved or adopted this CMA [meeting of the body overseeing the Paris Agreement], we will have to wait at least one more year – until COP29 – for this recommendation to come through, and then at least half a year before methodologies are approved by the supervisory body,” said International Emissions Trading Association policy adviser Björn Fondén.

“So, the first projects being able to register may be Q2, Q3 in 2025.”

Comhar Group director Emily Gerrard said there had been a tendency toward more complexity at COP28 negotiations, which could serve as a disincentive to investment.

“If you think about what makes this attractive or unattractive from an investment point of view, it is those things that we like as a private sector – the predictability, the certainty, the understanding of how things will work, transparency, ease of transaction, efficiency and the like,” Gerrard told Agri Investor.

Gerrard said decisionmakers needed to strike a balance between regulation and clarity, allowing participants to have trust in the scheme while not getting bogged down in the details.

“There are participants in the private sector that want to get going and make use of these markets, but while there is still a lack of clarity with Article 6.4, you can’t participate in it. You can get a bit ready, but you can’t launch into it until it operates.”

Read the full story here.

They said 

“Everyone keeps on challenging to say, ‘Is it just talk or does anything actually get done?’ There is a lot of talk, but talk does need to precede action”

Climate Fund Managers chief executive Andrew Johnstone says COP28 has been useful for climate finance, especially for his firm’s blended finance debt fund which needs coordination across several government ministries.

Fund watch

Ara Fund III closes on $2.8bn

Ara Partners, a Texas-based private equity and infrastructure manager focused on industrial decarbonization, has closed its third fund on its $2.8 billion hard-cap, according to a statement.

Ara Fund III was launched last year, alongside an infrastructure fund targeting $300 million, affiliate title New Private Markets exclusively reported. The flagship fund follows a global strategy investing in decarbonization solutions for industries such as manufacturing, materials and chemicals, energy and food and agriculture. The fund was oversubscribed, having initially targeted $2 billion.

It is the fourth-largest impact fund close since 2018, according to the NPMdatabase, and the only one in the top five not to be managed by a long-standing private markets brand (Ara was founded in 2017 as a specialist decarbonization impact manager).

The firm has also agreed to co-investment vehicles with some LPs, tipping the total capital commitment over the $3 billion mark. Rede Partners acted as placement agent.

“The growing, global presence of Ara’s platform and portfolio directly reflects the industrial economy’s continued demand for the technological innovation and infrastructure needed to decarbonize,” said Ara managing partner Troy Thacker.

Read the full story here.

Palladium Equity runs continuation fund deal on three assets

Palladium Equity is running a process to extend its hold over three assets from an older fund as it gears up for a potential fundraising next year, sources told affiliate title Buyouts.

The GP-led, multi-asset continuation fund deal is among several that are running through the end of the year.

GP-led deals represented around 35 percent of the overall total activity in the first half of the year, according to Jefferies’ half-year activity survey.

Palladium is working with Raymond James as adviser on the process.

The deal includes three assets: Sky Zone, Del Real Foods and Jordan’s Skinny Mixes. Total net asset value across the assets is about $450 million, one of the sources said.

BlackRock’s secondary group is lead investor on the deal, which is expected to close by year-end, sources said.

A Palladium spokesperson declined to provide details. Palladium holds the assets in Fund IV, which the firm closed on $1.14 billion in 2014. Fund IV limited partners had the option to cash out of their interests in the assets, roll into the continuation fund or do nothing, staying in the fund at the same terms they have had, sources said.

In this case, the majority of LPs chose to stay in Fund IV, taking the pure “status quo” option, one of the sources said.

Read the full story here.


Rural Bank’s 2024 outlook

Rural Bank, the Australian financial institution that publishes a high-profile annual analysis of farmland values, has published its outlook for 2024 – and it’s something of a mixed picture.

Climatic conditions do not look as bad as was feared earlier in the year, with the Bureau of Meteorology forecasting the El Nino weather pattern to dissipate by March 2024 and that rainfall through summer and autumn should be around average.

Full water storages in irrigated farming areas could also ensure conditions there are beneficial for another year. Average soil moisture levels are still below average, though, so good rainfall during the growing season will be important.

Away from the weather, trade conditions improved throughout 2023 and Rural Bank expects that to continue next year, with the reopening of trade with China a highlight.

Macroeconomic conditions are still likely to present a challenge for at least the first half of 2024, Rural Bank said, as strong population growth in Australia is offset somewhat by higher interest rates, cost pressures and low consumer confidence. Conditions should ease in the second half of the year.

Read the full report here.

Farmer climate survey

Most Australian farmers view climate change as the biggest threat to their businesses, according to the results of a survey conducted by lobby group Farmers for Climate Action.

The survey, which was filled out by 708 farmers and other people working in Australian agriculture, sought views on the Australian government’s Net Zero Plan for Agriculture and Land.

The main finding was that 89 percent of farmers have experienced “very unusual” or “somewhat unusual” climate-change-related events in the last three years, including heavy rainfall, unpredictable growing seasons and storms.

It also found that 71 percent of farmers have already invested money into emissions reduction measures such as solar panels, electrification of farm equipment and tree planting.

Climate change was cited as the single greatest threat to the future of farming in Australia by 55 percent of respondents, followed by bureaucracy and red tape (15 percent), water security (9 percent), increasing costs of insurance, fertilizer and other expenses (8 percent), transmissions lines being built on farmland (1 percent) and large renewable energy projects (1 percent).

A majority also said that promoting biodiversity on farms through mixed-species pastures and agroforestry systems, as well as rehabilitating degraded land not suitable for agriculture and trying to enhance pasture health and carbon uptake in soils, were the best ways to reduce emissions on farms.

Read the results of the survey here.


School of bluefin tuna

Amerra sells ‘steak’ in tuna business

New York-based Amerra Capital Management has sold its minority stake in Mexican bluefin tuna rancher Baja Aqua-Farms to a consortium of buyers. Financial details were undisclosed.

Law firm Gonzalez Calvillo, acting as counsel for Baja, said the consortium included Mexico’s Cultiba Aqua, affiliated entities of New York-based investment firm Continental Grain Company, Chicago-based family office Equity Group Investments and New York private equity company Castle Harlan.

Amerra chief risk officer Pat Morabito said the sale marked the end of a 12-year partnership which began with Amerra providing a credit facility to the business in 2011.

“Amerra worked closely with Baja executives and shareholders to transform the company from a struggling company into a fully vertically integrated enterprise.

“As a result, Baja is one of the premier integrated bluefin tuna ranching companies in the world.”

Amerra continues to own interests in aquaculture through its Spanish company Andromeda Group, acquired in 2016, and marine ingredients through Biomega Group.


FIA elevates two veteran execs

Atlanta-headquartered Forest Investment Associates has promoted senior vice-president Mike Cerchiaro to president and chief executive. Cerchiaro replaces Marc Walley, who will remain a board member and chairman of the investment committee.

Andrew Boutwell moves from his role as director of real estate transaction to assume his new position as senior managing director of FIA’s investment management unit, which manages two million timberland acres across the US, Brazil and Chile.

Cerchiaro and Boutwell both joined FIA in 2004.

“We have been deliberate and intentional about our succession planning, and as an independent and majority-employee-owned firm, FIA is proud to continue our legacy of growing our leadership from within,” said Walley.

“Mike and Andrew are recognized leaders at FIA and known throughout our industry with a reputation for excellence, innovation and as trusted leaders in forest investment.”

EY’s Rob Dongoski joins Kearney

Longtime EY agribusiness executive Rob Dongoski has joined Chicago-headquartered consultancy Kearney as partner in its consumer industries and retail practice.

Kearney announced the hire in a statement that also noted the appointment of James Wilde as a partner in its consumer industries and retail practice. Wilde previously held an agribusiness-focused role with EY-Parthenon, a brand under which a number of EY member firms across the globe provide strategy consulting services.

Dongoski said his move to join Kearney came in part from a desire to try something new. “I wasn’t too interested in continuing to do PowerPoint. I like the operational, real-world aspects of Kearney,” he told Agri Investor.

“I think of consumers sort of like the butterfly effect; they say they want to buy plant-based protein and that trickles all the way upstream.”

In addition, Dongoksi explained, the move away from his previous role allows him to pursue different opportunities, potentially including operating partner roles, which he had previously been prohibited from pursuing.

“In the EY, SEC oversight world, there are some regulations that don’t allow you to do board work, or certain things in private equity. For me, moving to an unregulated environment was pretty important,” he said.

Read the full story here.

VC fundraising

Agricarbon, a Scottish soil carbon measuring start-up, raised a £9 million ($11.3 million; €10.5 million) funding round led by Shell Ventures with participation from Barclays’ Sustainable Impact Capital, The Nest Family Office, Ananke, Counteract VC and MFS.

Vegrow, an Indian B2B marketplace for fruits, raised a $46 million Series C round led by GIC, with participation from Prosus Ventures, Matrix Partners India, Elevation Capital and Lightspeed India Partners.

Pachama, a San Francisco-based nature restoration start-up, increased the size of its Series B round to $64 million and was backed by T.Capital, Deutsche Telekom and Lowercarbon Capital, among others.

Spore.Bio, a French start-up developing AI that can detect bacteria in consumer products, has raised an €8 million fund round backed by EmergingTech Ventures, No Label Ventures, Famille C and Better Angle, among others.

Arbonics, an Estonian forest carbon removal platform, raised €5.5 million in a seed funding round led by NordicNinja, Plural and Tilia Impact Ventures.

Also in the news…

Inside the exit: How Vestar grew foodservice biz during covid and sold it to Sysco

Edward Don & Co made four acquisitions under Vestar (PE Hub).

China lifts restrictions on Australian abattoirs as trade tensions ease

China has lifted suspensions on three Australian abattoirs as it continues to ease trade restrictions on Australian goods (ABC News).

The looming land grab in Africa for carbon credits

Countries might soon be able to trade emissions reductions with other governments, but experts warn the market is already being exploited in developing countries (Financial Times).

Net zero emissions from Australian agriculture: a challenge and opportunity

An ambitious alliance to achieve zero net emissions in Australian agriculture and boost the $70 billion sector has been funded by the Federal Government (Cooperative Research Centre).

Today’s letter was prepared by Binyamin Ali, Chris JaniecDaniel Kemp  and Tom Taylor.