Field Notes: KKR’s holistic approach draws in ag; Murray-Darling Basin law passed; the agtech that can decarbonize Asia by 12%

KKR’s holistic approach draws ag into $2.8 billion fund, Australia’s Senate passes Murray-Darling Basin legislation, joint report says agtech can decarbonize Asia’s food systems by 12 percent, PSP reaps rewards from its direct investment approach, and more. Welcome to Field Notes, the start-of-the-week briefing for our valued subscribers only. Tips and feedback to: binyamin.a@pei.group.

First look

KKR Global Impact co-head Ken Mehlman says the inevitable damage caused by climate change will help sustain policy support for large-scale remediations such as those managed by Impact portfolio company Resource Environmental Services. (Image: Getty)

‘Agriculture, water and land remediation are really important’ 

When KKR closed its Global Impact Fund on $2.8 billion in November, the firm more than doubled its $1.3 billion haul for Fund I while also attracting three times as many investors.

Ken Mehlman, a KKR partner and global head of public affairs who also serves as co-head of KKR Impact, tells Agri Investor the main development in the time since Fund I has been an intensification of interest in its key themes and a more holistic approach to sustainability that includes ag.

The investment strategy for Global Impact Fund II is organized around pillars of inclusive growth, lifelong learning, sustainable living and climate action. It has attracted new and existing investors including pension funds, insurance companies, high-net-worth individuals and others.

“The energy transition isn’t just where we get our energy from. It’s also dealing with how to address the climate challenge – and that’s where I think agriculture, water and land remediation are really important,” said Mehlman, who joined KKR in 2008 after a career in national politics.”

Four of the 17 investments in KKR’s Global Impact unit are into businesses relevant to food and agriculture, which include Axius Water, a provider of nutrient removal for industrial wastewater facilities; India-headquartered seed provider Advanta; Texas-headquartered water quality and environmental mitigation company Resource Environmental Services; and carbon project specialist GreenCollar.

In September, Ontario Teachers’ Pension Plan acquired the remaining portion of KKR’s Fund I stake in GreenCollar it did not already own in a deal that a source told Agri Investor was worth A$600 million ($385 million; €364 million).

Mehlman also noted the appreciation of agriculture’s potential role as a carbon sink has gained steam among policymakers at the federal and state levels. He said the support for development of related markets within recent pieces of industrial policy legislation, including the Inflation Reduction Act, are likely to continue attracting bipartisan support.

“There’s a way to make farming your friend when it comes to addressing climate change,” said Mehlman.

Read the full story here.

They said it

“The problem is not who is doing it, but that we are allowing it to be done”

Arizona State University Kyl Center for Water Policy senior research fellow Kathleen Ferris tells the Associated Press attention on farming operations supported by Middle Eastern investors highlights the need for oversight of the state’s groundwater.

Water

The new MDB Plan 

The Australian government last week cleared the final hurdles for its proposed changes to the Murray-Darling Basin Plan, securing the support of independent senators such that it was able to get its bill passed into law.

The passing of the legislation means that the previous cap on the amount of water that the federal government could purchase from irrigators has been lifted, with market participants now expecting the government to begin buying large volumes of water before too much longer.

Many believe this will inevitably lead to higher water entitlement values as the government is almost certainly going to have to pay top dollar to achieve its aims, which will also result in a scarce resource becoming even more scarce.

The cost to the government will run into the billions – early estimates suggest it could cost around A$15 billion – if it does want to pursue extensive water buybacks. Stakeholders will watch closely to see how far the government can get before the next Australian general election in early 2025.

LP watch

PSP’s direct approach pays off

PSP Investments’ collaboration with Pomona Farming to create its Hawaiian farming platform Mahi Pono demonstrates the advantages of the direct investment model often employed by Canadian pensions, said an academic paper.

Authored by University Pension Plan Ontario CEO Barnara Zvan, PSP’s Eduard van Gelderen and McGill University’s Sebastien Betermier, the paper also examines Ontario Teachers’ Pension Plan’s acquisition of real estate operator and developer Cadillac Fairview; CDPQ’s greenfield development of a metro system in Montreal and CPP Investments’ acquisition of private credit firm Antares Capital.

The paper reviews the deals and details how they demonstrate Canadian pensions’ ability to develop internal synergies, reduce fee drag, co-ordinate among stakeholder groups and achieve scale in strategic markets. In the case of PSP’s 2018 acquisition and development of a 41,000-acre property now operated through Mahi Pono, the authors wrote that PSP’s direct approach allowed the pension to overcome many of the challenges that have kept most large institutional investors away from ag.

“In a traditional direct investment, an operator runs an ongoing business. By contrast Mahi Pono began from scratch and transformed the fallow land into a large-scale farming venture that emphasized permanent crops such as avocados, citrus, coffee and macadamia nuts. These were complemented by row crops and pasture-raised cattle,” said the paper. “As a long-term investor in Mahi Pono, PSP is able to capture the direct value created from land optimization.”

The paper also notes that while large funds such as those executing the deals examined in the report are best positioned for a direct investment approach, smaller funds can pursue strategic partnerships that offer some of the same benefits.

“Pension funds that are willing and able to invest directly and patiently not only create and capture value for their beneficiaries but may also generate real benefits for society as a whole.”

Read the full paper here.

Deals

AIM-ing high 

Alberta Investment Management Corporation and New Agriculture have made their first Australian livestock investment with the acquisition of the Kimberley Cattle Portfolio in Western Australia.

Agri Investor understands the value of the deal is greater than A$300 million.

The nearly 3,000,000ha portfolio previously belonged to Archstone Investment Group, the family office of Chinese property developer Hing Wing Mau, Australia’s 19th-wealthiest person, according to the 2023 Australian Financial Review Rich List.

The deal follows AIMCo and New Forests’ entry into agriculture with the acquisition of mixed farming business Lawson Grains in January 2022, triggering the launch of New Forests subsidiary New Agriculture.

The Kimberley Cattle Portfolio boasts capacity for 50,000 breeders and caters to various livestock markets.

Approvals for the transaction are expected by the first half of 2024.

Read the full story here.

Decarbonization

Report calls for $125bn backing behind 20 Asian agtech plays 

A group of more than 20 technologies hold the potential to help bring about a 12 percent reduction in CO2 emissions in Asia’s food chain by 2030, according to a report from PwC, Rabobank, Temasek and software provider Terrascope.

In the third edition of the Asia Food Challenge report series, the group reports the role of agriculture within overall carbon emissions is even more significant in Asia than in other regions. It estimates $125 billion in investment will be needed to implement technologies to address those emissions and explains that the readiness of existing technologies and their relatively low-cost give agriculture and food production a better “carbon return on investment” than energy or aviation.

The specific technologies examined in the report focus on rice cultivation, fertilizer use, ruminant and swine livestock, food loss and waste, and deforestation. They include specific rice varieties, precision ag equipment and alternative farming practices.

“Most agrifood technologies are currently designed for larger scale US and European mechanized farms and are therefore less suitable for smallholder farms in Asia, without adjustments and localization to account for different farm sizes, farming practices, and environmental conditions (such as soil health or water scarcity,” the reports said. “The investment in Asia tends to be driven by relatively underdeveloped production systems, logistics solutions and supporting infrastructure compared with those in Western agrifood value chains.”

A chapter on the investment environment surrounding technologies to decarbonize Asia’s food chains identifies the key role played by corporate investors in the region and sectors of particular interest including machinery and robotics, biologicals and packaging.

Read the full report here.

VC fundraising

Yard Stick, a Cambridge, Massachusetts-headquartered startup offering soil carbon measurement technology, closed its Series A on $12 million after attracting investments from Toyota Ventures Climate Fund, The Nature Conservancy, Breakthrough Energy Ventures and others.

Ripple Foods, a California-headquartered dairy alternative provider, raised $49 million in a fundraising round revealed in regulatory filings first reported by Forbes. The company’s existing investors include Goldman Sachs, Fall Line Capital, S2G Ventures and others.

HempStreet, a cannabis-focused healthcare startup headquartered in New Delhi, raised $1 million in a pre-Series A round supported largely by high-net-worth individuals and company executives.

AgroSpheres, a startup developing technology to improve crop protection products, added $3 million to a Series B it closed on $25 million with participation from Lewis & Clark Ventures, Ospraie Ag Science and others.

Also in the news…

Louis Dreyfus targets Namoi Cotton

Louis Dreyfus Company, the French agribusiness giant, has made a non-binding offer to acquire 83 percent of shares in Australia’s Namoi Cotton in a deal worth more than A$100 million (Australian Securities Exchange).

Bahrain fund targets $750m climate expansion

Food and Agriculture is one of four focus areas for a new climate investment platform established with an anchor investment by the sovereign wealth fund of Bahrain and managed by Investcorp that will seek $750 million for investments into leading international companies active in accelerating decarbonization (Mumtalakat).

Duxton lists Timberscome aggregation

ASX-listed Duxton Farms has put its 8,432ha dryland cropping aggregation Timberscombe, located near West Wyalong in New South Wales, up for sale (Grain Central).

Biden opens the taps for ag

The Biden Administration announced $196 million in support for 185 projects designed to strengthen American food and agriculture supply chains deemed critical to economic and national security (US Department of Agriculture).

Who invests in agtech funds and why?

Agtech VC firm Tenacious Ventures’ podcast interviews two LPs about why they like to invest in the asset class (Tenacious Ventures).


Today’s letter was prepared by Binyamin Ali, Chris Janiec and Daniel Kemp.