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Institutions should move to lower-risk agri: Australian think tank

As risks increase across a variety of sectors, lower-risk agri will become an increasingly important part of the portfolio of institutional investors, according to a paper released by an Australian think tank.

As risks increase across a variety of sectors, lower-risk agricultural investments will become an increasingly important part of the portfolio of pension, superannuation funds and other forms of long-term capital, according to a paper released by an Australian think tank.

The Centre for Policy Development (CPD) pointed to Sustainable Land Management (SLM) Partners as an example of an investor that supports long-term agri investments which enhance both agricultural profitability and sustainability.

“By increasing the ecological resilience of its landscapes and matching production to carrying capacity, SLM Partners is able to significantly reduce volatility of earnings from agricultural investments,” the think tank said. Improved soil health, biodiversity and quality of land management are among the factors identified by CPD as important for funds to meet commitments to investors.

Considering the future of Australian agriculture, the think tank says the natural resource base supporting agricultural production has been gripped in a cycle of mutually-reinforcing environmental and economic decline. It says sustainability-focused investors, farmers, brands and supply chain players will all play a key role in a stronger economic and ecological future.

“Demonstrating the sustainability and productivity benefits of tapping into virtuous ecological cycles, and to encourage more producers, brands and investors to get on board,” is the first step towards achieving this future, according to co-author Sue Ogilvy.

The paper also said that sovereign investment will become increasingly important for future food security.

The think tank suggests policies to promote high-value, sustainability-conscious markets, including extending cutting-edge practices to ‘fast followers’ and developing metrics for participants to have the information and incentives needed to drive better outcomes.

Read the discussion paper, From vicious to virtuous cycles: a sustainable future for Australian agriculture.