Australian fund manager New Harvest Investment Management has secured an equity commitment from National Australia Bank for its Indigenous Impact Investment Fund, as it continues to make progress with fundraising.
The bank announced it would commit A$10 million ($6.6 million; €6.1 million) to the fund, in a rare move by an Australian bank to make an equity investment in a commingled agriculture fund. The investment may be accompanied by additional debt funding, depending on the ultimate size of the New Harvest fund and other requirements.
New Harvest is progressing with fundraising and is on track to achieve a first close on around A$150 million, Agri Investor understands, with cornerstone commitments to the fund also being made by the firm’s principals. The fund has an ultimate target of A$500 million. NAB’s commitment is conditional on the fund raising a minimum of A$51 million.
The IIIF is a natural capital farmland fund that will pursue investments in farmland assets complementary to those held by Indigenous owners, aiming to create equity partnerships with Indigenous operators that will help them expand and improve their assets for the mutual benefit of them and the fund’s investors. The fund-owned assets will be run alongside Indigenous-owned assets as a co-operative managed by New Harvest Asset Management, NHIM’s asset management company.
The firm is chaired by industry veteran Don Mackay and board appointees include prominent rural figure Georgie Somerset. It is run day-to-day by managing director Simon Gray and its management team includes head of operations Tom McKeon, who was previously head of real assets at Insight Investments, with responsibility for its global farmland portfolio.
The fund will be focused on the interplay of pastoral livestock farming with soil carbon sequestration, aiming to use this to increase carrying capacity on the land as well as creating extra value for investors through the creation of Australian Carbon Credit Units.
“Carbon will be a central consideration of any investment that we make,” NHIM managing director Simon Gray said. “We very much see the voluntary carbon market, whether you are creating ACCUs for sale as offsets or inset credits, as a part of a holistic management approach involving livestock. The use of livestock assists in the grazing pressure with certain plants, which allows the creation of the canopy and in turn allows the creation of moisture in the soil, letting it hold more carbon.
“The evidence points to it being very difficult to bring carbon into clay-based Australian soils if you don’t first increase the moisture content of the soil. To do that, we’re not looking at a monoculture where you grow wheat every year, you’re looking at a diverse biosphere with ruminant animals.
“We recognize the complete interrelation and correlation of running a pastoral operation with a carbon operation, both because it is a legal requirement of these northern pastoral leases and because it directly impacts the health of the soils – which then directly improves our profit potential.”
The IIIF is targeting returns in the mid-teens, comprising an estimated 4.5-6 percent from asset operations, 4-5 percent from capital growth and infrastructure development, and up to another 5 percent from the value uplift gained by generating carbon credits, after an initial ramp-up phase.
NAB’s Indigenous focus
The fund also aims to set itself apart through its close co-operation with Indigenous Australians in Australia’s Top End, which proved attractive to NAB when making its commitment.
Gray said the fund’s farming operations will act as the standing buyer for all cattle produced on the Indigenous-run properties it partners with, not just buying prime livestock.
“We are basically their trading partner, and we manage our supply chain in a way that has an Indigenous-first trade and employment policy, making sure we make an impact where we can,” he said.
“This is a product designed with a true understanding of the limitations that Indigenous businesses face when it comes to accessing capital, so that it has an effect of unlocking capital that would otherwise not be invested.”
In a statement, NAB group executive for business and private banking Andrew Irvine said the bank was attracted to the potential to support sustainable Indigenous business growth and prosperity.
“We have listened to Indigenous Australians’ concerns regarding the barriers they continue to experience when attempting to establish and grow their businesses. This investment opportunity is about finding more innovative ways to unlock the potential of businesses operated by Indigenous Australians, contributing to a stronger Australian economy,” he said.
“Business has an integral role to play in strengthening Indigenous leadership and creating opportunities for Indigenous communities to succeed. This investment is an opportunity to support the sustainable commercialization of Indigenous Australian assets for current and future generations, whilst providing training and employment opportunities.
“Working together with Indigenous Australia, we want to strengthen financial resilience, increase business and employment opportunities, and develop NAB’s cultural capabilities.”