More Investors Are Backing Regenerative Agriculture
The landscape of agricultural investment is undergoing a significant transformation, with a growing number of investors turning their attention to regenerative agriculture. This trend is highlighted in the latest reports from Sustainable Land Management (SLM), a natural asset manager that has been at the forefront of this movement. SLM’s fourth-annual impact report and its first-ever portfolio-wide carbon accounting report underscore the increasing financial support for sustainable farming practices.
SLM’s assets under management (AUM) have seen a remarkable 40% year-on-year growth across its various funds and managed accounts. This surge in investment is not just a testament to the growing interest in regenerative agriculture but also a reflection of the tangible benefits these practices offer. From 2016 to 2023, SLM’s carbon accounting reveals an impressive sequestration of approximately 100,000 tons of CO2e in soil and vegetation. This carbon sequestration has outweighed the carbon emissions from SLM’s real asset portfolio, thanks to the adoption of regenerative management practices.
Mapping Investor Interest in Regenerative Agriculture
“There are far more investors who want to invest in regenerative agriculture and forestry, and we see that with AUM growing by 40% year on year,” Paul McMahon, SLM’s managing partner, told AgFunderNews. “It’s certainly a feeling of achievement on our side that we’re getting backing for something we’ve been talking about for quite some time.”
Founded in 2009, SLM has seen its AUM growth across multiple funds and strategies in the US, Europe, and Australia. McMahon points out that the most significant growth has been in collaborations with large institutional investors, including pension funds, insurance companies, and substantial family offices. Currently, SLM manages $610 million in AUM and oversees 306,066 hectares of land.
This growth spans a variety of regenerative farming strategies, categorized into four main areas: increasing organic annual crops to reduce dependence on pesticides and GMOs, developing regenerative practices for permanent crops like tree nuts, continuous cover forestry, and holistic planned grazing of livestock. In the US Midwest, SLM partners with local organic farmers on long-term leases, aiding them in converting land to organic status. This model has been extended to the West Coast and the High Plains region, with significant backing from institutional investors and family offices.
In Australia, SLM’s mixed-farming project is another area of substantial growth. This initiative uses regenerative farming to boost productivity and generate carbon credits for the local market. SLM formed a joint venture with Impact Ag Partners, attracting a large separate account backed by a family office and making significant acquisitions in New South Wales.
Carbon: ‘An Additional Lucrative Upside’ to Regenerative Agriculture
One of SLM’s primary goals is to transform land into carbon sinks and expand regenerative practices through carbon markets, which can offer an additional lucrative upside for land management. The 2023 carbon accounting report shows an estimated 100,000 tons of CO2e sequestered, equivalent to the emissions from 23,000 barrels of oil. This sequestration has surpassed the emissions from the firm’s portfolio, thanks to its regenerative practices.
Australia, with its aggressive carbon reduction goals, is a crucial market for SLM. The firm has sold 1.8 million carbon credits in Australia between 2016 and 2023. McMahon notes that the Australian carbon market has evolved, with corporates now driving demand for credits, resulting in increased prices. This shift from government to corporate buyers highlights the growing recognition of carbon credits’ value in achieving sustainability goals.
Cost Remains a Major Challenge for Carbon Farming
Despite the promising developments, the cost of measuring, reporting, and verifying carbon sequestration remains a significant challenge. McMahon explains that while technically feasible, financially justifying the cost of soil sampling can be difficult. In the US Midwest, the cost is manageable, but in Australia, the variability of land types makes comprehensive soil carbon measurement expensive.
McMahon emphasizes the need to reduce these costs through a combination of soil carbon sampling, modeling approaches, and remote sensing. The industry is still grappling with questions about cost-effectiveness, credit generation, and pricing, with answers varying by geography and land type.
Potential for Carbon-Neutral Beef
One surprising finding is the potential to sequester substantial carbon from livestock production through regenerative grazing systems. In Australia, SLM’s holistic planned grazing system has shown that it doesn’t take much carbon sequestration in soils and vegetation to offset emissions from beef cattle. This system has already produced verified credits that outweigh the emissions from the entire herd across SLM’s Australian portfolio.
McMahon notes that achieving carbon-neutral beef is a realistic goal with proper management, which is an exciting prospect for the industry. However, he cautions that regenerative agriculture projects must be scrutinized to ensure genuine change rather than greenwashing.
Farming remains a tough business, but the growing investor interest in regenerative agriculture and the tangible