Sustainable investment: delivering real returns and impact
“We genuinely care where and how we invest. So when we invest in rural landscapes, that landscape will be improved, it will be regenerated, the environment will be protected … and the community around that landscape will be better off,” Kilter Rural CEO, Cullen Gunn.
Inspecting an acacia tree. Image source: Kilter Rural
As the COVID-19 pandemic played out and vulnerabilities in the global food system became more apparent, sustainable agriculture captured the attention of investors.
For fund manager Kilter Rural, which invests in the regeneration of rural farmland, water assets and environmental protection, that attention just magnified the importance of what it has been doing for more than 15 years.
Kilter Rural CEO Cullen Gunn explains “we focus on improving Australian farmland and delivering returns while doing it. We work with investors - mainly based in urban centres - and deliver resources into under-capitalised rural regions”.
“It’s a fundamentally important role we play and we take it very seriously,” he emphasizes.
By 2050 it is estimated 50 per cent more people will need to be fed, globally. Cullen believes to achieve this the world’s current agricultural footprint must be stabilised and more food needs to be produced through the regeneration of existing, often degraded, farmland.
“Australia is in a really good position to do this. We are regenerating already highly modified, under-utilised farmland and remediating it for agricultural and conservation purposes,” Gunn says.
“We genuinely care where and how we invest. So when we invest in rural landscapes, that landscape will be improved, it will be regenerated, the environment will be protected. It will sequester more carbon than it emits and the community around that landscape will be better off.”
Kilter Rural was awarded Australian Impact Asset Manager of the Year in late 2019 for its long-term commitment to the delivery of returns with impact.
ANZ is supporting investment opportunities that achieve commercial, environmental and social outcomes and is providing around $5 million of working capital for Kilter Rural’s Australian Farmlands Fund (KAFF).
Established in 2018, the KAFF has a mandate to invest in a portfolio of irrigated farmland and water entitlements within the southern Murray-Darling Basin. Up to 30 per cent of farmland will be actively reforested for biodiversity protection and climate change mitigation outcomes. It aims to build long-term investor value through improving the condition of natural capital and earning payments for carbon sequestration.
“Our innovative capital allocation model for real asset investment seeks to deliver long-term financial returns through efficient use of scarce land and water assets underpinned by large scale ecosystem protection,” Gunn says.
CEO Kilter Rural, Cullen Gunn recently spoke with ANZ’s Managing Editor bluenotes, Andrew Cornell about sustainable investing of the future.
Listen to the full conversation:
Gunn believes the regeneration of landscapes needs a five to ten-year outlook. “If you want to regenerate environmental assets, it takes time. If you want to sequester carbon and get paid for it, it takes time. So by its nature, the sheer nature of agriculture, we have a long term view,” he says.
Kilter Rural’s focus on environmental sustainability is shared by ANZ. James Dunnett from ANZ’s Specialised Agribusiness says supporting business and financial practices that improve environmental sustainability is core to ANZ’s purpose.
“Kilter Rural’s values are closely aligned with ours and they have proven that balancing agriculture with environmental protection delivers sustainable returns,” he says. “Through partnering with our agricultural customers we hope to accelerate the adoption of improved sustainable business practices in the sector.”
The Fund not only looks to transform under-capitalised land, it improves biodiversity and enables the production of quality products consumers demand.
The Fund enhances the land’s ability to sequester carbon, particularly where the land was not viable for primary production, including tree corridors and water ways.
High value crops are sold under long term off-take arrangements - tomatoes to Kagome (a Japanese company and Australia’s largest tomato processor), SPC (a fresh food processor), Carlton United Brewers (its CUB organic barley) and Hakabaku (a Japanese organic noodle manufacturer based in regional Victoria).
To date the fund has raised $40 million and purchased five farms in Northern Victoria which Gunn says were under-utilised and considered unproductive in terms of financial and environmental outcomes.
The landscapes were improved with investment in water delivery and efficiency to grow high value crops and establish biodiversity and vegetation corridors. The water is used for the benefit of people, planet and profit.
Tomato crops. Image source: Kilter Rural
Tomato crops growing. Image source: Kilter Rural
Tree planting. Image source: Kilter Rural
Wheat crops. Image source: Kilter Rural
A hand on the danthonia. Image source: Kilter Rural