Spotlight On Carbon Credit Markets In Regenerative Agriculture, Forestry – SLM Partners

Amanda Cheesley Deputy Editor 30 January 2024

Spotlight On Carbon Credit Markets In Regenerative Agriculture, Forestry – SLM Partners

SLM Partners, a global real assets investment manager, is developing partnerships to open up carbon credit markets in regenerative agriculture and forestry practices.

Regenerative farming appears to be a trend to watch, according to SLM Partners – a business operating in a number of global regions.

The business has recently hightlighted its partnerships with specialist carbon project developers in the US, Europe and Australia, as well as the results of a pilot project in the US Midwest that assessed the carbon benefits of organic farming.

SLM Partners manages more than 300,000 hectares of land around the world. It aims to scale up regenerative farming and forestry systems that can deliver better economic returns as well as improvements in soil health, biodiversity and carbon storage.

Revenues from carbon credits, which until recently have been a “cherry-on-top,” are becoming an increasingly important driver of returns, the firm said in a note. But tapping into these markets requires strategic partnerships, R&D and innovation.

As food security, concerns about climate change, use of chemicals and other modern farming practices have become hot-button subjects, so interest in regenerative agriculture has grown. Although definitions can be unclear, one describes the term as as "a conservation and rehabilitation approach to food and farming systems. It focuses on topsoil regeneration, increasing biodiversity, mproving the water cycle, enhancing ecosystem services, supporting biosequestration, increasing resilience to climate change, and strengthening the health and vitality of farm soil".

US demand
In the US, SLM Partners, the firm believes that there is growing demand from corporates for voluntary soil carbon credits for insetting and offsetting purposes. The firm partnered with the non-profit organisation Ecosystem Service Market Consortium (ESMC) to create a large-scale pilot to assess the carbon benefits of transitioning conventional cropland to organic certification in the US Midwest.

It also worked with project developer Carbon Yield to apply ESMC’s Eco Harvest scheme across 2,477 acres operated by eight of its tenant farmers. These farmers introduced cover crops, organic fertility and changed tillage practices as part of the first year of transitioning to organic certification. Results published in January 2024 show that organic conversion leads to a reduction in emissions and an increase in soil carbon sequestration, it said.

With demand for carbon credits strong in Europe, SLM Partners is also partnering with two European carbon project developers, focused on the development of new carbon credit methodologies within agriculture and forestry.

It has teamed up with German-based Climate Farmers, helping farmers across Europe leverage carbon credit markets as a financial catalyst for transitioning to regenerative agricultural practices. They have agreed to co-fund the development of a carbon credit accounting methodology for Mediterranean orchards, specifically nut and olives trees in Iberia. The goal is to build a carbon accounting methodology for assets in the region, owned through SLM Silva Europe Fund, while also tapping into a new revenue stream. The first credits are expected to be issued in early 2025, the firm added.

For its forestry assets, SLM Partners said it is working with Ecobase, a carbon developer focused on European forestry, currently operating across 163,000 hectares in 19 countries.

In Australia, carbon credit markets for agriculture and forestry are more developed, the firm continued, due to government-regulated methodologies and demand. Over the last five years, its subsidiary SLM Partners Australia has generated and sold over 1.7 million Australia carbon credit units (ACCU) through regenerating native woodland.

New opportunities are also opening up for soil carbon credits. In 2023, SLM Partners established a joint venture with an Australian farm operator and natural capital project developer, Impact Ag Partners, a player in soil carbon credits in Australia. Through this joint venture, it is investing in cropping and livestock properties with the goal of applying regenerative agriculture and establishing carbon projects on all properties. The firm believes that carbon can add 1 to 2 per cent to an Australian farmland investment internal rate of return (IRR) in the right context and with the right management. See more coverage here about the joint venture.

With investors increasingly worried about equity markets and looking for investments which have a positive environmental impact, Paul McMahon, a co-founder and managing partner of SLM Partners, told this news service that there has been much higher investor interest in regenerative agriculture and forestry recently. McMahon said the financial returns of these asset classes are good: “They are a great inflation hedge in particular.” See more here about the firm’s funds. 

SLM Partners is a global real assets investment manager with $550 million in assets under management. It manages funds and separate accounts in the US, Australia and Europe, focusing on regenerative agriculture and forestry practices.

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