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Land Rebirth Captures Big Carbon Volumes, Good For Business – Study

Amanda Cheesley

24 May 2024

A study by UK asset management house shows that 100,000 tonnes of carbon dioxide equivalent (CO2e) was sequestered in 2023 by regenerative management of land used for cattle, crops and continuous cover forestry. The study comes amid continued interest in farming and land use techniques that are said to protect the environment.

Carbon sequestration is one way to cut carbon dioxide in the atmosphere and combat climate change by storing atmospheric carbon dioxide. The firm scales up regenerative farming and forestry systems that can deliver better economic returns as well as improvements in soil health, biodiversity and carbon storage, managing over 306,066 hectares of agricultural and forestry land across the US, Australia and Europe.

In agriculture, SLM switches land from conventional management – characterised by using chemical fertilisers, pesticides, intensive tilling and monoculture – towards organic and regenerative management. Regenerative agriculture concentrates on topsoil regeneration, increasing biodiversity, improving the water cycle, enhancing ecosystem services, supporting biosequestration, increasing resilience to climate change, and strengthening the health and vitality of farm soil. The business has $610 million of assets under management. All its land falls under the regenerative management model.

In forestry, SLM moves away from a conventional clear-felling regime and adopts “close to nature” silviculture, also known as continuous cover forestry (CCF). These practices increase carbon storage and protect and restore soil, biodiversity and water quality, it said.

A growing trend
This news service regularly covers agriculture, forestry, food production and related businesses when surging food prices. Aggravated by Covid-19, trade disputes and war in Russia/Ukraine, food has become a hot investment topic.

In total, regenerative agriculture was worth $10.3 billion last year and was slated to reach almost $32 billion by 2023 – a compound annual growth rate of 15.37 per cent from 2024 to 2031 (source: Insight ACE Analytic). Developments have included how in 2023 Switzerland's Nestle started a wheat farms project as part of the supply chain for its DiGiorno pizza brand; General Mills in June 2022 worked with Regrow Agriculture to monitor agriculture practices and their environmental effects across 175 million acres of farmland in North America, Latin America and Europe. In 2023, PepsiCo worked with Walmart to invest $120 million aimed at supporting US and Canadian farmers to improve soil health and water quality.

The regenerative side of food/agriculture is still relatively small, however. According to Statista, gross production value in the agriculture market is projected to be $3.90 trillion this year. An annual growth rate of 5.66 per cent is expected (CAGR 2024 to 2028), resulting in gross production value of $4.86 trillion in 2028.

Business benefits
As well as environmental benefits, SLM Partners said regenerative land management can be better for business – delivering an expected internal rate of return (IRR) that is 1 to 3 per cent higher than conventional farmland investing. Improved returns are achieved through higher yields, lower costs – for instance by reducing chemical inputs, higher prices through organic premiums, and better risk mitigation to climate change events.

SLM also expects regenerative strategies to benefit from the expansion and development of carbon and nature markets that provide an additional lucrative upside. As of December 2023, SLM Partners said it has sold a total of 1.8 million credits through Australia’s regulated carbon credit market.  

The report presents quantitative impact metrics that investors can use to work towards their carbon and nature targets. It marks SLM Partners’ first step towards integrating the recommendations of the Taskforce for Nature-related Financial Disclosures (TNFD).

Across 300,000 hectares owned in 2023, 21,000 tonnes of food were produced, including pasture-raised beef, nuts, olives and over 10 species of grains, together with 22,000 m3 of timber, the firm continued. Seventy-one per cent of cropland is certified organic or in transition to organic certification, and 62 per cent of forestland is managed under continuous cover forestry – giving increased resilience to a changing climate, and significant biodiversity benefits. Just 0.2 per cent of land was treated with synthetic pesticides.

SLM Partners’ also reported a 40 per cent increase in assets under management (AuM) year-on-year from 2022 to 2023. It is currently raising capital for three new funds focused on Iberian orchards, Australian farmland and carbon markets, and European forestry.

“The environmental, social and economic benefits of regenerative practices are clear. Farmland and timberland must be managed sustainably if it is to deliver sustainable returns to its workers and investors,” Paul McMahon, managing partner, SLM Partners said. “For too long, short-termism has driven the degradation of land itself – its soils, its fresh water, its biodiversity – and the healthy ecosystems farmers and foresters rely on to operate land profitably for the long term.”

See more commentary about the firm here and here.