CDPQ and CEFC Create an Australian Sustainable Agriculture Platform
The CEFC and global investment group CDPQ are creating a new sustainable agricultural platform to drive down emissions and improve sustainability across the sector. The $150 million CDPQ investment in Wilga Farming (the platform) brings substantial new capital to spearhead the investment push needed to help Australian farming decarbonise while also boosting farm production.
With an additional $50 million investment from the CEFC, the $200 million platform will be managed by Gunn Agri Partners, an established, mid-market sustainable agriculture manager with a strong commitment to improved sustainability across production systems and landscapes.
Importantly, together, CDPQ and the CEFC have also acquired a minority stake in Gunn Agri Partners, to help shape future sustainable agriculture and natural capital strategies, catalysing the decarbonisation of Gunn Agri’s extensive existing portfolio.
Gunn Agri Partners was established in 2013 by a highly credentialed team of agricultural and investment industry professionals combining decades of hands-on experience in institutional farm ownership and management. The firm adopts an industry-leading framework that integrates sustainability in the design and delivery of its strategies and a mandate to transparently report against targets for the assets it manages.
CEFC Head of Natural Capital Heechung Sung said: “This CDPQ investment is a welcome addition to the Australian market, to demonstrate the potential for institutional capital to drive the decarbonisation of agriculture. We believe there is enormous untapped potential for new investment in a sustainable future for agriculture as part of a net zero economy.
“By facilitating the flow of much-needed capital into the sector, our work with CDPQ supports the decarbonisation efforts of farmers while boosting production and enabling them to remain competitive globally. The platform will showcase market leading sustainable land practices to farmers across multiple production and climate regions, offering a pathway to reduce their carbon footprint.”
Executive Vice-President and Head of Infrastructure at CDPQ Emmanuel Jaclot said: “Through this partnership as part of our Sustainable Land Management strategy, we are reaffirming our commitment to investing alongside organisations that are truly moving the needle on sustainability in the agricultural sector by contributing to its decarbonisation. The CEFC and CDPQ’s experience—combined with Gunn Agri Partners’ recognized expertise as a land operator—will enable us to aggregate and manage farmland in the attractive Australian market, in line with regenerative agriculture practices.”
Gunn Agri Partners Founding Chair Bill Gunn said: “The DNA of our business is to be completely investor-aligned, to capture timely opportunities and to develop and operate assets with sustainability as a fundamental part of our management. I am very proud that is exactly what we have delivered on. Gunn Agri Partners was established in 2013 and has over 2.5 million acres of grazing pastures and forests in Northern Australia and is on track to deliver target returns. Our second strategy, focused on row crops is fully deployed and has recorded above target returns to date. Our permanent crop strategy is fully deployed and has received follow-on investments.”
The platform aims to fast track the uptake of low emissions technologies, carbon sequestration on agricultural land and measures to improve climate adaptability to make farming more resilient. It will work to demonstrate the benefits of regenerative farming and help position the sector to capture the economic opportunities of the clean energy transition.
Australian natural capital is dominated by the agriculture sector, which accounts for 55 per cent of Australia’s land use, across diverse conditions and a highly variable climate. The sector accounts for about 12 per cent of goods and services exported in 2021-22.1 It produces some 17 per cent of national emissions, and is uniquely exposed to climate extremes.2
With methane emissions and fertiliser use the main contributors to its carbon footprint, the agriculture sector is considered ‘hard to abate’ because it cannot make substantial emissions reduction through energy transition alone. However the sector is uniquely placed to undertake nature-based sequestration activities to aid its own transition while contributing to emissions reduction in other hard to abate sectors.
Ms Sung added: “The long-term impact of climate change on the agriculture sector and its critical role in food and fibre production is an important problem to tackle in a world that needs to rapidly decarbonise and address broader nature positive outcomes.”
The platform has secured The Glen, a 1200-hectare property near Delungra in northern NSW, as a seed asset. It has identified a range of initiatives to reduce its emissions, including reducing the use of synthetic fertiliser, improved landscape function to slow overland water flows, and the implementation of grazing management and soil carbon improvements.
The CEFC is also an investor in the Gunn Agri Transforming Farming Platform, alongside the global Kempen SDG Farmland Fund. Using expert advice from a team of leading agronomic and environmental advisers, including the CSIRO, the Transforming Farming Platform has adopted data-driven practices to make the farms more productive and resilient in a changing climate. This includes integrating regenerative farming methods and improved land management techniques to optimise yield productivity, reduce carbon emissions and sequester carbon.
1 ABARES Insights, Snapshot of Australian Agriculture 2023About CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2022, CDPQ’s net assets totalled CAD 402 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages. CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
About Gunn Agri
Gunn Agri Partners is an Australian-based agricultural asset manager with more than $750 million in AUM and commitments and is the manager of the Transforming Farming, Wilga and Wollemi platforms – agricultural investments that incorporate regenerative farming practices and the management of natural capital assets side by side with commercial farming.
2 National Greenhouse Gas Inventory Quarterly update: December 2022
CDPQ also put out a press release on this deal announcing a new strategic partnership focused on agricultural land in Australia:
The Clean Energy Finance Corporation (CEFC), an Australian government-owned green bank, and CDPQ, a global investment group, today announced the launch of a strategic partnership focused on agricultural land in Australia, with a first acquisition of a farm dedicated to row crops located in New South Wales. The new platform will invest an initial amount of AUD 200 million (CAD 178 million) over the next three years to acquire assets that will be managed by Gunn Agri Partners, a leading Australian farmland manager, of which CDPQ and the CEFC will become minority shareholders.
Gunn Agri Partners was established by a team of agricultural and investment industry professionals combining decades of hands-on experience in institutional farm ownership and management. The firm adopts an industry-leading sustainability approach to agricultural asset management that allows it to establish a scalable and specialised operational team in the local communities where the assets are located. Through this partnership, Gunn Agri Partners will be well positioned to build on its position in the Australian market.
The first asset acquired covers 1,200 hectares of arable crops and areas suitable for grazing and conservation. Weather conditions in the area allow for a range of summer and winter cropping options—including cereals, oilseeds, pulses and dryland cotton.
“This CDPQ investment is a welcome addition to the Australian market, to demonstrate the potential for institutional capital to drive the decarbonization of agriculture. We believe there is enormous untapped potential for new investment in a sustainable future for agriculture as part of a net zero economy,” said Heechung Sung, Head of Natural Capital at the CEFC. “By facilitating the flow of much-needed capital into the sector, our work with CDPQ supports the decarbonization efforts of farmers while boosting production and enabling them to remain competitive globally. The platform will showcase market leading sustainable land practices to farmers across multiple production and climate regions, offering a pathway to reduce their carbon footprint.”
“Through this partnership as part of our Sustainable Land Management strategy, we are reaffirming our commitment to investing alongside organizations that are truly moving the needle on sustainability in the agricultural sector by contributing to its decarbonization,” said Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ. “The CEFC and CDPQ’s experience—combined with Gunn Agri Partners’ recognized expertise as a land operator—will enable us to aggregate and manage farmland in the attractive Australian market, in line with regenerative agriculture practices.”
Established in 2020 within its Infrastructure portfolio, CDPQ’s Sustainable Land Management initiative seeks to invest in land-focused assets with long-term positive environmental impact and the highest ESG standards, demonstrating strong alignment with the CEFC’s aspirations around sustainability.
“The DNA of our business is to be completely investor-aligned, to capture timely opportunities and to develop and operate assets with sustainability as a fundamental part of our management. I am very proud that is exactly what we have delivered on. Gunn Agri Partners was established in 2013 and has over 2.5 million acres of grazing pastures and forests in Northern Australia and is on track to deliver target returns,” said Bill Gunn, Founding Chairman of Gunn Agri Partners. “Our second strategy, focused on row crops is fully deployed and has recorded above target returns to date. Our permanent crop strategy is fully deployed and has received follow-on investments.”
ABOUT THE CEFC
The CEFC is a specialist investor at the centre of efforts to help deliver on Australia’s ambitions for a thriving, low emissions future. With a strong investment track record, we are committed to accelerating our transition to net zero emissions by 2050. In addressing some of our toughest emissions challenges, we are filling market gaps and collaborating with investors, innovators and industry leaders to spur substantial new investment where it will have the greatest impact. The CEFC invests on behalf of the Australian Government, with a strong commitment to deliver a positive return for taxpayers across our portfolio.
About CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2022, CDPQ’s net assets totalled CAD $402 billion. For more information about CDPQ, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
ABOUT GUNN AGRI PARTNERS
Gunn Agri Partners is an Australian-based agricultural asset manager with more than $750 million in AUM and commitments and is the manager of the Transforming Farming, Wilga and Wollemi platforms – agricultural investments that incorporate regenerative farming practices and the management of natural capital assets side by side with commercial farming.
You can also read more about Gunn Agri Partners below:
Gunn Agri Partners was established by a dedicated team of agricultural and investment industry professionals. Gunn Agri is a farmland manager, the principals having decades of hands on experience from farm owner, to farm manager and heads of some of Australia’s premier farming businesses. Our core principles are alignment and transparency.
Services
The Gunn Agri team has deep experience through the value chain from acquisition, operation and disposal of assets. The team has extensive experience in management, corporate governance and advisory of agricultural companies and public organisations. Agricultural industry experience is combined with experience in debt / equity markets, investment management, corporate and risk management and reporting.
Gunn Agri Partners offers
- Farm management and productivity improvement services
- Funds management
- Direct investment management for separately managed accounts or investor clubs
- Transaction advisory services
- Advice on acquisitions, asset management and disposal.
I also urge you to read their approach to sustainable investments in farmland:
Gunn Agri Partners adopts industry-leading environmental, social and governance (ESG) practices in our approach to agricultural asset management. We recognize that building sustainable businesses requires a continuing focus, commitment and the integration of key ESG principles into business decisions.
There is a need for institutional capital to flow into agriculture and Gunn Agri Partners is committed to implementing industry leading ESG principles in the management systems of our investors’ assets. Managing assets is often made more challenging due to the long distances of assets from management teams and large scale of the operations. ESG considerations will ultimately improve how farms are operated, resources are allocated and stakeholders are treated.
To provide investors confidence of our ESG systems, Gunn Agri Partners adopts the following frameworks:
1. Principles of Responsible Investment; and
2. Global Good Agricultural Practices.
Alright, let me quickly go over some of my thoughts here.
First, it's the first time I hear about CDPQ’s Sustainable Land Management initiative.
On LinkedIn, I sent out an invitation to Vy Duong who is the Director of Sustainable Land at CDPQ:
I guess she works with Emmanuel Jaclot in Infrastructure but this is clearly a Natural Resources deal.
OTPP mixes Infrastructure and Natural Resources together but I prefer PSP Investments' approach to separate them out.
Admittedly, CDPQ doesn't invest a lot in timberland or farmland but clearly they're interested.
Canada's leader in Natural Resources remains PSP Investments (by far, especially in agriculture).
I had a chat with PSP's CEO Deb Orida recently, going over their fiscal 2023 results, and we talked about the Natural Resources portfolio which is very impressive. I said it's a unique portfolio because it is the only portfolio that has 75% agriculture in there:
Exactly, I know the franchise we built there by partnering with families and working with their local expertise to give them the capital to expand their land portfolio and where appropriate their processing capabilities has been a real strength of PSP.
What PSP has done in building out that Natural Resources portfolio is extremely impressive.
Marc Drouin runs that team and I talked about their approach here.
They're probably one of the biggest, if not the biggest farmland owners in Australia.
This deal with Australia's
As CEFC Head of Natural Capital Heechung Sung said in the press release above:
“This CDPQ investment is a welcome addition to the Australian market, to demonstrate the potential for institutional capital to drive the decarbonisation of agriculture. We believe there is enormous untapped potential for new investment in a sustainable future for agriculture as part of a net zero economy.
“By facilitating the flow of much-needed capital into the sector, our work with CDPQ supports the decarbonisation efforts of farmers while boosting production and enabling them to remain competitive globally. The platform will showcase market leading sustainable land practices to farmers across multiple production and climate regions, offering a pathway to reduce their carbon footprint.”
Gunn Agri recently bought 6,000ha land for CEFC, Kempen-backed farmland fund:
Australian farmland manager Gunn Agri Partners has acquired 6,000 hectares of land for its Transforming Farming Platform.
The land in the Liverpool Plain, which was previously proposed for a coal mine, has become available following an agreement in 2021 between the NSW government and Chinese company Shenhua Watermark Coal, to return its exploration licence after the approval to mine was withdrawn.
The agreement allowed the property to be returned to agricultural use and created significant natural capital assets, including the formation of Koala habitat conservation sites now managed by the NSW state government.
“The Liverpool Plains transaction is a prime example of the execution of our strategy,” said Gunn Agri’s portfolio manager for the platform, Bradley Wheaton.
Wheaton said integrating agricultural and natural capital management practices to generate market-linked returns was at the forefront of institutional investing in agriculture.
The Transforming Farming Platform is backed by the Australian government-owned clean energy finance corporation (CEFC) and Dutch asset manager Kempen.
The platform invests in underperforming small to medium farms to lift productivity and optimise land use by integrating row crops, grazing, carbon sequestration, biodiversity conservation and other natural capital assets at an institutional investment scale.
CEFC executive director Rory Lonergan said: “We can already see the advantages of this integrated farming model, which has the potential to deliver energy efficiency improvements to farms as well as optimise production, soil carbon, biodiversity and other environmental outcomes.
“This is a great demonstration of how a focussed approach on regenerative farming practices can deliver a positive outcome for farmers, agriculture, emissions reduction and local landscapes.”
A CEFC spokesperson said the green bank was an active financier to agribusiness, and it has invested in other funds, including Macquarie funds.
All this to say CDPQ picked great partners in CEFC and Gunn Agri Partners to expand its sustainable agriculture platform in Australia.
Below, for the past two decades, the value of Australian farmland has been on a steady rise, with specialist lender Rural Bank calculating the compound average annual growth rate at 7.5 per cent.
That is roughly the same as returns on the Australian Stock Exchange, and better than the 4.4 per cent growth in the residential property market over the same period. ABC News Australia reports (2021).
And Michael Curtis of Rural Bank explains why understanding the value of farmland is important to everyone in agribusiness, especially Australia’s farmers. The Australian Farmland Values report tells the story of national and regional farmland performance over the past 27 years.
Subscribe to Rural Bank insights to access the full report here.
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