SLM Partners reached out to Climate Farmers with a proposal to collaborate on developing a “carbon credit accounting and generation methodology” for measuring carbon sequestration in Mediterranean orchards. Recognising that the potential impact of this largely unexplored area could be a significant win for the regenerative agriculture movement, we were happy to jump at the opportunity.
SLM Partners
SLM Partners may need little introduction – they’re already the most well-established RegenAg investor and pioneer. But for those who aren’t familiar, they’re a real assets manager investing in regenerative agriculture and forestry. Their aim is to build land systems that are regenerative, resilient and profitable, tailored to the specific land use systems and the geographical contexts where they operate:
- In Australia, they focus on grassland, where they implement holistic planned grazing management.
- In the US, their work centres on grain production, with a strong focus on converting to organic certification to reduce chemical usage and synthetic fertiliser inputs.
- In most of Europe, their primary focus is on forestry, where they’re shifting away from clear-felling to more selectively extracting wood value over time.
- In Iberia, SLM Partners invests in Mediterranean crops like olives, pistachio, almond, walnuts and hazelnuts.
We had the pleasure of speaking with Alessia Lenders, Head of Impact at SLM Partners, to discuss our project, the future of carbon credits, and some exciting opportunities for RegenAg.
The role of Carbon Credits in RegenAg investment projects
Over time, Carbon Credits (CC) have taken on various roles for SLM Partners. In most projects, CC used to be seen as the cherry on top, but they have steadily gained importance and are now supplementing and de-risking the business case.
Australia, the country where they’ve issued the most CC, has been a forerunner. The main reason this market is more mature than the rest of the world is because of the Australian Carbon Credit Unit (ACCU), a government regulated framework. We expect Europe to follow suit in the near future.
The potential of perennials gives us a glimpse into the future of RegenAg investment
The SLM Iberia permanent crop fund has unique carbon features compared to other agricultural assets because of the high carbon sequestration potential of trees.
Investors are drawn to this carbon angle, and SLM Partners is committed to measuring and verifying the carbon profile of their assets. The goal is to show that these orchards can store more carbon in the trees and in soils than what is emitted through their operations.
“Additionally our investors want to verify that the biodiversity will be better in 10 years’ time when we sell the property than today when we bought it.” Alessia Lenders
The dialogue with investors is changing
There are many passionate family offices who have been following this field for years. These investors have made it their life mission to be a part of the RegenAg story. Their extremely deep knowledge of the subject and passionate angle challenges the status quo and fuels innovation.
On the flip side, institutional investors are amongst the most educated on the subject. They have a very different approach based on existing frameworks, whether it’s the global biodiversity framework or The Taskforce on Nature-Related Financial Disclosures (TNFD). This dialogue often starts from a climate risk angle: how can I use RegenAg as a way to better manage the risk in my portfolio of farmland? They seek exposure to real assets that offer greater resilience to climate change.
The influence of government and ESG compliance further push companies to think about impact. And Reportable Verified Regenerative Outcomes provide a clear, tangible way to prove that you’re making an impact through your assets.
Quality as natural selection
“Carbon Credits with co-benefits (e.g. improved biodiversity and soil health) have a clear differentiation from ordinary and cheap carbon credits that can be bought in bulk by the big polluters. These high quality CC or CC with co-benefits can be sold at a premium to sophisticated buyers.”
— Alessia Lenders
This is where things get really interesting. A higher price for high quality CC (CC+) serves as a natural filter, steering clear of large-scale polluters, like oil and gas companies, who are only looking for cheap CC to fulfil compensation quotas. Selling CC+ for a premium not only strengthens your impact but also ensures credits are purchased by buyers who are mission-aligned.
Another reason why it makes even more sense for Europe to focus on CC+ is that projects in Europe simply don’t have the same carbon sequestration potential as projects in the tropics. However, the co-benefits related to biodiversity and soil health are compelling enough to drive the RegenAg transition forward.
There’s also room to differentiate based on the quality of CC, especially in regard to additionality and permanence. We have data – fresh off the press – showing that perennials achieve far greater permanence in carbon storage compared to other practices.
Two big trends on the investor side
- The pool of investors keeps getting bigger, with SLM Partners seeing more people coming to the table – many of them exploring these kinds of assets for the first time. By now, we all recognise that getting into RegenAg has quite a steep learning curve. That’s why SLM Partners remains committed to education, as seen in the release of their new white paper on investing in regenerative agriculture.
- At the same time, they’ve noticed that the investors who have been engaged for a while are now very well-informed. It’s encouraging to see how quickly this developed. The risks and benefits in investing in RegenAg are no longer just conceptual. Investors understand the effect that exposure to disaster has on the financial performance of real assets, as well as from a broader impact perspective. And they are getting comfortable with the associated risks.
Why Climate Farmers
“One of the reasons why we really liked Climate Farmers and why we wanted to work together is because of the mission alignment. SLM partners and Climate Farmers are both strong advocates of system change and looking for ways to accelerate the transition. And our carbon credit accounting and generation methodology makes it more interesting for investors to invest in orchards. Which is a great opportunity for orchards specifically but also for RegenAg as a whole.”
— Alessia Lenders
Next steps CF & SLM Partners
Developing a shared accounting and generation methodology for trees is the beginning. Climate Farmers will continue working closely together with SLM Partners on issuing Carbon Credits with co-benefits across their entire Iberian portfolio. The aim is to deepen the understanding of farms’ holistic contexts and improve regeneration outcomes with every cycle.
“We’re very excited about this since it is our first carbon credit project for agriculture in Europe.”
— Alessia Lenders
