Measuring what matters: An approach for natural capital investors
Providing practical guidance
on agriculture and forestry
decarbonisation metrics.
Measuring what matters: An approach for natural capital investors shares CEFC insights into how institutional investors in the natural capital arena can enhance assessment of decarbonisation activities.
About this report
Measuring what matters: An approach for natural capital investors
As an investor the CEFC focuses on identifying opportunities that can provide both financial and environmental outcomes. This guide to assessing agriculture and forestry investments draws from CEFC experience and was prepared with the assistance of EY.
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Credible, comparable and reliable metrics are a foundational element of investment decisions, alongside well-established factors such as capital returns, risk and financial management… As we strengthen our own approach to metrics and reporting for agriculture and forestry, we are pleased to share our thinking with other investors making similar decisions.Heechung SungHead of Natural Capital, CEFC
About the guide
The CEFC sees natural capital assets as a strategic priority in a low carbon future.
Industries that rely on natural assets such as agriculture and forestry will need to consider their carbon impact on the landscape and how to improve the long-term sustainable performance of land use activities while protecting and strengthening broader environmental outcomes.
For investors, navigating emerging financial accounting, industry and regulation standards can be challenging.
Measuring what matters: an approach for natural capital investors provides practical guidance to achieving measurable sustainability outcomes.
Role of the CEFC
The CEFC has committed more than $440 million to the agriculture and forestry sectors.
Landmark commitments include:
- $75 million to Paraway Pastoral Company which has pledged to cut on-farm methane intensity by at least 30 per cent by 2030
- $75 million in the Australia New Zealand Landscapes and Forestry Fund managed by New Forests
- $50 million in the $200 million Wilga Farming sustainable agriculture platform, alongside the Canadian pension fund CDPQ.
About the opportunity
Producers, land managers and investors have a long-term interest in seeing successful global efforts to combat climate change.
Natural capital investments are an attractive asset allocation that can deliver appropriate returns for the risk while targeting environmental benefits over time. Metrics can aid investors and asset managers in assessing the credibility and comparability of sustainability outcomes.
In defining and grading metrics, the CEFC has leveraged available frameworks with a focus on those that are most meaningful and commonly used by institutional investors.
The CEFC grading matrix helps prioritise emissions abatement and sequestration activities that are expected to deliver immediate improvements and longer-term sustainability strategies.
Priority activities include:
- Optimising the frequency of rotations in crop, pasture and timber land management to lift carbon storage in biomass
- Employing agroforestry methods such as shelterbelts, insectaries, riparian zones, wetlands and habitat conservation
- Adjusting livestock management practices to lift productivity and reduce enteric methane emissions
- Efficient application of fertilisers, herbicides and pesticides to optimise yield, cut nitrous oxide emissions and pollutant run-off to soils and waterways.
