Green capital fertilises Macquarie’s smart farms fund

AFR, Feb 21 2018 at 12:15 AM

Macquarie’s property arm has won a $100 million investment from the Clean Energy Finance Corporation as it invests in a new agricultural fund based on precision farming techniques.

The new fund, which could be worth as much as $1 billion when it is fully invested, is based on a portfolio of diversified cropping properties.

Managed by Macquarie Infrastructure and Real Assets, the new vehicle has been seeded already and has closed its first round of investment, including the contribution from the CEFC.

So far it holds about 500 hectares of permanent cropping assets – for crops such as avocado – and 15,000 hectares of dry land assets for grain crops, including wheat.

The CEFC is already a well-known player in the commercial real estate sector, funding green building landmarks such as the new WorkSafe headquarters in Geelong. Last year it injected a $100 million investment into the AMP Capital Wholesale Office Property Fund.

As well, the federal green funding body already has some exposure into agriculture, providing about $800 million in debt facilities, of which $200 million is drawn.

However, the tie-up with Macquarie is significant because it is the CEFC’s first move into equity in the sector.

“This is our first big $100 million cheque into agriculture,” chief executive Ian Learmonth told The Australian Financial Review.

“It’s about improving farming efficiency and standards, reducing emissions around agriculture, particularly in cropping.”

The CEFC’s overall portfolio is delivering about a 4.5 per cent return. About 85 per cent of its exposure is debt.

The decision to take equity in the new Macquarie fund was partly opportunistic, Mr Learmonth said. “The opportunity was presented to us where we could invest in a fund and drive some behavioural change.”

The nitty gritty of greener, more efficient farming involves high-tech techniques, driven by GPS guidance and advanced knowledge of soil types and levels of nutrition.

Such techniques can maximise yields and pay off in energy efficiency and reduced carbon emissions.

MIRA’s head of agriculture is Elizabeth O’Leary, who said the precision farming techniques would achieve environmental savings, while maximising soil health and productivity.

“We have been managing a significant portfolio of farmland in Australia for more than a decade and look forward to bringing our expertise and experience across a range of production environments to further energy efficiency and sustainability practices in the sector.”

A key element of the funding entails a three-way effort between Macquarie, the CEFC and the CSIRO to establish a series of on-farm standards in energy efficiency and emissions reduction that can be taken up more broadly across the sector.

The Macquarie assets will cover seven different climatic production zones, giving relevance and legitimacy to any standards that are developed.

“We hope it may well be adopted in the same way the real estate sector has the Green Star rating system,” Mr Learmonth said.

As the fund’s portfolio grows, MIRA will set up a series of on-farm teams supported by a new business, Viridis Ag, based in Albury, NSW.