Unlocking value of natural farm capital

Australian-dollarsThe National Farmers’ Federation (NFF) and KPMG Australia (KPMG) released research showing new opportunities for farmers to unlock the value of natural capital, such as the land and ecosystems that underpin farm production.

The new sustainable finance mechanisms could unlock billions in additional farm income.

The report shows an immediate opportunity to implement sustainable finance instruments in the agricultural sector to provide incentives and rewards to farmers and other landholders for improved environmental outcomes.

Key recommendations are:

Implement the $30 million Pilot Agricultural Stewardship Program including supporting a research project to further develop these instruments;
Establish a $1 billion National Biodiversity Conservation Trust as per the Craik review recommendations; and
The development of a National Natural Capital Policy and Government established standards and trading structures.

NFF President, Fiona Simson said the research acknowledged the critical role farmers played in caring for the environment.

“Farmers have always been frontline stewards of Australia’s environment, managing 51% of our continent’s landmass.

“Unfortunately, efforts to incentivise and reward environmental practices historically have been short-term, or based on ad-hoc grants and programs. They have also been interfered with through complex and poorly understood regulatory requirements.

“We need a comprehensive approach that delivers the right incentives, and the right outcomes for farmers and the environment,” Ms Simson said.

Ms Simson said the NFF’s vision of generating $5 billion in farm gate income from environmental services related to natural capital was within reach if the appropriate steps were taken.

“We need a comprehensive approach that delivers the right incentives, and the right outcomes for farmers and the environment.”

Robert Poole, KPMG National Food and Agribusiness Lead Partner, said the tools were available to make this happen.

“There is an increasing opportunity to provide enhanced and new investment vehicles to the market that deliver ongoing financial incentives and rewards to farmers for improving environmental outcomes.”

“Through newly constructed financial instruments, such as green bonds and pay for outcome funds, we can provide investable agricultural options for institutional investors, government, industry and philanthropists directed towards improving the environment and delivering social finance options for the market.

“These options provide a return for the community, environment, investors, farming sector and society at large.

“With agriculture facing a $160 billion capital shortfall to fund its growth ambitions, accessing these new or refined sources of investment could not be more critical and provide sustainable ways to deliver returns,” Mr Poole said.

Fiona Simson acknowledged preliminary moves by government to unlock this potential.

“We welcome today’s commitment by Minister McKenzie to direct funding, through the NFF, towards exploring the mechanisms needed for farmers to earn increased returns from their natural resource management efforts.

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