Climate Asset Management has set aside 10% of a land acquisition in Australia for supporting biodiversity despite no clear way of capitalising on the area through nature-related credits, its CEO has said.

The natural capital-dedicated firm purchased around 1,800 hectares of farmland in the northeast of the country last week while committing to creating a “biodiversity corridor” for plants between two national parks, said Martin Berg, CEO of Climate Asset Management. The corridors are strips of land that aim to boost wider dispersal of flora.

The firm hopes to generate biodiversity, carbon, or reef credits from the land in future, but whether it will be able to is uncertain, Berg told Carbon Pulse. He could not share the value of the acquisition.

“We are generally quite cautious in our approach, we’re not promising that we can generate and monetise either carbon or biodiversity-related credits, but it might be possible,” Berg said.

“The viability of the project is not dependent on credits but that could be the icing on the cake.”

Climate Asset Management, a joint venture from HSBC Asset Management and specialist climate change investment and advisory firm Pollination, is working to reintroduce some endangered species of plants via the corridors.

“We are assessing on the carbon side and on the biodiversity side how the project might monetise improvements as that is our mandate, to show that managing land in this way supports commercial returns,” Berg said. Australia is drawing up a framework for a national voluntary biodiversity scheme. The future shape of the market is not yet clear though some pilot projects in the country are active.

“It is very early on with biodiversity-related credits. A few states in Australia have biodiversity credit schemes but they’re quite complex, and the national nature repair market is in development. There is no easy option,” Berg said. The Albanese Labor government is trying to create a national market for nature restoration, dubbed a “green Wall Street” by Environment Minister Tanya Plibersek.

“Having said that, I think in the future we could see that either on the voluntary or regulatory side, things may emerge, and that’s what we want to get ready for,” Berg said.

Despite activity around biodiversity credits in the EU and UK, there is not yet one region where biodiversity is monetisable, he said.

“We’re still some distance away from that. So it is important  to find other revenue drivers in order to make it work. At the moment, the most likely opportunity would be the so-called reef credits, but the project does not qualify because of the crop at the moment – that may change.”

The headline returns of the project are reliant on the investor transforming the majority of the land focus from sugar cane, which requires intensive farming, to sustainably managed macadamia nuts. The initiative has targeted reducing synthetic fertiliser and chemical pesticide usage by up to 50% from previous levels.

Under the Australian reef credit scheme landowners can receive payments for improving water quality around the Great Barrier Reef, with three companies releasing a draft method for earning reef credits on Monday. EcoMarkets Australia issued the first credits in 2020, which sold at an undisclosed price to HSBC and the Queensland state government.

“One of the investment theories here is that with changing practices the run-off into the ocean will be reduced,” which could produce reef credits, Berg said. However, the pricing and demand for reef credits has so far been “unclear”.

The capital for the Australian acquisition came from Climate Asset Management’s natural capital fund, which has raised around $325 million towards a target sum of $1 billion.

The fund buys land with the aim of increasing its value through regenerative agricultural or sustainable forestry practices before selling it. It was founded on the idea of mainstreaming nature investments.

Its strategy is next considering agricultural acquisitions in the US related to sustainable row crops, nuts, fruit, and agroforestry, Berg said.

“I’m very excited about the general interest in regenerative agriculture. We see so many more questions from investors, from other stakeholders in regenerative agriculture, everyone wants more sustainable practices,” he said.

“That means that there will be more opportunities from getting investors in these type of strategies, but also in finding the right projects.”

By Thomas Cox – t.cox@carbon-pulse.com

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