What's Happening?
The Association of the Luxembourg Fund Industry (ALFI) Private Assets Conference recently emphasized the growing importance of investing in regenerative agriculture and sustainable forestry. Martin Berg, CEO at Climate Asset Management, discussed how these sectors can deliver commercial returns while providing environmental benefits. Despite agriculture, forestry, and fishing contributing 4.3% to global GDP, institutional investment in natural capital remains low, accounting for less than 0.1%. Berg predicts that annual investments in sustainable agriculture will increase tenfold to $20 billion by 2030, with sustainable forestry investments remaining strong at $11 billion. The conference also highlighted the role of enabling technology and services in supporting natural capital improvements, with projected investments reaching $11 billion.
Why It's Important?
The shift towards investing in sustainable agriculture and forestry is significant for both environmental and economic reasons. These investments offer a hedge against inflation and contribute to biodiversity conservation, carbon markets, and climate change adaptation. As institutional investors increasingly recognize the value of natural capital, this could lead to more resilient supply chains and a commitment to carbon neutrality. The potential for substantial returns in these sectors may attract more institutional capital, driving growth in related industries and supporting global sustainability goals.
What's Next?
The market for natural capital is expected to accelerate, with increasing institutional capital flowing into sustainable agriculture and forestry. This trend may lead to more investment projects in emerging markets, despite higher risks. The conference also discussed the potential of blended finance, which combines public and private investment to de-risk projects and mobilize additional capital. As more investors develop standalone allocations for natural capital, the overall investment capacity in these sectors could expand, fostering innovation and sustainable growth.
Beyond the Headlines
The focus on regenerative agriculture and sustainable forestry reflects broader concerns about environmental degradation and resource scarcity. As AI and nature-based investing impact equity markets, investment managers are exploring new opportunities in food and farmland. This shift may lead to long-term changes in how agriculture is practiced, with a move towards more organic and resource-efficient methods. The integration of new technologies could further enhance production efficiency and sustainability, benefiting both the planet and human populations.
