As inflation soars and geopolitical tensions rise, Paul McMahon, co-founder and managing partner of SLM Partners, an asset manager, highlights the benefits of investing in regenerative agriculture and forestry.
As investors become increasingly wary of stock markets and seek investments that have a positive impact on the environment, investor interest in regenerative agriculture and forestry has recently increased, said Paul McMahon from SLM Partners. Heritage briefing.
Speaking exclusively to our publication, McMahon said the financial returns of these asset classes are good: “They are a great hedge against inflation in particular.”
The company, which manages funds in Australia, America and Europe, focuses on regenerative agriculture and forestry practices that offer attractive risk-returns, increase climate resilience and have positive impacts on nature.
This news service covers agriculture, forestry, food production and related businesses when soaring food prices made food a hot investment topic.
Explaining why they are seeing growing investor interest in sustainable agriculture and forestry, McMahon said: “Rising commodity prices over the past 18 months, whether beef prices in Australia, maize prices in the United States or lumber prices in Ireland, has been very strong over the last 12 to 18 months, which has directly influenced the financial performance of our strategies.
“As people are increasingly worried about stock markets, they are turning to these real assets,” he added. “Another factor is that more and more investors are genuinely concerned about investments that have a positive environmental impact. Forestry and regenerative agriculture have the ability to not only reduce greenhouse gas emissions, but also store carbon so that they can play a very important role in achieving climate goals,” he said. declared.
“Rising inflation and the war in Ukraine have also caused food market prices to rise, especially cereals and forest products,” he added.
During this time, fertilizer prices have tripled, which has had a terrible impact on conventional farmers but little impact on the organic farmers we work with, he explained. “It was a good time to be an organic farmer,” he said.
Nonetheless, commodity markets are cyclical and high prices will fall, he said. We have seen a slight decline in timber prices recently, but in the medium to long term the outlook is positive, whether for timber in Ireland or nuts in Portugal and Spain, he added.
“Land prices have also risen over the past two to three years, and even faster with inflation, so these asset classes are a good inflation hedge for investors,” he said. -he declares.
The main investors of SLM Partners are European and North American pension funds and insurance companies, large institutional investors and family offices.
With over $400 million in assets under management, the group has four main investment strategies around the world.
“In Australia we run a fund that has acquired 450,000 hectares of land for grass-fed beef cattle production, which is going well,” McMahon said. He implemented planned grazing to regenerate grasslands and improve animal welfare.
“Land prices have risen sharply over the past two years in Australia for all types of land,” he said. “Record beef prices have had a particularly positive impact on the pastures we own. The last few years have been very positive for Australian agriculture,” he said.
“In Ireland, the SLM Silva Fund has acquired 1,600 hectares of mixed coniferous and hardwood forest properties and this fund is doing very well,” he said. “It exceeds our initial objectives and offers good returns.”
It is an institutional European forest portfolio for scaling up ‘close to nature’ forestry, also known as continuous cover forestry.
The company said the 30 million euro ($32 million) fund has started implementing CCF on more than 60% of its properties and plans to cover the rest over the next five years. .
The strategy can improve biodiversity, carbon sequestration, and resilience to climate change, while providing greater cash returns. During his tenure, the firm said the fund delivered double-digit returns above target, demonstrating that impact strategies can outperform.
“In the United States, we operate separate accounts that help develop certified organic cropland for grain production,” McMahon said. “We partner with local farmers, acquire land and make that land available through flexible long-term leases,” he added. “We’ve invested heavily in the Midwest recently.”
The company believes that well-managed organic farmers support more biodiversity, have healthier soils, store more carbon in the soil, and support higher incomes for farmers.
The company’s new SLM Silva Europe fund, which invests in regenerative tree crops from forests to orchards across Europe, has also made its first investment in a 300-hectare property in Murcia, Spain, which will grow almonds, pistachios and organic olives, having had its first closing last December.
“There is a strong demand for nuts in Europe, especially for organic products, and there are opportunities for Spain and Portugal to increase their production,” he said.
“We think the fundamental demand for timber is there in Europe,” McMahon added. “The war in Ukraine has also pushed up prices due to a reduction in the supply of timber from Russia.”
“On the supply side, there are a lot of small, fragmented forests in the private sector in Europe that are under-managed and there is a real need to aggregate them and manage them better, which creates opportunities for investment,” he explained.
The fund acquires or leases land, introduces ecological and organic management practices and builds relationships with local operators specializing in ecological management practices and wishing to develop.
The company’s goal is to develop a portfolio of “Climate Positive” assets that will achieve Net Zero goals, while having measurable impacts on biodiversity and soil health. The target fund size is 250 million euros.
In conclusion, McMahon highlighted the benefits of the EU Sustainable Financial Disclosure Regulation. “We only invest in agricultural and forestry systems that have a positive environmental impact. It is expected that our European fund, which for us is a major focus, falls under Article 9 of the regulation,” he said. “We used to do that before, so it’s great to see more regulations to prevent greenwashing.”