With all that has happened since, it is sometimes easy to forget that 2020 started with Australia burning.
The 2019/2020 fire season in Australia saw over 17 million hectares of Australian landscape burnt. It is estimated that multiple billions of native animals will have perished. It was not uncommon to wake up to a blanket of thick smoke which was at times to bring Australia into the bracket of the most toxic air in the world, and that was also evident over the Tasman in New Zealand.
With the advent of the global pandemic and the market turmoil that ensued in March it is sometimes hard to remember that the world experienced more than a pandemic in 2020.
Despite 2020 being a declared a La Nina year, international analyses conclude that the globe ranks with 2016 as the hottest year on record. Australia recorded its 4th hottest on record. Locally, Victoria was overall around average for both temp and rainfall. However, after a wet start to the year – peaking in April – most months were drier than average. This overview comes as a timely reminder that though the world stopped for a pandemic, climate change did not.
The doom and gloom that was 2020 was brightened by the groundswell of support seen from individuals and institutions alike, signing up and putting in place real actionable timelines to achieve climate change mitigation strategies. On the 11th December the Net Zero Asset Managers agreement was signed, a group of 30 global asset managers with more than $9 trillion USD under management committed to net zero emissions by 2050.
Perhaps one of the strongest signals of this readiness being; The US presidential elections held in November, where a President was elected who stated his first action would be to rejoin the Paris Agreement for climate change action. The global consensus is that the time is now to invest in and plan for real action to mitigate and reverse climate change.
The market uncertainty of 2020 found managers looking more seriously at impact-focused alternative assets, investments which would provide uncorrelated returns to the global markets and Environmental and Social outcomes. Kilter Rural finds its investment offerings at the intersection of Alternative ESG/ Impact investments. Over the past year our funds have shown returns which have moved not in reaction to global markets but the sector specific market trends. The Murray Darling Basin Balanced Water Fund (MDBBWF) December 2020 results show the funds correlation at 0.02 with the S&P ASX 200.
Looking ahead in 2021
The 2021 global economic outlook seems set to continue with the same extraordinary 2020 levels of Quantitative Easing and governments implementing fiscal policies designed not to combat social issues but stave them off,government economists and global fund managers alike cannot be certain of what markets will bring in 2021.
What appears certain is continuing growth in recommendations towards investments that deliver financial returns balanced with ESG outcomes and climate change mitigation. Blackrock, the worlds largest investment manager has named climate change and ESG as central to its investment strategy for 2021.
For over 15 years Kilter Rural has been working at the intersection of two focus areas; alternative impact/ESG investments. With assets that are uncorrelated to key markets, Kilter Rural offers financial returns which can weather any market storms. This is coupled with the focus within our investment offerings to provide a part solution to climate change sets kilter rural Investors up with investments that offer diversifying effects when part of a broader investment strategy.
Kilter Planning for the Future
As part of preparing for and building coherent responses to climate change risks in February 2021 Kilter Rural is undertaking another significant planning session on the science and impacts of climate change.
The session will initially hear from CSIRO on the current position and the future outlook and impacts for farmland water and ecosystem operational management. Kilter Rural will also hear from Sarah Barker of Minter Ellison on the outlook for governance frameworks and responsibilities of companies and directors in the context of clear impacts from climate change.
Kilter Rural will use the session to review and where necessary renew both its operational responses and its governance and reporting frameworks to sustain our leadership position in addressing climate change in food production and ecosystem protection.
The Australian Farmlands Fund invests in land and water assets and works within our managed landscapes to revegetate and regenerate landscapes targeting to deliver a net carbon sink.
Kilter Rural investments not only provide a part solution to climate change but are also offering uncorrelated returns, meaning no matter what the markets bring, the diversifying benefits of an investment in Kilter Rural will not be encumbered.