Kilter Rural has completed its second ESG report for its A$68m Australian Farmlands Fund, measuring the condition of environmental assets under its stewardship utilising the globally leading Accounting for Nature Framework® for developing environmental accounts.
Kilter is committed to building a sustainable business through the integration of Environmental, Social and Governance frameworks into the operating processes of the business.
Kilter’s policy position is that Climate Change is a present and immediate threat that any responsible long-term asset manager needs to address. In addition, environmental challenges of soil health; ground water management; sustainable surface water diversion and chemical control are established issues with known solutions and can be addressed in a manner that provides improved investment outcomes. Further details on the initiatives and reporting on the Farmland, Water and Ecosystem assets are described below.
Kilter will lead through management of its rural landscapes with the intent of providing positive social and economic outcomes. This will be done by seeking to employ staff and contractors from local area and providing work conditions and lifestyle opportunities that meet community standards. Kilter will also pro-actively communicate within local communities to identify concerns so that where possible the operational activities of Kilter are understood and potential impact minimised.
“We don’t just measure activities, we measure outcomes”
Sean Winder, Kilter Rural CFO.
Kilter will adopt a management framework that supports adherence to the making ethical decisions and the responsible sourcing of materials and services so as to not intentionally cause injury or disadvantage to other parties. Kilter has established a Governance, Risk, Audit and Compliance Committee with external non-executive members to monitor this function.
Monitoring, Evaluation and Reporting (MER) is a vital component of this process as it enables Kilter to refine a set of indicators to assess performance against our goals and implement initiatives to improve outcomes across the farmland, water and ecosystem assets we manage. The MER framework is formalised into Kilter’s ISO 9001 accredited Quality Management System.
KILTER RURAL AND REGENERATIVE AGRICULTURE
Our farmland investment model is built on experience gained through 15 years regenerating 9000ha of old-style irrigation farms for a $25 billion institutional investor.
Financial returns are not compromised for environmental objectives. Instead, these two key elements combine to underpin long-term value.
In a Kilter Rural-managed landscape agriculture and ecosystem protection are fundamentally inter-dependent operations that improve long-term investment performance with reduced risk.
Historically, the response to increased demand for food has been the continued conversion of forests and native grasslands to agriculture. Ongoing land clearing for agriculture fundamentally overlooks the value provided by natural assets. Continued deforestation will drive further loss of biodiversity and remove carbon sequestration and oxygen provision services that are vital to sustaining life on Earth.
We are using the positive global outlook for food to build on proven opportunities for regeneration presented by underutilised, already modified agricultural landscapes. In most countries this represents 50-70% of the terrestrial landscape.
DESIGN FOR CLIMATE CHANGE IMPACTS
A key element in our fiduciary duty to investor partners is addressing climate change-related risks. For more than a decade, we have been designing landscapes to ensure resilience to climate change-influenced weather events, such as severe droughts, floods and rainfall events. This foresight has ensured delivery of farming programs through the worst drought in modern recorded history, the largest flooding event in 100 years and locally unprecedented high rainfall events.
NET-CARBON SINK FARMLAND
We take an industry leadership role in both CO2 sequestration and emissions reduction on farms. This is achieved by actively sequestering carbon in both soil and native revegetation. We have proven capability in landscape carbon and emission accounts through our 15-year institutional investment mandate.
Habitat removal and modification remains the main cause of native species extinction in Australia and globally. Our landscapes revegetate up to 30% of the area under management, returning key components of native ecological vegetation communities.
Our agricultural regions typically have less than 5% native vegetation remaining. Increasing biodiversity on farmland has multiple proven benefits for groundwater and salinity management, crop health, soil moisture retention, buffering from weather events and beneficial pollinators and pest control species.
KILTER RURAL AND MANAGING ASSETS
As an alternative real asset class, water also provides an opportunity for diversification and risk mitigation.
Water is a limiting factor in all agricultural systems. An investment in water assets is well positioned to benefit from structural trends in global markets for food and fibre in response to climate change.
In generating returns, our management approach recognises and addresses inter-related needs of investors, irrigator, ecosystems and communities. This has delivered proven benefits for investors and irrigators in the past decade as we monitor any impacts of water product use by irrigators.
Our water purchase and lease-back product has been notable for lifting yields and reducing volatility for investors, while enabling irrigators to grow and/or redevelop their operations. About two-thirds of clients utilising the Kilter Water Fund lease-back product have done so to enable irrigation redevelopment for water use efficiency or to facilitate business expansion.
Landscape environmental accounts
Monitoring, evaluation and reporting is vital in identifying, responding to and mitigating risks to investment returns.
We have a demonstrated ability to monitor, interpret and report on condition of natural assets is captured within a standardised and quantified environmental accounting system called Accounting for Nature Framework.
The framework is aligned with the UN-adopted System of Environmental-Economic Accounting and will result in the production of an annual certified account of the condition of the underlying natural asset base (soil, vegetation, water) that supports all farm production. Implementation of the framework reveals the real impact of farmland, water and ecosystem investment management activities.
ENVIRONMENTAL IMPACT REPORTS
The Murray-Darling Basin is one of the world’s largest and most productive river basins. It plays an important role in supporting biodiversity for a vast array of plants, animals and ecosystems.
The Murray-Darling Basin Balanced Water Fund balances the needs of irrigators, the environment and investors through counter-cyclical use of water. Each year it makes donations of water and cash to the Environmental Water Trust, which is responsible for optimising the environmental impact able to be achieved with the fund’s resources.
Innovation, Research and Collaboration
We have a long history with a range of partners and project initiatives to advance efforts to increase farm productivity through improving the condition of our natural asset base.
We increase farm productivity through:
- Actively working alongside catchment management authorities, Aboriginal corporations and multi-government NRM agencies
- Investing in high quality, science-based expertise in soil to regenerate its healthy and productive condition
- Collaborating with the Wentworth Group of Concerned Scientists to produce farm-level environmental accounts of the soil, native vegetation, water and fauna assets that we manage
- Partnering with R&D institutions such as CSIRO, the University of Melbourne and the GRDC, Cotton Australia, Australian Tomato Processing Research Council
- Collaborating with industry and product development groups including National Irrigators Council, Wedgetail Food and Fibre, Southern Farming Systems, Australian Certified Organic, Australian Fodder Association, Australian Processing Tomato Research Council and the Cotton Research and Development Corporation
- Engaging in programs such as Caring for Country, Carbon Farming Initiative and the Emissions Reduction Fund.